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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (30513)	5/20/2005 3:40:15 PM
From: mishedlo	Read Replies (4) \| Respond to of 116555

China sharply lifts taxes on textile exports news.ft.com

To: Haim R. Branisteanu who wrote (30513)	5/21/2005 8:39:45 AM
From: PAST	Read Replies (1) \| Respond to of 116555

If the analysis below is correct, Gold, Gold Shares, Foreign Bond Funds, and PM will continue to have a tough time recovering any time soon, but I haven't followed Henry To long enough to determine the quality of his analyses. Especially interesting is the recent post here that Bush has made an agreement with the ME to buy our bonds which would, if true, have the effect (somewhat) of slowing the rise in the Dollar (thus also reducing some concerns over deflation). Market Round-Up and the NYSE Specialist Short Ratio by Henry To May 16, 2005 >The March data on foreign reserves (the amount of foreign assets held in the custody of the Federal Reserve) has just been released - remember the following chart from two weeks ago? Quote from our commentary two weeks ago: "Studies by GaveKal (which is one of the best investment advisory outfits out there) have shown that, historically, the return of the U.S. Dollar Index has been very much correlated with the growth in the amount of foreign assets (which is pretty much all U.S. dollar-denominated) held in the custody of the Federal Reserve. By my calculations, the correlation between the annual return of the U.S. Dollar Index and the annual growth of the amount of foreign assets held at the Federal Reserve banks (calculated monthly) is an astounding negative 61% during the period January 1981 to February 2005! That is, whenever, the rate of growth of foreign assets (primarily in the form of Treasury Securities) held at the Federal Reserve banks have decreased, the U.S. Dollar has almost always rallied." Following is the revised chart (up to March) showing the annual change in the dollar index and the annual change in the growth (second derivative) of foreign assets held at the Federal Reserve banks: [see chart at link] Annual Change in U.S. Dollar Index vs. Annual Rate of Growth in Foreign Reserves - Should be converging! Please note that at the end of March, the U.S. Dollar Index was at 81. By the close on Friday, the Dollar Index has already rallied to 86.1. However, judging from the above chart, I believe a rise of the Dollar Index to the 90 to 95 level is now inevitable.< safehaven.com