Uranium 2010.07.28 While gold and gold pull back, uranium has a sudden up movement. The price of uranium oxide has jumped three days in last two days and today in this order: U$1.25, U$2.00 and U$2.50. With such a jump, the uranium stocks are very excited for a few days and finally settle down. CUSI has lower by 0.95 or 1% after going up 10% this week and about 3% during the last 2 session of last week. Uranium is very inactive on the COMDEX market. The volume is low. Now the UX is above the 80 RSI, we may see some pullback or sideway action. This is not necessary the best time to jump in.

Gold 2010.07.28 Gold is not the only commodity took a fall of 1.8%. Oil also. Gold contract will be expired on July 29 which is tomorrow. If you could not deliver, you have to sell the July contract to escape the delivery. Last month, on June 28 the drop was U$15. Following that only July 1, there was another U$45 drop which may not related to delivery. It could be a conspiracy theory to avoid delivery but the volume in July is one of those high volume month. The continuation of contango could rough a few feather. May be we shall see more of these month end fall.

Gold 2010.07.27 Gold correction may have a bit more to go. So far the trend is intact.

Gold 2010.07.25 Growth stocks usually does not pay dividend. People invests in it for its growth. Gold does not pay dividend. In the long run, it appreciate. Gold stock are some what in between. You will expect it performs in the middle but not gold stock. Taking a timeframe from 1999 before gold price slumps, it was sitting at U$290 on January 1999. It makes 300% gain up to now. HUI has a 600% gain, TSE is 77% and Dow Jones is a meager 12% gain.

Money Matters 2010.07.25 The TSX S&P Index is definitely overbought as indicated by the steep OBV.  If there is any inflation, there may be more buying and holding. When there is buying and holding, the supply of stock in the market is becoming scarce. So it is not necessary rally is supported by high volume. When rally is supported by high volume is either short covering or panic buy. Both are not healthy indicators. Now we should debate on whether inflation will push the value of the equity which will drive up the price. It is wrong to assume the inflation will drive up the equity price in discriminately. When the product of a company has the pricing power, the inflation will pass on to the customer so the profit margin of the company could be protected. If the company loses it pricing power, for example due to vicious competition, the profit margin will not be pushed up. The value of the company may go up due to the inflation of the asset held. This is again go back to the factors that equity's value is based on. GE is a good example that its assets are world class. But the share price does not go anywhere in the last 10 years. Why? Because the rise of the BRIC which is emerged from lost price product manufacturing to high tech. Bell weathered company such as Coca Cola grows through competitors destruction does not work any more when BRIC set up the fair competition rules that do not dominated by the American Economic Empire. Analysis in the market is traditionally tied to first level of observations which manipulated by media. If you can control the media, you can control the company report. The actual fact is lying 3 or 4 layer below which Don Coxe calls the 16th page news. Why now the professional analysts have difficulty because they are not trained to analyze fact 3 or 4 level deep. This is why retail investor are in a very difficult position if they could not do their homework. This is why you cannot just buy and hold using the first level fact. You still can do that using much deeper levels of fact because this is the reason why you hold and wait for the growth opportunities.

China 2010.07.21 On July 2, 2010, CNBC reports that "GM's Auto Sales in China Top US for First Time". On July 20, 2010, IEA report "China overtakes the United Strates to become world's largest energy consumer". In both cases, it is the total that China exceeds American not the per capita. This is the key point because with 1.3 billion of population, i.e. about 4 times of American, it just means the potential up side will be way higher if there is a catch up, even it is not at par. All these indicate China is on track to her growth. During the 1940 while China was on silver standard, American forced the rise of silver to bear the deflation upon China. Now American forcing China to appreciate the yuan. It is repeating the same exercise but this time the effect will be different because China will use the saving to buy out American. Stay tune for the new development.

Money Matters 2010.07.20 The WTI price has a very interesting feature. The 50MA crosses under 200MA but turning level or a bit of up. The daily has risen above the 50MA and about to rise above 200MA. The MACD is also turning positive. WTI may prepare a break up.

Money Matters 2010.07.15 Is U$ going down? Is U$ peak? With the right timeframe, you can almost create a situation you want. The following has a few charts from StockChart.com (thank you). There are week chart. From the SmartChart, we see two major features, there could be a bottom head and shoulder if the right shoulder could be complete which means USD rally back to 88. From the RSI, it has dove below 50. There may be a few more measure to hit the bottom. The trend line for the bottom of RSI is also getting higher. There is a 60% possibility to make the right shoulder. Other than that the P&F has clearly indicate a bullish up trend. So can fundamental support this? Yes. Most of currency are going to be competitive devaluate. As U$ does not deteriorate worse than other European and Japan economy, she will be ahead. The demand for U$ will remain high. During the volatile period, there will burst of moment to pull down commodities. Copper is being dump as its stock level at LME doing a free fall. As commodities are decoupling the U$ we can see the major trend of commodities are continue to point upward. Don Coxe has given meaningful warning last Friday during his conference call. He warns that there are many ferocious player on the commodities. Retail investors may not measure up to trade against these professionals. This to me is just another way to say extreme volatilities.

Moneynamic 2010.07.11 Day to day, we do our business (real or virtual) using money. We put away our salary, saving etc mostly in our bank (piggy or not). It is not surprise to me that common people see money equate the wealth. But it comes to me as a major shock that analyst and economist see money is wealth. This is saying weight is equal to mass in physics. They are related closely but not exactly the same because money is the projection of wealth. The real McCoy could not be mixed up with its shadow. Who studies economy understand the world could not develop efficiently without money which is an exchange rate (when tangible becomes the exchange medium) between goods (including arts and human life). Along that line, when did the economist and analyst forget the fundamental of economic and started to say money is wealth? The money system (use of money for trading) creates a systematic, measurable, and descriptive way to do transaction within a circle of influence (the same money system). (Note: The EU as many pointed out now that, is a number of circle of influence bond together by political whip.) Beyond the same money system, the recursive function (defining the rate of exchange is now not for object but between currencies) repeats itself. When the bank note issuer say the money is backed by something, it is a security system put in place to ensure the integrity of transaction during the lifetime of the transaction. When this integrity falls apart you will have a currency that changes its stability (exchange rate of objects) volatily fluctuates that makes the transaction's integrity jeopardized because you are not sure what is needed to complete the transaction. This has been observed by many economist that volatile foreign exchange rate (not necessary getting higher or lower) will kill international trade because the planning becomes extreme difficult. Does money really needed gold or some stable backing? The question should be divided into two parts: stable backing and whether gold is a good candidate to back money. If promise could be enforce, promise could be. The trouble with promise is that it could be fabricated. It is not necessary to be gold, anything that could not be created out of thin air can do. In fact, many new founded countries do not have any hard asset backing their currency before they were formed by need a currency for political or practical reason are simply backing the currency with trust. There is nothing wrong with trust until it evaporates. If we drill deeper on the fact that people complain about non-gold backed currency suffered from inflation. This simply not true. Materials are consumed. It is getting more scarce. So supply is reducing. The law of elasticity can tell us that the life is getting harder because we have to pay more from from a smaller pool which means lower supply and higher or unchanged demand. In a closed reference system, e.g. a country, the demand will not be the same because the population and the distribution of wealth will change. It is always the government's intention to grow the salary which means more tax revenue to pay the devaluated treasury. If we accept that, we also have to agree on the fact that the level of economic progress around the world are not even. Some will be lagged and some will be more advanced. When the advanced moves slower, they may not reduce the consumption but the lagged may increase the pace. As the result, we are witness the increase in demand. Consider the population at the beginning of the 20th Century, according to Vaughns-1-pages.com (http://www.vaughns-1-pagers.com/history/world-population-growth.htm), the world population was 1.6B. At the end of 20th Century, the population is 6.1B. A growth of roughly 4 times. This could push the price by a factor of more than 10 folds using the famous hyperfolic supply and demand curve. We should also observe that the growth rate at Asian is about 4.5 times of the West. This menas the Asian's demand on material will exceed 4.5 times because Asian was lived in a much lower living standard than the West. The West has been living on what the Est could not afford. When the table is turned, the purchasing value of a U$ reduces to a penny is not surprising.

