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Trade War Tuesday - China, Japan & US at Odds
Trade War Tuesday - China, Japan & US at Odds
War does not determine who is right, only who is left. - Bertrand Russell
Just when you thought it was safe to go back in the water, Japan and China are at it again. We discussed the "fishing’ incident last week and Japan has released the Chinese captain who rammed one of their Coast Guard vessels. Now shippers in several Chinese cities said customs officers have stepped up spot inspections of goods being loaded onto ships bound for Japan and being imported from the country. Traders said officers in some cases were taking the highly unusual step of looking at every item in a container instead of following normal practice of examining a small sample. The heavy searches, which can add costly delays to shipments. For it’s part, Tokyo wants China to pay restitution and now China’s navy is moving into disputed waters.
China is fighting a trade war on two fronts as they are threatening to retaliate against US businesses operating in China if Congress passes legislation intended to force a revaluation of the Yuan. The House of Representatives is set to consider legislation this week that would let companies petition for higher duties on imports from China to compensate for the effects of a weak yuan. Forcing China to raise the value of its currency may create 500,000 jobs in the U.S., most in manufacturing at above-average wages, according to C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington. China’s currency, which is undervalued by as much as 25 percent, is the most important trade issue facing the U.S., he said in testimony last week.
So we are pressuring China to strengthen their currency, which would make our currency relatively weaker. One would think the dollar couldn’t get much weaker than it is now (see Dave Fry’s chart). We’ve been shorting GLD (buying GLL) and TLT, expecting a dollar bounce off these levels but if we fail here - we’re going to have one very ugly chart.
Of course a 10% drop on the dollar could be just the ticket for the markets - since our stocks are priced in dollars. That makes them look pretty good compared to cash that’s sitting on the sidelines (or tied up in notes) that’s lost over 10% of it’s buying power since June.
That’s right, JUNE! As people who travel to Europe are well aware, prices of things outside the US have gone up considerably in dollar terms. For our Multi-National Corporate Masters, who collect half their funds overseas, the dollar dive just represents another 10% pay cut for their American slaves, which is why the rich men are keeping the pressure on Congress, Treasury and the Fed to keep that dollar down. Americans aren’t buying anyway so who gives a crap about their worthless currency?
As The Market Oracle points out, the only people really buying Treasury Bonds, which finance our deficits are the "Primary Dealers," the too big to fail banks who get their money from the Fed and the Treasury through the wide-open "liquidity windows." Of course they don’t mind tying up their money in dollars as they borrowed dollars to buy the dollars and the Banksters make money on the rate spread. Banks borrow money at 0.25% FROM THE GOVERNMENT and they lend it back TO THE GOVERNMENT for 1-2.5% and THAT is how the US can give the banks over $4Tn of bailouts and stimulus WITHOUT CREATING A SINGLE JOB!
Look at what’s happening people: "They" (Banksters and their pet Government) have devalued 10% of your dollar-denominated assets in 3 months by printing 10% more money - all of which THEY kept. In fact, one of the parties in Congress wants to keep MORE of the money they are stealing and give LESS of it back to the people so they can make sure they have enough money to pay off the Banksters for all the loans they gave us with the money they stole from us. Man you guys are SUCKERS!!! Here is your market rally priced in Euros:
At PSW, we’ve been shorting Treasuries for a while now, expecting this bubble to pop and I warned members about this yesterday, saying (about where to keep your money):
I don’t care if you don’t trust the market - trusting the government to pay you back at all in 10 years is dodgey and believing that the dollars they give you after they rack up another $15Tn in debt (not to mention after a decade of unfunded baby boomer obligations coming home to roost) will be worth anything like the dollars you gave them a decade before is not even in the realm of rational. I am not joking - it’s not… People buying long-term TBills are simply not thinking things through at all.
