9 replies to this topic

[arbman]

All these trips that the treasury secretary has been making to China should be to sell something, right? After all the guy is from GS... So, China will not buy the US Treasuries, the dollar is weak, the rates need to stay high for this reason and the only way the rates can stay high is if somebody directly invests in the US stocks. If the US businesses go into a recession from here, the consumer will be very much stressed since the rates can not easily come lower before the USD goes higher some. China will also feel a lot of pain during a consumer spending recession in US. In late '90s boom, US had a strong currency and high rates because of the direct foreign investment in massive amounts. Will the pattern repeat? The housing would continue to have trouble since the rates can stay high during such a period... Something to wonder about... - kisa

[Cirrus]

Energy, materials and precious metals holding up nicely....they're buying right now IMO.

[CNSZ]

Chinese do want to invest in US and other western countries, like they just invested in BX and Barclays. the issue is they may not be able to do that. if they invest too much money in one company or one sector, congress will for sure steps in with a reason to black the deal. but as a country, there is basically not possible for them to invest in broad market link index fund. so there is no hope that Chinese will rescue the market for us.

The reason for treasury secretary and other visiting China most likely are trying to slow down their move to unload US treasuries. Chinese still holding a lot of US treasuries, but their recent move to invest in BX, Barclays and keeping buying oil field around the world is a sign of moving away from keep buying treasuries with their reserve. there is noway US can stop their move, but we may be able to make a deal with them to slow down the movement.

All these trips that the treasury secretary has been making to China should be to sell something, right? After all the guy is from GS... So, China will not buy the US Treasuries, the dollar is weak, the rates need to stay high for this reason and the only way the rates can stay high is if somebody directly invests in the US stocks. If the US businesses go into a recession from here, the consumer will be very much stressed since the rates can not easily come lower before the USD goes higher some. China will also feel a lot of pain during a consumer spending recession in US. In late '90s boom, US had a strong currency and high rates because of the direct foreign investment in massive amounts. Will the pattern repeat? The housing would continue to have trouble since the rates can stay high during such a period...

Something to wonder about...
- kisa

[arbman]

Well, if they unload their treasury bond reserves, the market will sure collapse, but then there will be a global recession probably and they will have to buy them back, I don't see the logic. It is probably not their selling, but probably their lack of buying is causing the trouble...

[arbman]

CNSZ, how did the foreign investment come to US during the late '90s?

[pdx5]

There is just no way China can unload USTreasuries. Just think about the consequences. Interest rates on UST will have to be jacked up to find new buyers and new cash so that China can be paid for their UST's. (Federal budget has no surplus cash to dole out). If interest rates go any higher, what happens to housing? That's right! It gets creamed. If that happens what happens to consumer spending? That's right it tanks! If that happens what happens to Chinese exports? That's right they get flumoxed. That will then start a vicious downspiral in world economy and trade. NO, China will not unload UST's, not right now. May be when US economy and housing are again on an upswing.

[Cirrus]

Well, if they unload their treasury bond reserves, the market will sure collapse, but then there will be a global recession probably and they will have to buy them back, I don't see the logic. It is probably not their selling, but probably their lack of buying is causing the trouble...

If they unload them at a moderate pace the dollar will decline and they make more on basic materials and precious metals positions they buy/own.

Actually, I really don't think this correction ends until energ and materials take some sort of hit.

[CNSZ]

Sorry for used wrong word. I should have not used word "unload". the reality is that China is not buying as much US treasuries as before. Chinese trade surplus for the first 6 months this year was 110B plus, up more then 85% from year earlier, but. Chinese only added 6.5B us treasuries between Jan and May this year, they purchase 11B between Jan and May last year. The investment they made recently is a clear indication that they are seeking a way to make better use of their foreign reserve then buying us treasuries. I do agree with your guys that Chinese is not unloading us treasuries, at least now. if they do that it will hurt both economy. They will even keep buying, but may be not at the rate we'd hope.

[CNSZ]

CNSZ, how did the foreign investment come to US during the late '90s?

You can not compare late 90s to now, in the late 90s, we do not have such big deficit and we were even tried to pay off some of the government debt, US dollar was strong, we are the leader in the internet booming, bond market has better return. What do we have to attract foreign investment today?

[arbman]

What attracts the foreign investors to the US markets is the liquidity and the size of the US markets. You can not move the same kind of money in any other market. So, when you go with secure and liquid markets, the US markets are still the dominant markets of the world...