Gold 2010.07.08 After the new high U$1,266 on June 21, gold has gone done quit a bit to the current U$1,190 level. There is a different about U$80 dollars. This is a big drop in absolute dollar value. Is gold enter a severe correction? The following table shows the inflexion points of gold prices. What we see here is the gain is greater than the lost. One should pay attention the gain or lost is getting narrow. This is what we should watch out. This is either a base formation or a top out.

China 2010.07.01 Is China's economy slowing down and the GDP will shrink with the PBoC tightening the credit? We know that China has a U$500B infrastructure rebuilt project which actually includes U$350B from previously announced railway modernization project. There is another infrastructure rebuilt in China's cyberspace. She is going to unify the internet, television and telecommunication. A 300B yuan or U$44B is planned to integrate 12 cities first then pushed to the rest of the country later. The report from China Daily (Trial launched to converge TV, web and phones on 2010.07.02) indicates there may not be any visible results for the first few years. This is interesting. Is this pork barrel project? No this is a needed project but the result could be much invisible if it does right because it paths for the future. This is a true railway project of the 21st Century. Is the capital tight? No, if it is tight, such advance infrastructure project will not be done. Is there such a demand? Judging from the growth of China's Internet 2 project, this is real and realistic growth management. This is not an overbuilt. This is a health sign. Let do not judge China's growth rate by some other country and give the planning bureau of China some credit.

Money Matters 2010.06.28 U$ may be fiat and back up by no hard asset. So does currencies around the world. The Fed's balance sheet is weak but the gun will keep it going without any bankruptcy. Higher interest rate may be paid for the auction of bills and bonds but the interest rate are coming out of thin air. The people's pockets are also deep. The bottom line is the gun and the economic imperial empire will keep the U$ going. Other countries will love to have a currency stronger than theirs. The following charts (complement of stockcharts.com) shows a bowl pattern. The weekly chart shows much better than the daily chart that USD is just continuously high above the 50 and 200 period MA. The P&F shows bullish pattern. Will technical win this time over fundamental?

The following complement charts from bigcharts.com shows a very huge base for the U$. Will this mean a recovery of U$?

China 2010.06.27 RMB is floating again. China resumes to use the reference basket of money to evaluate the RMB. There could be a wild card on what is in the basket down the road. The current components consist of fiat currencies. In the future, there is a very high possibility to fortifying it with precious metals. The objective of adding precious metals is not to harden RMB which is hard enough but to stabilizing the world economy. By adding gold in to the money basket, it could be the beginning of gold standard again. Rather than back RMB by gold fully, which means China has to buy up gold held by the rest of the world which basically drives RMB and gold to the sky. This high value RMB and gold is no good to anybody. However, the present of gold in the money basket could stabilizing the value of RMB which reduces the volatility. This will be the key success to import and export planning. One could ask how will gold stabilize the value of RMB. It is by using weighed factors. Gold  could be heavily weighted but not backed. There is no need to have any physical gold involved because it is not backing the currency. But how could the gold tie to the RMB? This will be coming from the IMF's withdrawing right. Yes, there will be reform in IMF and it will happen in not too far future. Another way to stabilizing RMB is to create a synthetic future contract for the RMB to avoid it runaway. This future contract is the RMB denominated bond. The issuing of RMB bond has already begun. The RMB bond is purchased now using the RMB current value. When it is matured, if there is no roll over (it may be as doubtful as can be) the bond could be converted back to other currencies which is selling RMB. This is what happens to the U$ which was shorted by borrowing U$ for other currency. When expatriated, the U$ rally. Why RMB would not be pushed higher when the bond mature? I strongly believe it is not China's intention to become the first top two world settlement currencies. By holding the third position and leave the top to U$ and German mark, the expatriation could be reduced yet, there is influence in the world trade stage. In the Far East, the ASEAN (Association of South East Asian Nation) will continue to trade using the RMB to a greater extend but it remains in the family. The trade and the exchange is being closely managed by China. The runaway risk will be reduced to minimal. As the result, China uses ASEAN to take on the low price manufacturing while she took up the role of high price (high tech and big ticket items such as automobile), China controls the quality of trade and enjoy the import of deflation from the ASEAN and West while manages the appreciation of RMB within a reasonable rate.

Money Matters 2010.06.21 The “unpegging” of RMB to U$ was over exaggerated and completely blown out of proportion by many entertainysts. The statement from China says limited floating, not completely free float. According to PBOC, the change is needed as the balance of payment is reaching equilibrium. This confirm the view point of currency volatility risk. The spokesperson also says “"With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist," ” It is imperative that the unpeg does not mean a good thing for the American. When China started to peg, she did it to protect the export from the volatility of the currency movement. Any volatility in currency is japerdy to import/export trade because of the currency risk. It does not really just to keep the RMB low for export. Whether the RMB is really low to stimulate export is one way to see it but this also implies less U$ to be received. You are talking about giving up profit. We see how bad it could be when the Chinese low cost/profit margin manufacturing collapse due to the margin vapourized during the 2007-2009 world economic crisis. When there is no pegging, one should also consider the two ways street scenario. With such powerful currency control and huge FX reserve, the RMB could be driven down. How, sell RMB in contract in directly through bonds. When bonds are matured, the money in RMB will be converted back to other currencies. This is happening and happening fast. Today, when the reallity of unpeg sinks in, the American stock market is less enthusiastic, the commodities market almost tanked. This is a true reflection.

Money Matters 2010.06.21 Copper has dropped from its recent high of U$3.68 to the current level of just under U$3.00 this morning. This is a drop of over 20%. Copper being haled as the Dr. of economic and a trial and true indicator of the status of the economy. Does it reflect the past, present or future. If it is in future, how far is it in the future and is it a fixed or variable case of case? If the indicator is for the past, it does not help our investment too much. History is water under the bridge. Present and future is more interesting to us. If it is present it has the value of showing the true picture so that we can react properly if it contrast to the market's superficial view. If it is for the future, the important question will be how far in the future? Is the range change case by case or even in very case? If it even changes in one single case, it is not a very used indicator even it is very accurate. A study for the range of fluctuation for copper's interday high and low within 40 trading days over a one year period shows a range of U$0.50 to U$0.90. If this is the fluctuation we are looking at, the drop from U$3.68 to current level is just somewhere in the chaos of fluctuation. By taking into account of 200MA, copper is not in good shape. However, could it be a very wide trading range we are looking at? The fall of 20% is not necessary the right threshold? The copper price was 10% below the 200MA last week. Today, it is 5% below. This is a strong momentum movement which also confirmed by the rising of OBV. In conclusion, the copper indicator reading may be more complicated than just reading its up or down in a very short term.

Energy 2010.06.21 Japan and China have been actively pursuit oil deals in Middle East. Japan has non-Government operated oil companies drilling and producing for her country. China has been actively buying oil from Saudi. The most recent news was joint venture with BP in Iraq. Association of Peak Oil and Gas Study's June 21 Peak Oil Review quoted "The Saudis reported last week that during 2009 56 percent of their exports went to Asian markets. The US share of Saudi exports dropped from 20 to 14 percent between 2008 and 2009 while the EU’s share dropped from 12 to 10 percent." We have witness the declining of world oil production while American and European are not increasing the production. The Asian's demand form China and India is just start to ramp up, the supply and demand equation is definitely tilted to the demand side notwithstanding the short term fluctuation. This explains a very steep contango for oil future. To confirm this conjecture, we have to identify whether the reduction of the Saudi export to American and Europe are caused by the increase of Asian purchase.

Energy 2010.06.16 WTI continues the march. NG pulls back by 5% to drop below the U$5 mark. It is a psych barrier more than any material technical barrier now. During the thinly traded evening, NG climbs above the U$5 mark to U$5.039 or 0.6% compares to the end of day price at 17:00 EST. All these are noises and sparkles. The important technical event is both break above the 200MA. NG broke earlier, pulled back but hold high. WTI just did that today for its 200MA and 50MA. So we have seen an established major energy trend. If we take a look at the distillates such as heating oil and gasoline. Both also broke the 200MA last week. The trend is now lined up. Let see what is the NG inventory report can do to the NG price.

Energy 2010.06.15 WTI prices broke the tradition that falls before the Wednesday EIA report. It is not fall but up 3% by U$2.30 to U$77.05 for WTI at the end of the COMDEX price. Volume is not impressive. It is just the 200 day volume average. The jump is not necessary short covering but speculation. These speculation are rare. The price of oil is now entered a critical recovery position. If the oil inventory support such speculation, the price will start to build a plateau. There is a high probability that the price could hold because the OBV is rising with the RSI at 60 range. There could be room to go.