Our hedges to go along with this comment were well-timed entries into TZA ($26.70) and EDZ ($28.10) but, of course, we did our usual hedged option positions (see link). Earlier in the day I had sent out an Alert to Members with a put purchase on BIDU and so far, so bad but we planned on scaling in and $105 is our expected top so we’ll see how that plays out. We also picked up a long on FTR (see Oxen Group’s pick) a short on the DIA a short on NFLX (yes, we dare!), more TBT ($31.44) and longs on RIG, HOV and AAPL plus a ratio backspread on WAG, who had a nice upside surprise this morning.
So, on the whole, we had trades for every direction and we can only hope one of them turns out to be right. The nice thing about the disaster hedges is they pay us over 1,000% if we hit them and that really helps to balance out a little speculative bullish betting. Generally, we’re following the strategy of building long-term positions in solid stocks that are cheap and hedging by getting a little short on the ones that seem a little stretched in value at this point.
Our overriding concern (aside from the macro issues I mentioned in yesterday’s post) is that much of the recent rally, aside from the fact that it’s mainly the effect of a weak dollar - is nothing more than a fake, Fake, FAKE prop job put up by the same Primary Dealing Banksters as they try to razzle dazzle the sheeple with the up market trick while they reach into their pockets and rip away 10% of their lifetime savings in asset value.
So it should be no surprise that today’s Case-Shiller Home Price Index came in up 0.6% month/month and that’s up 3.2% for the year, which beat expectations of 3.1% by a rounding error (the full amount was 3.18%). Still the pre-markets are in "razzle dazzle" mode now and up close to 100 points off the 5am lows.
Very nice - home prices are up 3.2% and the really good news is you get to buy them WITH DOLLARS, and those are worth 10% less so the homes actually cost 6.8% LESS when calculated in real money (and don’t calculate your home’s declining value in gold or you will begin to cry). As fundamental traders we look at the Case-Shiller Report and we look at the Dollar and we look at the Markets and we RUN AWAY! I mean really - are you people crazy? Prove to me that these levels will hold up AFTER the quarter ends and I’ll be happy to get more bullish but, for now, CAUTION!!!
Asia had a cautious morning with a 1% pullback on the Nikkei and the Hang Seng while the Shanghai gave back 0.6% and India held firm at 20,104. Europe is pretty much flat ahead of our open but also the beneficiary of a massive 5am (EST) prop job initiated by much better-than-expected German Consumer Confidence data and improving UK GDP numbers. As we expected from our discussion on Ireland yesterday, Moody’s downgraded their debt THREE notches to Baa3. Portugal is also having serious problems and this week the EU banks have to roll over $400Bn in debt so this party ain’t gonna be over ’till it’s over, as the great Yogi said.
We get our own Consumer Confidence report at 10am but no other data with Thursday and especially Friday giving us our major data-points for the week. We played bearish yesterday as those 7.5% lines did not hold up (see yesterday’s post) and we’ll be watching them again but I expect another day of two-way trading as we don’t know how low that dollar can go but we do know that stocks are priced in dollars so a further breakdown in the buck should be able to give us yet another push higher - but it’s a Pyrrhic victory at best…
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Americans are increasingly disturbed by the growing economic clout of China. With Chinese growth rates consistently above nine percent, they accuse it of stealing U.S. jobs, of keeping the yuan undervalued.
http://www.prime-targeting.com/trade-war-us-china/
Between Japanese militarism and Chinese communism, it would be a hard task to determine which is more bloody and evil.
But I do not believe Japan has no weapons of mass destruction (including the bomb). Japan is a country of secrets and hiding the bomb or its chemical/biological equivalent is not simply possible but highly likely.
@suteibu You know your history well. Too bad so few Americans realize that the US supported Mao and the communists. It is apparently too hard to believe. Yes. There would have been no Mao the Murderer if the US had not supported him.
Japan needs to work more on becoming a voice in world leadership. The missteps of the Showa Era are an embarrassment to Japan. But, Japan must be realistic and move ahead. To rely on the US is a mistake.
China will never stop being evil, because in the first place, China is evil to its own citizens. Why would it behave better to the rest of the world?
