Two Chinese Bond Auctions Fail

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Mon, 05/16/2011 - 11:18 | 1279249 EscapeKey
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I see the Chinese haven't yet managed to copy the US system of Primary Dealers and Open Market Operations.

Mon, 05/16/2011 - 11:27 | 1279299 bonddude
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Rift between Politboro and PBOC ? I smell JASMINE !

Mon, 05/16/2011 - 13:23 | 1279798 TruthInSunshine
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We will all look back to this period and realize, collectively, that even as bad as things are in the house of finance regarding the U.S. and most of Europe, China was tulip central.

My very unpopular view is that many multinational corporations are going to get burned long and hard on their infrastructure investments in China.


Mon, 05/16/2011 - 11:38 | 1279303 bonddude
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Bill Gross must have gotten word that the Chairman was displeased.

Mon, 05/16/2011 - 11:15 | 1279250 FOC 1183
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take notes Tim

Mon, 05/16/2011 - 11:23 | 1279269 Math Man
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Failed auctions = Real rates will soon be positive = The Chinese will stop buying PMs.

Goodbye gold, Goodbye silver.




Mon, 05/16/2011 - 11:25 | 1279292 SilverRhino
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Congrats on getting it completely backwards you dumb fuck.

Mon, 05/16/2011 - 11:30 | 1279304 EscapeKey
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Making sense is not part of MethMan's agenda. It's all about spreading FUD for his corporate masters.

Hey, MethMan, is that line part of the daily update you were mailed from your "marketing" employer today?

Mon, 05/16/2011 - 12:48 | 1279651 DonutBoy
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Why all the vitriole?  Is it possible he has a point?  All the anger sounds like some pretty defensive PM investors.  There is a region where MathMan is right.  If people believe in inflation but not in currency collapse they seek yield.  That describes my parents.  This is how they're investing their retirement funds. That is the Bernank's target region.  Other investors, like me, believe he'll overshoot. 

It is important to be asking why your investment thesis may be wrong.  I'm glad you're here MathMan.  I want to  see what you have to say.


Tue, 05/17/2011 - 00:34 | 1281955 h3m1ngw4y
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he is right. but real interest rates will not become positive in an inflationary environment

Mon, 05/16/2011 - 11:46 | 1279358 Math Man
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The only ones who have it wrong are you guys...

The Chinese and the Indians are the largest buyers of PMs - BECAUSE THEY HAVE AN INFLATION PROBLEM.

Real rates are negative - they have no choice but to buy hard assets.

Failed auctions mean investors are demanding higher rates...and that real rates will soon be postive.

Positive real rates will DESTROY precious metal demand from India and China.

And thus the price.   Not to mention the impending collapse of the commodities market that will squash US inflation expectations. 

Mon, 05/16/2011 - 11:47 | 1279376 EscapeKey
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From the 'bible' on hyperinflations:


Mon, 05/16/2011 - 11:54 | 1279393 Bay of Pigs
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Where do come up with this shit? Do you read anything posted here on ZH?

I don't think you do. In fact, I'm sure of it.

Mon, 05/16/2011 - 11:56 | 1279399 trav7777
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then real rates will never be permitted to be positive, because failure to grow = implosion.

Tue, 05/17/2011 - 01:23 | 1282050 TruthInSunshine
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"It only takes 32.5 renminbi to dig an ounce of silver out of the ground."

Mon, 05/16/2011 - 14:14 | 1279994 strannick
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Mathman gored by SilverRhino.

Mon, 05/16/2011 - 11:28 | 1279293 SheepDog-One
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Meaningless drivel, as if PM values are only relevant to whether or not China is buying them? Hold whatever paper you want.

Mon, 05/16/2011 - 11:29 | 1279311 KlausK
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Meth much?

Mon, 05/16/2011 - 11:30 | 1279313 Tortfeasor
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Remind me again, what happens when people lose faith in currency?  The stop buying ______ and start buying ______?

Mon, 05/16/2011 - 11:42 | 1279344 TheTmfreak
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They stop buying popsicles and start buying bubble gum.


Mon, 05/16/2011 - 11:45 | 1279364 tmosley
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I'm all out of bubble gum.

Mon, 05/16/2011 - 11:52 | 1279384 TheTmfreak
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Although now that I think about it I shouldn't be surprised but... I was surprised that came from a movie rather than Duke Nukem....

Your face. Your ass. What's the difference?

Mon, 05/16/2011 - 12:25 | 1279527 tmosley
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"They Live" is EXCELLENT.  One of the greatest fight scenes in western cinema.

Mon, 05/16/2011 - 11:44 | 1279348 Urban Redneck
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Time for Chinese banks to dump reserves yielding a negative real rate to make room for Central Committee mandated purchases.

Mon, 05/16/2011 - 11:42 | 1279350 tmosley
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Real rates are negative, therefore they will soon be positive?


Mon, 05/16/2011 - 11:21 | 1279273 oogs66
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China might have to sell some treasuries so they can buy their own paper? 

Mon, 05/16/2011 - 11:23 | 1279284 DK Delta
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We are drowning in debt. People are looking for a sandy beach.