China 2010.06.12 According to the National Development and Reform Commission of China, the first half of 2010 China's CPI will increase by 2.6%. This is a very special announcement (China Daily report http://www.chinadaily.com.cn/china/2010-06/13/content_9972697.htm). The number is higher than many countries' target 2% inflation rate. Last year the CPI was up by 3.1%. By this standard, China's inflation needs attention. This is not the first time that China taking attack at the inflation. The string of action to cool down housing speculation, lower export tax to reduce local supply, raising reserve and many others are foresight to control the inflation. Although the rate may be higher than the 2.6% but she is not sitting on the hands. The proactive action is the hallmark of the current generation of Chinese government. We should praise these type of well orchestrated economic planning.

Money Matters 2010.06.07 USD has peaked above 88 and the momentum shows a possibility to break 89. The more such the threat the more short covering or short term investment preference despite the long term dire outlook of the USD. At the same time, commodities are not getting cheaper. In any short period of time, commodities may be corrected in various ways but the average trends are not really falling due to the continuous recognition of limited reserve. What happen to some "strong" currency such as U$? There is inflation plus implosion of the economy; a very difficult situation to get out. The export is heavily impaired by the fluctuation and high value of the currency that will cut down the competiveness and deteriorate signing of deals. If any deal is done, the currency risk has to be hedged which increases the cost. Although the American economy is down turning, the inter-relationship of world economy will not benefit and to some degree affected. However, the change of leader has been obviously shifted to the BRIC. But the BRIC is not mature enough to lead yet. There will be some gap of confusion until the BRIC can have a clear grip like the West after the Second World War. A period of 10 years may need to reach the equilibrium which may be the run of this Kondratieff winter.

Money Matters 2010.06.02 Bull and bear is not just the name of an English pub. It is the polarity of the stock market, commodity market and bond market. So they say. They also say that in a bull market everything rises like the rubber ducky in a bath tub filling up with water. They also emphasis that in a bear market, everyone loss. The winner is who loses least. To some surprise, some claims that we are in a bear market but there is a gold bull market. Is it talking with the both sides of the mouth? We do not know. Is it possible that some asset class will rise during a bear market? With the margin clerk running at overdrive, this may not be possible. But it may be possible for a very small number of equity can do that. The most frequently quoted is Homestead which rose to the tune of 60 times from the lowest low. This Homestead was a gold producer. Deflation killed all the cost to make the production so cheap the profit margin is very high. The need for the wealth storage pushed the demand of the wealthy to the top. So there is possible but one has to be very lucky.

China 2010.05.29 There is a series of junior employee suicide at one of China's biggest electronic contracted manufacturer FoxConn. As of today, there are 12 suicides. A recount of such event was seldomly available from any official or semi-official China news media but there is a summary report with details from China Daily, Foxconn shines light on China's factory problems 2010.05.28. Labour dispute and low wages issues exist at all stage of development of labour movement. But it will not be faced and taking positive action if the industry is at a struggling and declining trend. Consider the textile and coal mining child labour during the Nineteenth Century British Industrial Revolution, there was not much of positive action from the employer to manage the problem until East India Company had its firm grip on the world. First, the workers had a better living if they could swallow the bitterness. Their complain was just empty words. Second, the social attitude towards the issue was not sympathetic enough to create the mass opinion that trigger the change. The mass opinion is generally the product of the mass media which in turn controlled by the upper echelon. The upper echelon will take action if their is impact on their profit. Foxconn incident is an example. The sadness and the concern impairs the productivity and availability of labour. This affect Foxconn's competitiveness. By weighing the impact on factors, this results a general salary increase of 20% as reported by the China Daily, 20% raise for Foxconn workers 2010.05.29. There are two observations. China is more open and progress as oppose to the West's reports. (This does not imply China is as progressive as it should be. It also reflects the dark side of the wealth ripping off the poor.) The human right movement is progressing. Human right is a social culture development. It has to going through its growing pain and develop the culture and it is not something you can just install and go. The second observation is that when the West is alleging the declining of the growth in China, the truth may surprise the West because a dying company will not do a massive raise for the base worker. An implication of this is that there is a real threat of inflation in China which means China will have many more future actions to curb inflation which will be misinterpreted by the West again to weaken the economy. China's small step action is calculated and monitored closely. A very different discipline from the West. Will Deng Xiaoping's experiment successful? This is the real question.

Money Matters 2010.05.24 Some analysts interpret Reuter's CRB Index that the world is heading towards deflation because the index is heading down. The following is a CRB's monthly chart (complement of Moore Research Center, Inc http://www.mrci.com/).

There is a major pullback in the year of 2008 follows by a rise that peak at the end of 2009. How accurate is this interpretation? Without a question, the index indicates a short price deflation. There is a major characteristic that has not be take into account. Price spikes due to seasonal event. In general it is a much smoother change. Any spiking is just speculative action. So by smooth out the recent volatile action, we see a much rapid rise in commodity price. But it may be too early to say this is the scenario. If we look at the CRB after 1980 the deflation is obvious until 2001. We may be witness the beginning of another deflation starting 2009. If we count the change since 2001up to now, we are still seeing 150+% inflation. If we try to collate the price oil to retail gasoline price, good luck. We have seen the peak of gasoline and fall but not falling that much and even the price of oil pulled back meaningfully but not the gasoline. If the transportation and fuel cost rises, you could pretty much bet that the food and energy bill go up.

Money Matters 2010.05.23 Greek's debt is visible because it borrows money (in terms of actual loan from IMF) and selling bond. For such a small country it triggers a rescue package at U$1T level. Although not all of it will be given to Greek but it compares to the world's largest economy, United States. However, the debt of American is almost invisible. People only sees the fiscal imbalance. The tradition of bond auction disguises the loan. Traditionally government auction bond to minimize cost but the loan will be repaid at the end of the period. It is like financing the operating capital of a company through the revolving door line of credit with a floating rate. Once you stopped the revolving door, the debt will accumulate like a snow ball. So there is a strange but pressing question why American still spends billions of dollar for the military and performs so called 'world police duty'? Literally, reducing the military budget will help to shrink the deficit. On the other than the military budget provides employment, maintain a huge portion of the GDP and export. So there is the vicious circle.

Money Matters 2010.05.13 Panic started to simmer in the markets. There was panic but people are back to complacency and then panic again. The Europe is using debt to fight debt. This old formulae never failure but has major major consequence. Consumption can be in two forms: spending of the people and war. Europe has part of it spending but not war. American does both. The damage is far severe. With debt, it creates a hole that when filled up, you lost the sovereignty of the country for a long time. During the Great Depression, American Government used all kinds of debt to restore the country. Without that the vicious circle did not break. It is true that debt will damage but you have a chance to dig yourself out. Only if you are under water with liability more than asset then you may not get out. You need the debt as the bridge funding to survive. Without the bridge funding you cannot win back the future to level of debt. Japan may be in a depression but people are living not in poverty. House may be expensive but some people can own house. Japanese Yen may be high but the high quality products can bring in revenue. It is totally different from the PIIGS. American are losing the resources because they owned by the economic empire not the country. Is Europe in big trouble? It is but not as bad as all the loan lent out by France and German are defaulted. As long as the loan is not defaulted, the balance sheet does not have to write off the loan. So the volatility should not be there if there is no market makers. The market makers play with the fear and euphoric of retail investor to squeeze them dry. The market goes up they win. The market goes down they win. They have long and short for long and short term. The market does not have to fall significantly because someone from the East will play the same game with these market makers. The only way retail investors to win this war is to understand the demand of the world. Even U$ could be the store of the money by political pressure. It does not have to be gold. U$ has done that over a century. It still can play such game as long as the economic imperial empire in favour of the American. It seems the shift to the East or North will happen sooner than expected.

Oil & Gas 2010.05.13 Gold holds while the markets are in correction. Last time, gold followed the market to collect. If every time, gold follows the market, market maker will not make money easily. Brent is at U$80 and WTI is at $74. Brent is from North Sea which is basically closer to home (Europe) than to America. Nonetheless, the usual U$3 discount is now changes to U$6 premium. How can this happens? This is the quark of the market or the irregularity man-made because of no delivery. The no delivery does not reflect the real supply and demand. Gold bears the rumor of future buyers demand the delivery. This true or not does not matter because the market buys the story and nobody dares to sell short. On the other hand, as long as the super tanker holding millions of barrel of oil floating near shore is believable, it is good enough to benefit the short sellers.

