News 5.24.11, Commodities Games in China, South Sea Tension, US Debt, Emerging Market Risks

May 24, 2011



  • Steel : For Global Steel Industry China Poses Guessing Game – WSJ
    • “There could be far more (steel) warehoused in China than other producers realize”
    • “If Chinese economy softens, much of that steel could be exported, pressuring prices”
    • “Nobody knows how many steel companies are in China”
  • Soybeans – WSJ China Real Time
    • Copper has been used for financing schemes in China, Soybeans now also thought to be involved
    • Used as a way to circumvent tighter credit markets, companies borrow against commodities
    • Falling prices would expose scheme

China :

  • “Is South China Sea a New Dangerous Ground for US China Rivalry” East Asia Forum
    • Region is increasing in strategic importance for trade and power
    • Tension between ASEAN countries, countries aligning with the West as China asserts itself
    • Securing the South China Sea is the best hope for China to become a Naval Power
    • Eighty percent of China’s Energy imports pass through the South China Sea
  • “Pay Attention to China’s Marxist Revival” – WSJ China Real Time Report
    • Leadership wants to reform the Communist Party and return to it’s roots
    • Xi Jinping, the next leader, wants to revive Marxism adapted for the modern day
  • Richard Koo sees “Blood” amid Chinese Property Developers – AlsoSprach
    • Real Estate developer loans are high
    • Credit binge and spending surge leading to inefficiency
    • Government not omnipotent, despite what people say
  • China Growth Estimates coming down amid Tightening, Goldman Won’t Rule out 5-10% Drop – Bloomberg, Bloomberg II


  • Likely to Default Through Higher Inflation lending CDS irrelavant – CurrencyTraderMag
  • Market Performance During POMO Days – Quantifiable Edges
    • Takes more and more Fed stimululus to get the same amount of juice
    • Clear stock market performance degradation when no stimulus
  • Research Shows Spending Cuts Most Successful in Reducing Debt, Supporting Econonmy, Raising Stock and Bond Markets -
    • Most successful are government wages and transfer payment cuts
    • Least successful is raising taxes, which shows little to no benefit to improving debt situation
    • Refutes Keynesian principles that without government spending economy would fall apart


  • Bank Loans Surge 36%, defying Central Bank amid rising Current Account Deficit – Bloomberg


  • “Is Brazil at Risk of a Sudden Stop” – Deutsche Bank
    • Strong “fickle” inflows into equities and credit markets are prone to sharp reversal
    • Triggers are risk aversion and rises in foreign interest rates
    • Strong foreign currency position provides a buffer
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