Wednesday, January 23, 2008


Who will bounce the highest?

It has been on the horizon for a long time. The US cannot afford to tolerate the trade imbalance with China. The only way that seems plausible to stop that is to crash the markets and bring the yuan down. Beijing has refused to do Washington's bidding on this, and rightly so. It needs to keep its own market as stable as possible or slide into social chaos.
The Federal Reserve seems to be panicked with its declaration of the largest cut in two decades causing further panic on Wall Street, and Hong Kong, India, Germany, Brazil and Japan taking a hit. London seemed able to stop the slide after a wild day's trading that flipped between gains and losses, but ended in a gain.
Russia's RTS crashed through the 2,000 mark.
Asia has been badly hit in this crisis alongside the subprime disaster.
It seems Bush's idea of a money toss failed and the Fed's cut caused more panic at first, though things may slow a little today.
Out of all of this financial storm the best result will be seen in the emerging markets which are somewhat immune to Washington's trantrums. Europe and the US, however, will not see too much of a recovery as the market is awash with money, but investors will not be too quick to invest in the slower recovery of economic giants. Rather, those with any sense will see the greater gains to be had in markets in Eastern Europe, South America, Chin, Vietnam, India and Africa. So at the end of the day, the US will lose again.
The fed cut seems to show a sign that the authorities are in panic and whether or not this is true does not matter. The result will matter. Those short-term high risk traders will stampede. The question remains as to who will suffer the greatest losses.
My money is on the US.
This is because other markets are financially sound. They have the depth in industry and growth to support them. America does not. When they put their hands into the basket it will be empty, while other countries, like Ireland and the UAE will still come up with a fist full of opportunities for growth.
It will be interesting to note where the big US players have hidden their funds to wait out the crisis. The soaring gold price would be some indicator.
Bush has taken a terrible gamble. He cannot be sure that the big boys will bring their money back into the US at the end of the day. After all, when the US can offer minimal growth, GEMs can offer double, tripple or up to 10 times that amount. Why would any investor want to ride that tired old horse.
This idea gives Russia a lot of confidence, as it will to China and India. They know the money is waiting, it has been sucked out of the US and once the fear eases it will flood into new markets.
This makes the investor in the line to score and score big.
Industrial giants like Gazprom have taken a hit and are now undervalued. The energy giant has shed around 7% in this crisis. But when it rebounds you can be sure that it will pick up much more than that as investors go after the bouncers.
Do da peoples in Russia pay you to writer this stuff?
Weren't you in da KGB? Are you in da FSB now?
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