Energy 2010.05.13 The chart for American's natural gas inventory has indicated a significant deficit. This deficit is far more than most of the last few years but the NG price does not reflect this situation. Either the distributors are complacency or there are future contracts for the summer. The later is not true. If the situation continue, the NG price could explode during the hot summer months of August and September. With the most recent downward pressure on WTI (Brent remains above U$80) but NG can hold on above U$4.00, this is a bullish sign. Platinum has recovered during the beginning of evening trade (up U$28 or 1.6%). The volatility of commodities continues.

Money Matters 2010.05.06 Without a question, the market is in big trouble. It is not just only the debt of PIIGS anymore. There are confusion on the commodities demands, bond yields, BRIC GDP growth and stability of the U$ and the American economy. People may have been betting the wrong horse. When they find the horse is not the one that they expect, after the one wanted out of the stable that causes panic. If we stand at 10,000 feet, there is a slight different this time than the crash of 2008 and 2009. So far, gold has not been dumped and gold stocks are not falling in sympathy with the market. In fact gold stocks are strong, no relatively but absolutely. To ensure a better interpretation of this situation, we have to take the situation in a broader spectrum. Copper has a correction of 20 percent with all the tell tail signs of a lower copper demand. Oil is close to 15%. Copper’s correction is triggered by the worry of slow or negative growth in China as the Shanghai Expo project is finishing up. You cannot expect the demand maintained a high all seasons. Oil’s fall is due to the demand temporarily clogged by the reduced activity in the aviation industry. Both could be resolved in short time. Gold’s strong performance signals a non-deflationary future. By combining the QE goes with the debt, inflation is not a question of will but when. Today, the market has reached some level of capitulation. It may need a few more such days to hit the bottom. Updated: At the end of the day, Dow Industrial dipped 1,000 point and rose 653 to close by down 347. There is some capitulation driven by energy sector. Next few days will be interesting.

Money Matters 2010.05.06 We may want to ask the question does it really Greek debt trigger this May correction? It is an obvious conclusion to draw based on the circumstantial evidence. Taking away the panic on financial, debt is deflationary for disposable income. It is also inflationary relative to the other currencies. The higher the currencies the more financial and political stability of the country. No strong currency exists without strong export and government with a highly secured society. In the case of PIIGS, their financial factors of the equation is weak. Import is high. GDP is low. These are not the ingredients of strong currency. The import dependency will be the other blade of a two blade sword. U$ is also facing the similar difficulties. Even we have the deflationary factor, the inflationary factor will spread the wild fire of inflation. Zimbabwe is the best example. She has heavy debt and almost no export but the inflation is at hundred percent per month. If it is deflationary, the price of wealth storage will rise. So the stock market, commodities and precious metals will rise. There is also another major ingredient that amplify the effect which is the BRIC factor. While the west is highly debt laden, the BRIC countries are not. They have strong export, relatively stable political and social structure. This contributes to a inflationary side of the equation. China and Australia took the lead to cool down the economy before it is overheated. China's continuous constructively increase bank reserve will create much better heavy banking system than what can be done by a bunch of Wall Street politician to the Wall Street. Whenever there is action, there is reaction. By raising the reserve in China and tax in Australia trigger the selling. This correction may not be driven by the PIIGS factor but it helps. The really reason could very possibly by the temporary removing money off the table. To confirm that we have to watch two things. The first is the continuous healthy manageable GDP growth with a slow increase in interest rate. Even moderate interest rate hike will accelerate the collapse of the PIIGS (by extension the Euroland) economy. One may argue the bond market demand higher interest rate. However, if the economy collapse even the bond market has to suffer. So the correction is needed for the runaway bull market. So far, the selling is amplified by the action of the margin clerk. We could not have a firm reading on the true direction. As usual, wealth is destroy along the way. How much to correct or will it replay the Great Depression market? It is still too early to say. One major difference between now and then is the missing of a group of huge sovereign wealth funds which long for asset. These funds are smart and patience. Time is on their side.

Money Matters 2010.05.05 USD Index surges from the brink of falling below 80 to a whopping 84+ in a few days after EU promises to bail out Greek. It is the bell tolling that let people aware of the PIIGS danger of contagion is real and now. Euro will be dragged down despite Germany's steady economy. Steady is not good enough. EU even wants to talk away the rating agencies down grade of any other countries in the future by threatening to replace these rating agencies' country rating function by a government agency. This is to say if private rating agencies do not follow the lead of EU, a puppet rating agency will replace their function. This threat is not just empty but ironic. A liar replaces another liar. For this reason, the money has to flee Euro to other currencies. Australian dollar is stable, Canadian dollar is table, New Zealand dollar is stable but not Japanese yen, British pound and U$. Among the last three, U$ is the less of all evil and it is highly liquid rather than first 3. U$ becomes the choice of emergency exit for now. When U$ rises, it upsets the balance of market and the margin clerks have to work overtime. Commodities and equity have risen significantly so they are the first one to hit. However, there is already signs of slowing down the dumping. In a week, the smoke will be thinner, the money will find a home. We shall see the true home of the money next week.

Money Matters 2010.05.03 Australia government does not only see her economy recover fast but also sees the opportunity to fix the pension underfunding by levy a very heavy 40% tax on the natural resources companies. Without question, this is a rush decision which does not only provoke giants such as BHP Billiton, Rio Tinto and Xstrata but also Canada (e.g. Ventura and Teck) but the most important one China. China's FX fund has no place to go but natural resources around the world. For the recent years, she took over many small and medium resources company not just in Australia but also in Canada, in South America, Middle East and Africa. But the most important and strategic area must be Australia because of low hanging fruits. The Australia action could meet with equal reaction which could cripple her plan. It is just like Alberta's oilsand royalty regime that created tremendous opposition, capital withdrawn and development shutdown. At the end, Alberta government has tone down the royalty regime. As the result, natural resources stock were hampered badly today and could continue for a while until the details are revealed. Then the swing will continue. The market's fear is the cockroach effect. One country could levy heavy tax on natural resources, other could follows. If any country could stand up and guarantee no such action in the future, the hot money will pour to that country. Will American and Canada follow? There may be some possibility but Canadian Harper government may be wiser. Obama government may be refrained to do so because this is the opposite of Quantitative Easing by raising any tax which is deflationary.

Money Matters 2010.05.03 While everyone is worry and biting nails on whether Greek will have the bail out money, there is a side story that did not catch the attention of many. Don Coxe has been identified Greeks' financial problem is only the canary of many sovereignty debts. It is not just PIIGS. How does it play out will have a profound impact on the world's financial world. Guild Investment published a commentary that the debt default could trigger a 10% market correction around the world. Therefore, it is many country's interest to put a soft cushion for the default. According to a INK Report on April 26, 2010,China is going to give a lending hand to Greek. "the stakes are extremely high for China and other countries to get the Greek situation under control. So it is not a big surprise that over the weekend People’s Bank of China Deputy Governor Yi Gang said that China was “part of the force” helping to stabilize the Greek situation according to Bloomberg news". The bad news is that the problem is much bigger and the good news is that China will be part of fire brigade.

Energy 2010.04.29 NG has a sudden drop of 7% today after the EIA announced the last week inventory. Is this pure speculation or actually this is creditable statistics. From the chart, we can see there is over production above the standard model but the actual figure is in deep deficit as shown by the surplus chart due to the progressive change of usage model. When fundamental does not change, the technical break down is not necessary 100% reliable.

Money Matters (Mystery) 2010.04.28 PIIGS is not coined yesterday. These five EU countries have a history of economic struggle decades. Most probably, the Olympic Games at Barcelona and Athens did not improve the countries' economy and might be worsen it. A lot of debate held around the eligibility to remain in the EU as a member whose debt to GDP ratio should be kept below 6% while PIIGS are near or at double digit. Standard and Poor and Moody credit rating agencies cannot ignore these facts in conjunction with the industry hardship in these countries caused by the financial melt down with or without any IMF help. At a very close brink of IMF provides a package to bail out Greek the credit rating agencies down grades Greek to junk bond level. This is the repeat of history when Bearsterns, Lehmann Brothers and others failed. What the effect is to create a short covering opportunities who knows the 100% sure fact that will lead to a lower rating but has not announced. The institutes will not be that ignorant and complacent to do nothing. Rather synthetic short such as CDO from Goldman is created to benefit the situation. If all these are foreseeable where is the panic coming from ? The answer is retail investor with the help of flash trading and high frequency trader program that accelerates the market movement to ensure the world is under their thumb. There is an interesting article by Ellen Brown on these type of trading, Computerized Front Running and Financial Fraud, How a Computer Program Designed to Save the Free Market Turned Into a Monster by Ellen Brown, 2010.04.21. There will be a period of panic ranging from days to months coming as PIIGS countries come clean one by one.