When Japan left Taiwan, the people there cried. They did not want communist China. They had benefited greatly from Japanese investment and infrastructure - as Japan provided in many other Asian countries at the time. By comparison, the habit of the Chinese communists was to destroy everything in order to make the citizen powerless. China even destroyed its own infrastructure. China will not be a voice of reason for the foreseeable future. It is imprisoned by red bureaucratic thinking and the small minds that come from reading a little red book.
Old tricky Dick Nixon opened up trade with China to the utter surprise of the Soviets which was indeed his intention. Fast forward 30+ years and we see the results. Soviets imploded but China prospered and now represent new US challenge which is more economic than military but serious nevertheless since they essentially finance our folly. Would it not be ironic if China and Russia now played a game of detente to our utter surprise. Russian energy for Chinese manufactured goods we taught them to make is a good bargain especially if it limits US power in their respective regions. Only problem is what to do with all those US dollars in Chinese hands that weaken by the hour and Congress threatening to weaken even further .Be careful what you wish for and watch for who will buy treasury bonds after the bank bailouts. Japan and the UK can not although oil producers can but will debend on the price of oil
Japan is a slowly dying country. They have an enormous debt load and a horrendous demographics bomb. The Chinese remember how the Japanese military treated their civilians during the Japanese colonization of the early 20th Century. It was savage to put it mildly. China is going to seek revenge in a nonmilitary manner, economic destruction of the Japanese. China smells the current opportunity.
@Vampyroteuthis Do you really know or understand anything about the comparisons of China and Japan? No. Just what your stupid gradeschool textbook taught you and what you see in Hollywood movies. China is, was and has been a massively corrupt country. Your sense of proportion is non-existant.
what's a 'dying country' anymore these days? fall from previous grace?? look around, everyone already done that.. is japan going to turn into iceland?
After what horrors China put up with in WW2 from Japan, they turn around and do the SAME THING to TIBET.
The horrors inflicted by Japan upon the citizens China PALE in comparison to the horrors Mao and his red army inflicted on the citizens of China. China still treats its population like dogs. That's why Chinese people are trying to escape to Japan by the boatload, just as they have tried to do for generations. I don't see any Japanese risking their lives to stowaway in boats to China. Use your heads people. Open your eyes. The facts are right in front of your faces.
For Japan, it is all about food.
They have 3 times the population that their arable land can support.
The Emperor gets into a rice paddy every spring to symbolically show that all Japanese are in the same paddy.
Did you ever see photos of sprawling food fields?
Their protein comes from the sea. Fishing is everything. Look how they fought to keep tuna off the endangered species list.
The Chinese are fishing more and going farther afield. The Three Gorges Dam has ruined the East China Sea for fishing as no nutrients are getting to the fish. More Chinese and Japanese fishing boats are going to bump together. Soon their navies will be bumping together to protect their own.
To the Japanese it is all about food.
The 1973 American Soya embargo of Japan had a great effect on Japan. The embargo was due to an El Nino that caused drought in the US. The American cattle farms needed feed. It was after this that they bought up America so that they would have leverage. There have been no food embargoes on Japan again.
I do not doubt that those Congressmen with a strong Japanese manufacturing base in their constituency will be the most vocal for the USA to intervene in this brouhaha.
www.neaculture.it/The%20Political%20Economy%20of%20Food.pdf
Sorry Pal. But welcome to the 21st century. This has nothing to do with food.
The 21 st century is about food.
Saudi to buy large chunks of Ethiopian landWritten on Monday, April 6th, 2009 at 6:59 am by ethioforum
(06 April 2009) A consortium of five Saudi business men has pledged an investment of $266 million into agricultural projects in Sudan and Ethiopia. The projects will lease land in the two countries to produce food for export to Saudi Arabia. The Ethiopian portion of the deal was reached as part of a wide ranging programme of investments signed by Saudi agriculture minister Fahd Balghunaim and Ethiopian Finance minister Sufian Ahmed.
In Sudan, a Saudi Arabian firm Hail Agricultural Development Cooperation (HADCO) has leased 22,830 acres (roughly the size of the French capital, Paris) in the northern part of the country. The deal worth $45.3 million sees HADCO lease the land for 48 years to grow wheat and corn for export to Saudi Arabia and gives the firm an option to acquire a further 80,940 acres.
