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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (3166)	12/10/2003 11:50:28 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Raising interest rates to stop commodity inflation is more than likely useless. Glad someone else here is thinking clearly. Thanks for that post. Slowly but surely we are going to spiral down the path of Japan and try and fight the inevatable writing off of worthless debt. GM has 300B of worthless debt and ford has billions as well. Now we bail out UAL with 80% govt guaranteed loans in a sweetheart deal to C and JPM. Japan refused to take its medicine and we are too. This is going to be one long drawn out affair at the current rate. No doubt we will slip in and out of recession several more times over the next seven years, each time some idiot will proclaim a bottom. Perhaps we see a couple rate hikes but if we get them, throw every cent you have into eurodollar futures cause there will be no more. M

To: MulhollandDrive who wrote (3166)	12/11/2003 7:28:27 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

the great sucking sound you hear is china buying raw materials yes, but a lot of those raw materials are going to China to be processed for export. it is not a total black hole. also, the high concentration of Chinese demand in commodities has not been lost on commodity bears. in fact, this is a primary reason for their bearishness. raising rates in the US will have no effect on a demand driven price spike in commodities in china yes it will. to the extent that higher interest rates cause a slowdown in the US and global economies, demand for goods from China is reduced. China is dead without exports.

To: MulhollandDrive who wrote (3166)	12/12/2003 8:59:36 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

<raising rates in the US will have no effect on a demand driven price spike in commodities in china.> I don't quite agree, but certainly China raising rates in China, could have an impact. From CI on Chinese inventory builds: "It's been discussed in various darker corners on the Street lately that Chinese companies have been stockpiling commodities. Part of the rationale behind the PBOC's (People's Bank of China) recent increasing of banking system reserve requirements was to slow Chinese borrowing that at least in part has been financing what is essentially commodities speculation in corporate inventories. Thanks to the wonderful folks at International Strategy and Investment, we have the following numbers for your perusal": China Inventories By Component Classification Yr/Yr Rate of Change (October) Tech, Machinery, & Transport Equip. 20.3% Plastics 17.9 Smelting Metals 14.5 Pharmeceuticals 13.0 Tobacco, Timber, Power Products, Furniture, 11.8 Paper 10.1 Chemical and Petro Products 9.4 Rubber & Chemical Fibers 3.7 Food/Beverage 3.5 Mining 3.0 Apparel 2.9 TOTAL 12.4 The chart and numbers tell us that China has been a big importer of commodity products, a good portion of which have found their way into inventories. No massive revelation on our part by any means. But what is important is that if the Chinese economy slows in any way, or curtailment of borrowing becomes significant, commodity prices are at risk short term. Especially after the run up they have had in terms of both price and magnitude of accumulation in Asia.