China 2010.04.026 Last G8 meeting, there is another shadow meeting by BRIC to influence the outcome of the G8. China was the conduit or might be the leader of the pack. Today's G8 Summit at Halifax, China has vested major interest on Iran which is a trading partner and oil supplier. Tehran also  the centre of the Islamic world which China is more than happy to be friend with. The sign of no shadow meeting indicates China is preparing this G8 meeting and the G20 at Toronto this summer very intense, very seriously and very focus. Negotiation has already started to cleanup the agenda. Early report indicates that RMB revaluation is no long on the table which has been ferociously driven by the American. This is a piece of humble pie the West has to take. We most probably would not hear any outcome of the exciting and animated exchange of words during the private small meetings. If not, we have to embrace major volatility around the world.

Money Matters 2010.04.023 Mystery of Greek's debt financier is solved. The bond market is not the white knight. Greek has to get the support funding from IMF. Or IMF does not allow Greek to fall so that its balance sheet and EU's balance sheet looks bad. Debt on top of debt. The situation is too much in parallel with the post WWI Germany. The pressure cooker is at its top limit.

Money Matters 2010.04.022 The market has been in a strange mode. It discounted the fact that Greek had more debt than disclosed before. More strange, Greek does not go for EU or IMF but to the bond market which may provide some interest since last bond offering. If the world is going to collapse and these bond becomes junk bond, the sophisticated bond market should not take it. On top of all these the Irish debt is mounting. When the rest of PIIGS come clean, the whole southern Europe become the belt of debt except France. This become a tremendous opportunity for Russia to penetrate and control these long desired countries. But if the bond market does not help out but holds on to the presumably U$, its inflation rate will definitely higher than the 0.25% it pays, then the bond money will have to find a parking lot. The world economy is not recovering evenly. The East and South (Africa and Australia and Brazil) is better than the America and Northern Europe. With the threat of volcano ash that could hinder the traveling in next few years, the tourist industry is tarnished. Right at this time, better and better economic news are coming from the BRIC. If you look at I00 ETF of the world's international companies (so called global fund concept), it is not doing well. Will BRIC becomes the Atlas of the world economy? If so, this is a tall order. Holding on cash will suffer the diminishing of purchasing power. Invest in commodities is threaten by the manipulator and derivative unwind. Invest in equity is not so much safe heaven because of the off book balance syndrome. North America stock markets open low and climb in a steady way. It is a bullish sign. If finance sector collapse, it seems the epicenter will be at New York or London not Frankfurt or Toronto or Shanghai. Will it be safe to invest in these countries?

Money Matters 2010.04.015 The current notion of economic recovery gears on the economic health of the West is a wrong assumption. The notion of higher oil price can hurt the world's economy recovery is also dead wrong. The Western analysts remain equate the American to the world even fair and square the BRIC is rising. The demand waning at the West does not shrink meaningfully but the BRIC's growth is stronger every day. The destruction of demand at the West is made up more than enough by the East as the domestic consumption at BRIC expand. The issue of BRIC's currencies will also rise which means the cost of commodities to the BRIC countries will be less impacted by higher U$ prices.

China 2010.04.011 The focus on China seems only on one thing: when will her economy implode? This has become the spectator's sport for entertainysts. By shoehorning and throwing out the terms such as overgrown, overexpand, overheat without any analytical fact to support their justification, it becomes a spitting contest sideshow. These entertainysts use two contradicting pieces of partial information distortedly. The first piece is the growth rate of the Chinese economy is too fast at the 7-12%. The second is the majority of the Chinese population does not participate in the economic growth and these people are below poverty line. By taking the information out of the context both are true and create calamity impact on the health of the GDP. On the other hand, when statistician compares, a proper reference model must be used and just use this model rather than using part of the model conveniently. For example, the criticism on overheated real-estate speculation will soon create a collapse that implode the economy like the American. Guild Investment's April 7, 2010 commentary Global Market Look Good to Us, points out that for some small group of real-estate investment, the overheat exists for these multiple properties purchased for speculation purpose. At the same time, it is a hundred years old housing problem that shortage of the housing (forget affordable or not) is a major concern of the state. Significant reports on the shortage profiling are ignored. These reports usually bear the sensation headline like innocent citizen evacuation for high rise or farmland endangered by the expansion of apartments. Guild Investment points out one of the most important safeguard mechanism to reduce housing bubble is the 50% down payment rather than the 0% or negative (i.e. rebates or home equity) down payments in the States. When you satisfy the 50% down payment rule, your capital leverage is significantly handicapped as oppose expanded by the negative down. Lets get back the first point regarding the reference model. China's economy has been suffered since the Treaty of Nanking when the West marched in China and asked for compensation. The industry and commerce further hampered by the Sino-Japanese war which basically stripped the rich mineral resources from the Northeast area of China. After the Second World War, civil war engineered by Russian and American continued a period of success on manufacturing and financial industry around Shanghai but did not spread to the rest of the country. With the founding of People's Republic of China, the sanction of the West prohibited the growth until Dang Xiaoping in the 1980's. So we are observing a handicapped base that did not participate economic growth over 100 years for one billion population which is about 4 time the population of America who is enjoying 25% of the worlds productivities while China is enjoying 3-5%. When you compare with such a small base, the yardstick has to be normalized for a proper reading. The proper analysis will not be discussed here but leaves it to some other specialist. Perhaps the most escaped economic development in China is the Shanghai World Expo. While the construction of the 2008 Olympic Games, the entertainysts predicted the collapse of the commodity demand after the Game. It did for a short while and than it picked up which had been explained as speculated hording of commodities by citizen which was predicted to a cave in. The question is why the construction of the Shanghai Expo was not included in the consideration? Expo has its root traced to do trade since last century. It always benefit the hosting country because it becomes the exhibition and trading ground for local import and export. This Expo will be no exception. It will promote the newly transformed export model and high end products. The export model has been fortified by shifting from American heavy to world heavy especially the growing demand of non-Japan Asian countries' Association of South East Asian Nations. Many of them is now using RMB to settle the trade. Through ASEAN and friends of African, Arabian Peninsular and South America, China is now is the first nation of world export. This will help the conversion of trade settlement currency from U$ to RMB. The Shanghai Corporation Organization manages Russian and her friendly countries. World Economic Forum provides a strong bonding between European countries and China's trade. This could potentially reduce the influence of the International Clearance House of the West but that will be another story. With a steady hand, China is pulling Asia, Africa and South America out of recession. The result is further insulating the Non-US Friendly countries from the American. The first conflict will be surfacing. Most probably on the nuclear weapon of Iran who is a major trading partner and oil supplier of China.

Energy 2010.04.05 We have a break up before the Easter Long weekend and have another strong move today. We are going to see above U$100 oil.

China 2010.04.02 The Sino-American healthy relationship continues to have its more than normal share of attention on the China Daily. There is a second report today, Hu, Obama vow more cooperation to mend ties 2010.04.02 on China Daily. This time, the report is not from Xinhua rather it is directly by China Daily. This is an escalation on the authority on the view point of the matter. This report disclosed that the call was not originated by China but by Obama. This means China is still on the upper hand that Obama is willing to deal a better card, i.e. use the 'currency manipulator label' as carrot to coerce China to follow his agenda. This is another type of threat the China would not take 10 years ago and will not take it now. The report emphasis the one China policy which is another way to say sovereignty. American gets lost. American continues to believe that the greedy American based multi-nation companies will give up the China market so the Obama government could use this as a bargaining chip. The pawn used in this poker game is Google. Does Google really want to given up its Chinese business or it is actually losing ground to Baidu? Does Google really support freedom of information? No. Any security expert and many leak indicated otherwise. Forget about a conspiracy leaked about the CIA tapped into search engine. There are many information sanctioned by the US and Western government supported by Yahoo and Google. They even tap who search the information such as nuclear weapon or virus implementation. You can only searched using some other engines. This is a political play that China waiting the American to make the first move. There is another point mentioned in the report; Iran. This China's trading partner will be pressure point for China. It is not the currency. But this pressure point cannot be touched. The consequence will be devastating to American unexpectedly. It could very possibly the significant rise of RMB but at the same time, the offloaded manufacturing by Vietnam and Indonesia will not happen because China will absorb all their export by its domestic market using the high valued RMB which these country will be prefer to the U$. American will suffer massive inflation while the expatriated revenue from China will be decreased because the Chinese will retaliate.

