Archive - Jun 21, 2010

Even as investors increasingly sniff at the possibility of the CNY becoming the new reserve currency, buying up the Yuan with both hands, resulting in a provisional close of 6.7970, the highest since the 2005 revaluation, and even as algos cheer this move in the futures market, gold hits another all time record of $1,263. For full implications of what buying both stocks and gold at the same time, we refer you to the previously published essay by Don Coxe, but in a nutshell, it is a rather bad omen, when stock appreciation is being hedged for complete systemic failure. In the meantime, China's UST holdings just depreciated by a few billion in FX adjusted terms, and the end of the USD accumulation, as well as its negative trade balance, means that the country will now be a second-rate player in the Treasury market. We really hope the frontrunning algos have it right this time.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 21/06/10