MarketVVizard's Market Thoughts: Re: Re: From latest public Trimtabs [Dec 22]

» Austrian - Re: Re: From latest public Trimtabs [Dec 22]

In response to message posted by azxcvbnm:

You are right. The Yuan revaluation will be small at first, but the entire world was not expecting a change in peg or revaluation. This revaluation must be caused by increasing raw material costs outweighing the benefits of finished goods exports. Given most Chinese companies operate at less then 10% gross margin, even a modest increase in RMs leads to a need to change the Peg.

The goal of the revaluation is dollar up, copper down, iron down, and oil down, generally all commodities down as they are dollar denominated in international trade. A side effect is the Dollar, gold and silver should correct, perhaps severely.

Given the significant move in the dollar over the recent few months, the correction could be extreme due the extended nature of the currency markets. This has lead to massive treasury purchases, a lowering of interest rates, which can become self reinforcing similar to the opposite when Greenspan said the Fed would not buy long term bonds.

Gold could easily break 400 on the downside, the Ten year treasury could approach 3.8%, and 30 year mortgage rates could drop below 5%.

Regards,

--Austrian

-- posted by Austrian