China 2010.04.02 On April 2, 2010, Chinese President Hu Jintao made a statement on the Sino-American relationship, according to a Xinhua report published on China Daily, Hu: Healthy, stable ties benefit China, US, 2010.04.02. This is a short report but it covers trade, sovereignty and nuclear security. In another word, the scope is everything. There is unusual backdrop of this report. It quotes Hu's discussion with Obama over a phone call. Although this calls are not rare but rarely reported. It could be a hint, as Chinese always do, a subtitle way to tell the American that there are many things Chinese strongly disagree on the phone call. In this call, most probably, it is initiated by China who wants to find some middle ground to protect her interest while American is aggressively doing something that displease the Chinese. On the economic side, there is a possibility of trade measures is not something China wants. The continuous pressure to push China to appreciate the value of RMB is another way that ties to sovereignty and trade. This is equivalent to China to ask the American to increase the bond rate to protect the value of the gigantic Chinese  foreign exchange in U$. In this report, China issues a warning that it will not tolerate any single side action that could infringing China's trade and sovereignty right. This message signals a beginning of an era that China will not bow to every wishes of American. If American does not get this message, the result will be very messy. On top of this complication, China also puts the stake in the ground on the Iran nuclear security. She does not agree with the American's approach. This is the precursor to warn American not to repeat Iraq. China is an important trade exporter to Iran and Iran is a major petroleum supplier to China. There is no way China will accept invasion of Iran that interrupts her benefit. There is another China Daily report Sino-US tensions show no sign of easing 2010.03.26 has explicit details on the trade issues which include a statement made by the Vice Minister of Commerce during his Washington visit. From this report it also shows a flurry of Chinese minister level bureaucrats visiting Washington which is a very significant sign.

China 2010.03.30 Stratfor has an interesting discussion on China's options under the pressure of American's currency revaluation. This article China: Crunch Time by Peter Zeihan also present some very less known fact about Bretton Woods Agreement on the trade promotion.

China 2010.03.28 Unical is the trough of the China buying spree limited by the Congress. Since then the rule has been relaxed, a lot. Does China flexing the creditor muscle or what? Not necessary. Energy is always a strategic reserve for American or any nation just like the port container terminals. It is not desirable to be controlled by a foreigner no matter how poor you are. Just take a look at Hong Kong. Every freighter had to stopped at Hong Kong before transport by barge to the much shallow Pearl River or through train to the inland. Now Hong Kong is the independent political nugget that also help the China's financial and economical activities. During the 50's to 90's, Brits skimed much of the profit from this entrepot terminal. Most recently, the American entertainysts have not comment on the vital development of invasion of Chinese automobile industry to the home land America. First, the Hummer deal (gone sour), now is the Geely buying Volvo. Volvo is the Swedish pride but the American really spoil it to make it no different from any Ford car for just U$1.8B. What makes Volvo so important is exactly why Geely failed to enter the North America or World market two years ago: crash test. Volvo is famous for its cabin's safety. Now, rather than spends a few years to figure out how to pass the crash test, the technology is handed to China on a silver plate. The U$1.8B price is a bargain price consider what will happen when the Americans have to down size to a smaller car. While the Big 3 auto-manufacturer still making gasoline T-rex, Geely can easily fill the need of lower purchasing power American. For those green guys, the Chinese BYD electric card is coming. The importance of these changes are two fronts. The first is that the export to America is not just those in Wal-Mart. It is the higher price item. Not just a bit higher, it is the American's first love, automobile. Second, the infiltration of Chinese investment is no longer up held by the Congress when the real administration (the big companies) says yes even it means losing business in the future.  Will China going to revaluate the RMB? This will mean less revenue for China but lower price for American for the good sold in America. The Congress wishes to wane the cheap stuff made in China sold in Wal-Mart but now it is out flow the more money by buying big ticket items made in China. The higher the RMB, the more competitive because China will be building manufacturing plan in America using either the devaluated U$ or grant from Congress. These American built cars may have lower profit margin but China will make it as competitive as hell. China can sacrifice the FX reserve for nothing, why can't it sacrifice more for a pound of American's flesh. The competitiveness is not measured by price. It is by the ability to grow the industry and know how. China could almost pay American to take these product. Because it grows the manufacturing industry. China has the FX reserve to finance the lose until its heavy industry is on the top of the world while its domestic economy grows to feed the Chinese citizen. China purchases Bombardier trains five years ago to run the Tibet railway. Now it is selling train to Montreal, Bombardier's home turf. Scary not?

Money Matters 2010.03.23 On Monday, the whole market was flooded with fear, greed and speculation. During the early morning, the instability of the Eurozone's economy suddenly hit the nerve after IMF warned about the sovereign debt deterioration. The panic created a demand of U$. USD shot up and almost broke the glass ceiling of 81. The strength of U$ apparently took the speculators by surprise. So some lamb had to be sacrificed. Commodities took a across the board hit. WTI was down to below U$79 to U$78.86 and volume was only 12% of 200 day average. Gold panic was worse because the decline continued after last Friday's almost U$18 drop. Trading was heavy, 400% of 200AV with a daily spread of $16. At the end of the day, the lost was only U$4.70. The boat rocks left and right. Some one on board will be thrown to the rough sea. The short term fluctuation is difficult to ride. Would it be day trader's paradise or hell? This morning USD climbs again by 0.3% but the panic on commodities has been subsided. Silver and heating oil is the lamb down by 0.6%. Others about 1%. Again the tight collation between commodities and U$ has started to get loose.

Money Matters 2010.03.21 The following weekly complementary chart from www.stockcharts.com shows an interesting short term behavior of the WTI relative to the USD. It is in a downward trend. In a bigger scheme,  if the USD rally finishes, we can see the WTI goes up even USD remains strong to other currencies.

China 2010.03.18 A very insightful analysis on China's "bubble economy" and other major economies by Guild Investment's newsletter "WE SUGGEST THAT INVESTORS LISTEN TO WHAT CHINA IS SAYING" published on March 18, 2010.

Money Matters 2010.03.17 WTI flirts with U$83 again. The glass ceiling is U$84. Once broken, we are going to see triple digits oil price.

Energy 2010.03.17 There is a market believe that American is reducing the consumption of petroleum products so there is not enough demand to support the current level of oil price. With words from OPEC that the price is in there expected range, the oil bull takes a hit. Although there is a general believe that China's growth could support the demand. However entertainyst has been singing from the old song sheet that the "mild" growth of the China will disappear soon and quickly face a economy collapse. Right after these comments, China publishes the January economy growth is 28% year over year. To someone, 28% growth is falling through the floor of demand destruction without seeing the fact that deals after deals sealed by the Chinese state own petroleum companies. It starts make somebody wonder why. First, even EIA also publishes the stats that American is not cutting down petroleum consumption NOW. After the financial crisis in 2008 and 209, people are resuming the consumption habit which will also include the merchandize transportation. If there is any destruction of demand, it is returning. The government would like the people to believe greener future by telling people are reducing consumption. The story from EIA is not. There is a interesting stats included on the imported goods. After a significant reduction in 2008 and 2009, it is more or less recovered by forecast. Is this pacifying the people? If the increase in petroleum consumption is based on the thesis of the recovery, is this too optimistic? The following is from the EIA March 10, 2010 report:

*Projected **Includes transportation diesel, heating oil and some bunker fuels. In 2008, transportation diesel (on-highway, railroad, and vessel bunkering) accounted for 70 percent of total distillate fuel usage (EIA, Fuel Oil and Kerosene Report, December 2009, Table 13). Source: EIA, Short-Term Energy Outlook, March 2010.

