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

To: ild who wrote (4581)	1/8/2004 11:08:47 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

We import SKUs for WMT, and export bubbles to Asia: Xie on Speculative Excesses In our view, the situation in China is caused by the low Fed funds rate and the weak dollar. Excessive credit expansion is causing excessive speculation in China. Shanghai’s commodity futures market has become extremely active lately. Its one-month futures price for wheat averaged US$24 higher than CBOT’s price per ton in September last year; the gap widened to US$50 in December. We have observed similar trends in other commodities. Speculation has been a driving force in the rapid rise in commodity prices in international markets, in my view. Of course, where there are large price gaps between offshore and onshore markets, there would be arbitrage activities. To complete the trades, Chinese speculators have to take the physical deliveries offshore to make the deliveries onshore because the Chinese currency is not convertible. That force has driven freight shipping rates through the roof. Commodity speculation eventually leads to inventory in China, which could cause onshore prices to fall below offshore ones. The losses have to be borne by someone. In China, the banks usually end up holding the bag.