The investment deals are part of an initiative by the Saudi Arabian government to secure food security for the Kingdom by acquiring fertile land in neighbouring countries with sole aim of providing food supplies for the country.
This is part of a trend that has seen an increasing amount of “food Security” investments by Asian countries in Africa. In Madagascar the recent coup was triggered by amongst other reasons opposition to the deal between the former government and South Korea to lease land the size of Belgium to the Korean firm Daewoo to grow and export food back to South Korea.
The following report sets the tone for the 21 st century.
An Abrupt Climate Change Scenario and Its Implications for United
States National Security
October 2003
http://famguardian.org/Subjects/Environment/Articles/ClimateChange-20090131.pdf
Yes, at this time China is acting in a belligerent manner due to past well documented and recognized Japanese cruelty. Japan is thinking about it's table and not it's past misdeeds.
We're all are living in Amerika...
Amerika, it's wonderba!
We're all are living in Amerika...
Coca-Cola and sometimes (trade) war.
www.youtube.com/watch?v=yydlX7c8HbY
Historically they have spent more time invading other homelands. I think the Chinese would be wise to remember what a berserk Japanese nationalist looks like.
Perhaps the mistake the US made was not getting to Japan before Germany did. Or the US siding with the Communists of China versus the Nationalists.
It might surprise you to know that just about every action by Japan since the US "opened" them has been either in concert with the US (often through backroom deals to keep the US's hands clean) or in reaction to the US. The Chinese might use Japan to get at the US but they would be more concerned about an economically struggling US than a "berserk" Japan.
Congratulations. You did read your 6th grade social studies book.
However, you might want to study the issue a little more deeply by considering some actual historical facts about who's done what to whom.
The point is, the US is going to protect Japan about as good as it protected South Korea when North Korea torpedoed their ship. Forget about the factories in China. Japan needs to worry about preserving it's homeland.
Just thought the Japanese could use a heads up in case they didn't figure this out yet.
Unfortunately, they are clinging even more to the US. This is working out well for the US.
It usually does. Spread the word...
China is clearly hankering for a serious spat. We'll see how well the present US Administration can screw the pooch on this front. We all know who's going to be the loser though. Yo. Japanese people. You need to change your Constitution.
If they get one, there will be no shortage of people in the US willing to deal with the problem in a most-unfavored manner to supporters of China.
China and Korea are not impotent anymore. Japan is incapable of threatening them with gunboats anymore never mind invasion and occupation. The Chinese have the Japanese by the shorthairs. The Japanese factorys in China are not under Japan's full control. The Chinese have eliminated the Japanese as a major competitor for resources. The Japanese better get ready for the future. Being antagonistic against your larger neighbor is not the way to survive into the future. The West will be incapable of protecting and providing for all of Japans commodity needs.
Hardly so, but don't let that interfere with your Third World lovefest.
Japan can afford to be given the US's implicit backing. They make a few golfcarts in the US, we return by making sure China stays out of Japan.
And do you think the US's position is any better.
I already drank myself stupid last night. Anyways, when is the hyper inflation suppose to get here? I'm getting impatient. It's like waiting for the bullets to arrive via Fedex for my gun so I can blow my brains out.
I hope you aren't so stupid as to be short GLD! Not with the blizzard of bugout clauses detailed in the GLD prospectus! Not while the warships are setting out to protect sovereign honor on the high seas while central banks play chicken with their currency and the global trading house of cards. And didn't Iran just fess up that its nuclear establishment was under severe cyber attack by the Stuxnet virus. What will their honor require in retaliation? Some trades are not worth the risk because of the asymmetry of the outside forces.
If something happened in Asia, you might be hours late in the 24 hour currency markets before you could close out your position / when the market opens locally, if it opens under normal rules. Clearly, don't try this at home.
Huh? If I were still actively trading, buying puts on GLD would be one of my strategies.
I'm not suicidal anyone. Just I'm annoyed and impatient that the end game isn't here. I was making an analogy, a poor one I guess.
Right I'm on 4chan in a boobs thread.