Second, the American big oils are losing reserve without ability to replenish the reserve because of wrong focus on high expensive oil like those in deep sea area of the Gulf. In order for them to buy cheap reserve, they have to talk it down. This is definitely a good conspiracy theory. We know we are facing peak oil plus end of cheap oil. This is not just for American. The domination of American's big oils have been fading along the control of world through the American based company is just fading day by day.

Third, American always think they are the centre and master of the universe without knowing that things have changed. To understand the world, we have to diversify our research.

China 2010.03.17 Financial Post has a very interesting article today, "Are we headed toward a global trade war?". Other than the commentary on the trade war, it states that the 22% rise of RMB against U$ by China in 2005 does not put a dent on China's trade surplus. This keen observation could play out again today if the pressure to revaluate RMB from American realizes. This will not help the current account deficit, conversely, it increases the deficit. The explanation is simple. The export from China is not just driven by China but by the international countries from America. They monopolize the market to sell products that OEM from China as oppose to China companies selling products to American directly. The value of RMB is not in the equation of the trading model. As the result, higher RMB means higher price or higher inflation. American has to be careful for what they ask for. If we can make a conjecture why these international companies control the market this way and any chance to change? The answer to the question is "to buying product from China to sell in America" is a way to establish foot hold in China. If they don't do that they can not open business in the China's virgin market. This is the formula for foreign capital invasion of a country's economy hoping that the company will survive because of their advanced products that will not have market competition. The later part of the model will not work because we have seen products from China is not just evolving to match the challenge but also export to the world directly that will weakening the West's economy. The table has turned.

Money Matters 2010.03.16 What happens during hyperinflation? First, we all learn from cartoons that money supply is surged and the flow of money is high in term of volume and speed. When the velocity of money is high, there is a secondary effect on the interest rate/profitability which governing business activities' profitability. The higher the speed, the more sensitive to the rate of change. In the supermarket business, because of the velocity of money is so high (high transaction volume), the profit of the investment is amplified multiple fold by the minute profit margin. If the price is in a vicious adverse spiral, the price will continue to spiral up which will be self-propelled to even higher money volume. The advance of the price has to be driven by limitation of supply not the demand. Higher price will reduce the demand unless it is inelastic. Higher demand with amply supply will not create the positive price potential to add additional margin to protect profit. Therefore, supply limitation is the dominating factor in a import only country such as Germany after the First World War. If the country has export, inflation will devaluate the currency and make the price more competitive. The result will slow down the velocity of money because the current account surplus will decelerate the export price in term of other currency but increase the local exporter's profit if the product is manufactured locally. The damping effect will create a counter balance on the local inflation. If the balance could not be achieved, the export will be killed. There is a risk for lower currency value for export. But this risk is not as severe as internal inflation which has been suffered by many European countries. If the export diminishes, it goes back to the import only scenario to fuel the hyperinflation. American is not an import only country. It will not be easily trigger hyperinflation. On the other hand, lowering currency and reduction of importing deflation will fuel internal inflation.

Money Matters 2010.03.11 Overshadowed by the fury of news (China suspends buying gold [read bought a ton of it recently at a lower price], Greece's debt heralds the surface of debt crisis for PIIGS, American's jobs lost is less intensive, bankers flowing the bonus again), the USD had an anticlimax of dropping more than 50 bps (0.6%) to 79.81 this morning while base metals and WTI enjoys a counterweight rally of 0.4-0.8% except gold future which is U$10 behind the spot price of U$1,1118. Even the natural gas stops falling which is about time for the seasonally low of the NG. If it does not fizzle by the end of the day, we can call the U$ in trouble. The pattern has been in favour of the U$. It usually climbs back to the 80.

Money Matters 2010.03.09 After the WTI touches the U$82, the price is falling before Wednesday the EIA weekly inventory announcement. The old routine is back rather than the rise last week. Technically, the price of U$80.50 this morning still holds above the long resistance line of U$80. Could the resistance become support, this will be the moment of truth. If it does not hold, energy should be sold. If it holds, there may be some gyration to attack the next target of U$90. If it does not hold and now is the top, then energy should be liquidated. There is no fundamental indicator for the change of energy consumption other than conjectures. American has not significantly reduced the use of energy (by Visa). The American manufacturing is slowed down. It is compensated by the China's GDP growth, export and infrastructure building, notwithstanding the growth at the Asia and 3rd world. With the global warming controversial simmering down, the pressure to reduce oil consumption is lowered. This will create better optics for the big oil companies. The big oils also like the tune of lower oil consumption because of their problem to replenish their reserve. If the demand is lower, they have a longer life of reserve by using lower production number. This is strongly contrasted by the China petro companies. As Don Coxe said in a CBC interview, there is no way to stop the growth of Chindia due to the internal and external demand. His new motto is "Chindia's necessity is the mother of growth". Updated at the end of day: WTI fell as low as U$80.17 but bounded back to U$81.50, lost U$0.27 at the end of the day even USD up 13 bps. This demonstrated the jitter and the power of the shorties. The market is not only dominated by the supply and demand. This is a war game.

Money Matters 2010.03.05 Overnight, the C$ to U$ does not change much. The effect of the Canadian 2010-2011 budget's effect could be masked by the closing of the weaken. With the interest rate peeking over the horizon, the C$ has been holding back. Investors who are going to invest in Canada does not want to have high C$ for the meantime. If they try to buy C$ for their investment by announcing their intend, it could increase the cost. Nonetheless, the effect of the market could be mull today but vigorous next week. On a side note, WTI closes above U$80 for a few days. Today could be pivotal for the establishment of a support at U$80.

Money Matters 2010.03.04 As the WTI fluctuating between the U$70 to U$80 range. Would there be any benefit for the day trader? There are two established fragile factors. First the range, second the bouncing within the range. The range is fragile because the geopolitics and politoconomics can drive the WTI beyond the upper or lower bound. Although most of the time energy opens high and closes low yet there are days the trend is reverse without 'real' reason. The sudden movement of the market ingrain and against-grain every week. The surprise further amplifies the amplitude of the changes. Day trader may have been forced to become investor or at least holding it for a few days. The principle of day trader is to advert risk by holding the security when you can react which excludes the time of market closed. By holding overnight, the temporary momentum trend will not be the only factor. So risk level increases but not the necessary reward.

Energy 2010.03.03 Gold has broken the short term resistance of U$1,120 to U$1,130 level this morning. WTI has been flirting the above U$80 level and beaten down many time and rises again. Today, the press continues with the USD pulling back slightly. Any slight weaken of USD will mean very little to the WTI price because now is all speculation on the demand of oil. With the news Greek cutting spending and increasing tax, hope has created. But this could be sell on news type of event. Updated at end of day: WTI closes above U$80 and tops U$81 before falls back. This is rare because the WTI rises before the EIA number which is not usual. However, we should take consideration with the sudden strength of EURO that weakening U$. U$ should be weaken but the strength of Euro is just speculation before Greek meets Germany and France. We could expect a sell on Euro which could boost U$. Along the similar vein, gold advances above $1,140 at the evening which could set the stage to recover the U$1,200 high ground.

Gold 2010.03.02 Gold has broken above the short term technical resistance of U$1120. This is a good sign despite the strength of USD which continues to flirt with 81. There are two dimensions of this situation. The weakness of the Euro dragged down by PIGS pushes the USD (Australian $ is a very minor component of USD) and the inflationary of economy despite of the weak recovery. We are going to face the stagflation without question. Consumer spending will be very discrete and limited.

