Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: John Pitera who wrote (84571)	9/4/2008 6:20:58 PM
From: mishedlo	Respond to of 116555

Thanks John - Well stated - EOM

To: John Pitera who wrote (84571)	9/4/2008 7:11:50 PM
From: ajtj99	2 Recommendations Read Replies (5) \| Respond to of 116555

From a technical standpoint, if the Euro does not hold 143 USD, it's got little between there and 136. It has quite a bit of support in the 135-136 area. Ultimately, it is likely headed to 125 and 117. This in turn is causing the USD to stabilize against the Chinese Yuan, as the Euro had actually appreciated against the Yuan since the creeping peg was adopted by China in 2005. The Yuan is currently about 4% higher against the Euro than it was 3-years ago, so China would like to see its currency appreciate some more against the Euro to deflect trade protectionism from that area. What does this mean for China? Well, 50% of the Chinese growth has been due to foreign direct investment the past 2-years, and much of that was due to the 1-way currency bet, as it locked in 5-8% gains annually. With the strengthening USD, that foreign investment should drop. Already real estate prices are dropping 15-20% in many cities in China as these flows of cash are not being sustained, and this could be just a beginning of a larger slowdown in China. China is important because of their appetite for commodities. A slowdown there brings lower prices everywhere, and it also reduces flows of funds back to the USA. The global economic slowdown is an unwinding of leverage and credit that is only just starting to show its effects. We likely won't feel the full force until 2-years from now.

To: John Pitera who wrote (84571)	9/4/2008 8:01:37 PM
From: ggersh	3 Recommendations Read Replies (1) \| Respond to of 116555

John, " bigger trend changes in currencies do tend to take a period of many months and quite often a few years to turn" How absolutely true! I've only heard one other person state that in 30 years in the business... "It's highly dangerous for global financial markets to be experiencing this extended period of extreme volatility and massive directional price swings. It's way too easy for banks, Investment Banks, Global Macro Asset Managers, Private Equity, Hedge Funds etc to get caught on the wrong side of several consecutive 4 to 6 standard deviation market moves and the panic and "hail mary" mentality that comes into play when trying to cut losses, make those losses back... and get the balance sheet looking better." Another great observation, very seldom heard. Thanks for a great summary of how scary it is out there ...