Mon, 05/16/2011 - 11:27 | 1279289 Deep
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Hey Tyler, Bill Gross just "spoke" about you over on CNBC

Said some blogger, misconception




Mon, 05/16/2011 - 15:10 | 1280194 speconomist
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Hehe, just watched the video from CNBC posted here, didn't realize he was talking about the Tylers!!!

Mon, 05/16/2011 - 11:27 | 1279291 Cognitive Dissonance
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It just means the Chinese don't have enough leverage over their primary dealers.........or who or whatever serves the function of drinking all the debt served with the noodles.

Mon, 05/16/2011 - 11:30 | 1279298 Azannoth
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It's called Blow Back, bitchezzz

Or look up Newton's 3 law of physics

Mon, 05/16/2011 - 11:29 | 1279302 TorchFire
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They will fully monetize their debt...just like the Bernank.  Ultimaely this will be very good for PMs as the intellectually sleepy of the world come to realize the pervasive fraud of central banks.

Mon, 05/16/2011 - 12:26 | 1279535 stewie
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FYI:  China is not the US.  They can't "fully monetize their debt" while maintaining the peg.  The problem they are having right now is one of liquidity caused by the raising of banks' reserve requirements.  

Amen on the eveilness of CB however.





Mon, 05/16/2011 - 11:30 | 1279306 SheepDog-One
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They cant auction off 1 year debt? Wow amazing. I guess theyll dump the remainder of their worthless UST's now.

Mon, 05/16/2011 - 11:31 | 1279317 Out9922
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Mon, 05/16/2011 - 11:42 | 1279342 topcallingtroll
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Not a chance!

They only survive complete economic ruin if they maintain a suppressed currency.

They know the endgame is a rising yuan. They are trying to keep the rise as slow as possible.

Mon, 05/16/2011 - 12:38 | 1279586 stewie
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Yes absolutely.  Ben's playing Currency Chicken, trying to get the Yuan's rise to accelerate in order to rein in US current account deficit.  He knows this will cause pain to China by way of inflation.  Right now the Chinese are trying to suppress inflation through traditional means (rising RR & intersts rates), but nothing can be done with the cost pull inflation caused by the falling USD-Peg.  China is clinging to the US tooth & nail, and Ben has jumped in the water with an air tank.  It's only a matter of time when China has to let go to get some air, or drown.

Check the Yuan's peg.  This will signal an end to PM's raise, unless this chicken game ends in a head-on crash.  In that case, holding physical will might you. 


Mon, 05/16/2011 - 11:39 | 1279330 topcallingtroll
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America haters like to ignore that we have the advantage in this game and china is weak and about to implode the greatest malinvestment bubble in history.

America haters may try to ignore the truth, but the chinese government is well aware of their disadvantaged position.

Mon, 05/16/2011 - 11:51 | 1279381 tmosley
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The Treasury Bubble?

Or the Dollar bubble?

Mon, 05/16/2011 - 11:38 | 1279333 Oh regional Indian
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As an aside (southward) India has been raising rates to fight the inflation monster (same situation here, essentials are way too expensive, junk is cheap and can be bought on credit, classic bi-flation via hyperinflation and super-deflation in tango).

To walk about in an Indian market is to see the essence of social engineering displaying it's finest victory. The 300 million, newly minted Great Indian Middle Class. Soon to be taken to the cleaners, but right now, who needs food when you get a Maybach? Eh???

Weird world.


Mon, 05/16/2011 - 11:42 | 1279340 dracos_ghost
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Chinese hard landing anyone?

Mon, 05/16/2011 - 11:49 | 1279385 trav7777
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Bbbbut....I thought the yuan was the new reserve currency!??!!

Mon, 05/16/2011 - 11:55 | 1279390 eaglefalcon
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As far as monetization of debt is concerned, the Bernank and the Jeetner has a scam going on:

1.  Geetner prints treasuries and sells them to primary dealers

2.  Bernank prints federal reserve notes and buys from primary dealer

Those two have a stealth, incestous relationship.


The problem for the Chinese is that their Ministry of Finance doesn't issue bonds, the the central bank (PBOC) does.  So if they want to monetize, this is what they need to do:


1. Zhou xiaochuan prints bonds and sells them to commercial banks

2. Zhou xiaochuan then prints RMB yuan and buys from commercial banks


That wouldn't be stealthy incest at all.  It's more like masturbation in public 

Mon, 05/16/2011 - 12:06 | 1279463 instinctiveDrift
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+1000 For the coffee I just spit all over my monitor. Great analogy, thanks for the laugh!

Mon, 05/16/2011 - 12:11 | 1279489 EscapeKey
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I agree. More links are required for opaque accounting fraud.

Mon, 05/16/2011 - 12:18 | 1279512 KlausK
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Touch of genius. We get the picture ... Urrgghh

Mon, 05/16/2011 - 12:51 | 1279673 Calculated_Risk
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I can't decide if I need a cigarette or a shower after that...

Mon, 05/16/2011 - 11:57 | 1279417 PulauHantu29
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"Very Bullish for the markets," says Wall Street.Should be worth at least 0.5 GDP Boost.


Mon, 05/16/2011 - 11:58 | 1279424 Atomizer
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Man who fishes in other man's well often catches crabs

Mon, 05/16/2011 - 12:25 | 1279541 carbonmutant
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The 2012 we get is not the one this administration is talking about...

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