Moneynamic 2010.03.02 There are multiple dimensions of forces that act in the market to drive direction. Some of them are more powerful than the others. Some are not affected by the others in some period of time. Some have delayed time effect. As the result, the consequence of changes could be in a pattern indifferent from random. To make the scenario more complex, each country's economy is also affected by the economy of other countries and the global policonomics. Most interesting and simple one is the central bank's rate. This rate sets the last resort borrowing money by the country's banks. It has been a perception via advocated by financial analyst and the economist that there is a tight and immediate effect. When its true surfaces, people a furious on the inconvenience truth. The credit cards charging the client on credit balance at 20+% rate is well known among the credit card users but the fact does not click. As the result, the perception preached by the government on using low interest rate to stimulate the economy is a myth. This is the cause of pushing on the string. Partly due to ineffectiveness of the central bank rate and partly because of the debt. The original purpose and intends of the design is lost in now because the rate is now controlled by the banks which take advantage of the low borrowing rate from the central bank and high lending rate to the customer. This raise the question that whether the bank shareholders benefit the situation. By revealing the bonus and salary to those collaborate the sales of the financial product, the benefit to the shareholder could be at a much less degree. As Australia leading the world increasing the rate, it does not mean other have to follow to defend their currency. In fact, they want the currency's value low. The rate hike is only a moderator used to avoid runaway economy. So there are a lot of room to stay put for some countries. On the other side of the argument is that the creditor will not be happy to see the value of their loan diminishing. This is only a simple observation. It is the booming consumer economy that leads to inflation and lower currency value. Only booming manufacturing economy could improve the currency's value. The creditor has to weight on the benefit of lower loan value if there is side benefit. China succeeded on using this formulae to bootstrap her economy. Can this on going? There is a good reason to go on because even China completes the development of the domestic economy, it may not be enough to maintain the country's GDP growth. For sure, the U$ foreign exchange reserve of many countries may seek better parking lot.

Money Matters 2010.02.19 The commodities have been under attack like GuildInvestment.Com said. This is part of event sequence that compliments the rise of the U$. The rise of U$ follows the announcement of increase of Fed's discount rate. The last 3 days' action accumulates 153 bps. During this strong rally, WTI rose U$4.93 or 6%. Gold went up U$30 or 3%. Copper hits U$3.30. Gold may retreat from the high of U$1120+ to U$1100+ after Fed's announcement and in the shadow of World Bank's gold sales news (ref: http://www.bloomberg.com/apps/news?pid=20601102&sid=asPP4CyfIjPg). The trading pattern for the last 3 days was open low and close high for the commodities. This is a bullish action because selling at the open (short?) does not put down the demand. The supply does not damp the demand. If this is true then the moment of truth will come by end of today. Let's do not create another conspiracy theory on their coincidence. Rather let's think why this time the results are different from the past. Usually when U$ getting strength, this signals the stronger purchasing power which means it can buy more commodities so the price of commodities falls. As discussed in previous notes, the purchasing power of U$ has to be in question that detach the price of commodities partially. The partial linkage is shown when U$ up and commodities down. The disengagement is shown by the scenario U$ up and commodities up which is what we have seen now. This has identified a very interesting fact that may help the trade surplus of Canada because the commodity prices in C$ gets a double boost. There is another possible implication. The value of commodities of either undervalue or U$ is overvalue. This will make investment in foreign currency more tricky.

Money Matters 2010.02.13 How fast could the U$ fall? There is a direct relationship with the political influence by the shadowed U$ monetary empire composed of the Wall Street Czars, U$ report multination companies, IMF and the UN. This a closely knitted empire that its profit and existence is based on the influence of the American military, foreign policies and trade. When U$ falls, their wealth (incremental  and accumulated) in U$ will be decrease. They could deploy their accumulated wealth to other currencies (including other countries' currencies, real estate, precious metals and artworks). However if the world do not have a stable economic and political healthy state, deflation and inflation will eat away their wealth in  big way. During inflation, economic could divert the focus of demand to something other than their medium of wealth storage. During deflation, the value will just drop. To keep up the U$ value, loan is lending out in various way. The payback is either through favour or through buying back of the U$ loan to keep the U$ up. The American Government is the issuer of the currency but it is not the owner or beneficiary anymore. It is the moneylords. Cheap U$ gives them less power so a free fall is not just bad to the countries that hold U$ as foreign reserve. There is a perception that U$ is the safe heaven investors flock to when their is trouble. It is a mean to raise the value artifically by reeling in the U$ to keep up the value of the wealth. To be more precisely, the future income. Other than the Wall Street lender, the IMF drives the value of U$. If IMF's special withdrawing right is calculated in more than U$, it paths to the possibility that the IMF loan will be in other currency which reduces the control of the value of U$. In a way, a rapid falling of U$ may happen if the international debt of the PIGS defaults because the lump of money will have no more effect on the PIGS. Rather to let the influence vapourized, you do not reel in the loan of a guy who could bankrupt and leaves the lender nothing. Bankruptcy is a easy way to restart without the baggage. Brazil did that but not without price such as the control of the Amazon rain forest and many natural resources. The PIGS does not have that types of natural resources. Every time, when people believe U$ is going to sink to the bottom, other currency suddenly shows significant weakness that boost the U$ which has no real reason. EU is in a much better economic health than the American. It does not make sense for people to trust the U$ more than the Euro. However, whether it makes sense or not, there is no difference. You lend the money when it is low value and reel them in when it is high (naturally or artificially) to keep the wealth growing. The flooding of money to the world when the interest rate is low during high money velocity is sowing the seed to harvest at higher interest rate when the velocity of money is slowing down. But how to take advantage of the Greek crisis? You hold the loan to Greek and reel in others. But why U$ continues to fall in the past centuries?

Money Matters 2010.02.05 The American banking systems (or the investment systems) remain the dominate players of the speculation market. Due to the low interest rate of the the Fed, the carry traders borrow the U$ to invest in other stock casinos around the world. As soon as negative news sent out and in combination of an artificially squeezed U$, these carry traders have to sell their investment to balance the book to reduce risk. The selling sparks a vicious circle of selling that begins with quick selling at lower price to the hyper active margin clerk to call in the margin. The end of day dumping signifies the terror in the eyes of these carry traders. The news on unemployment is all discounted by the market for a very long time. The fluctuation these days are just pure action and reaction between the banker and player. The public's sentiment has been continuously influenced through different news and market trends for various objectives. The biggest two are the energy consumption (which has not been down and increase production) and the China growth is slowing down (proved to be wrong every time due to missing the fact). With the availability of ETF, we can see the unbelievable of detach of the trading price to the real value. When you need money, you can sell the ETF. Because the ETF can be redeemed for the physical metal, the linkage has an adverse effect to the metal's price. Rather than a tie driven by the physical metal, it is not necessary to be safer to invest in metal. The smoke and mirror are every where.

China 2010.01.31 The New York Times has a feature article "China Leading Global Race to Make Clean Energy" 2010.01.30 on provides some interesting insight on the current status of green energy movement in China. In some area, she is ahead of the American. This has alarmed President Obama. Furthermore, the Chinese solar and wind energy industries are on track to lower the cost of manufacturing and have plans to export. This implies the traditional 800 pound wind turbine gorilla GE's dominated market will be weaken in time. The myth of holding big Western industry giant is safe may not be that safe without assessing the world market frequently.

China 2010.01.30 The Iceland was the first one that has hydrogen replenish station for the hydrogen fuel car other than the hydrocarbon gas station. This is as green and as clean as it can get. China, one of the alleged environment non-friendly country and bull eyes of many green house gas cutting culprit, has announced to build 27 plug-in station for electric car as a pilot project and more will be built countrywide. This could be the second country that walk before talk to make the world cleaner using the electricity. Of course, these energy could come from highly polluted power technology but this is the first step. Complement of the China Daily: http://www.chinadaily.com.cn/bizchina/2010-01/28/content_9390392.htm. According to this report, the electric car industry and the heavy duty battery industry will be complemented by this move. American has been claiming the leadership of electric car by car manufacturer such as GM's Volt but there is no such complementary plan. The first world distributed commercial electric car could very possibly by China's BYD not Volt by the second half of 2010. China's actions are very pragmatic. She deserves more recognition on the effort to improve the quality of life of the Earth.

Money Matters 2010.01.30 The January month ended with a bust. Basically all indices were down since the end of 2009. If this is a sign than we can find a easy example that exception could happen. Last year had the entertainyst spelling the dooms. Should the market be read that easy there will be no poor man. The feedback effect will just turn the tilde to the other side. Is the market at the bear market rally? This is a very good question. Someone as seasoned as Eric Sprott would say the bear market started since the burst of the dot-com and continues. It is very true that Cisco is not at its $30+ and Microsoft remains at the $20+ levels. None of these advance higher than their historical high. But Boeing has come down from its historical high of $100+ level. The index has been confirmed not the safest way to preserve the capital because economic cycles are the sum of may business cycles of different industries. They are all intertwined but not necessary have to move in the same direction and amplitude as the same time. Some leads, some lags and some just growing or dying. This brings out a very important factor of investment as pointed out by Dr. M. Berry (http://discoveryinvesting.com/) that the management separate the man from the boys. Nonetheless the market direction will dominate many equities' performance. However, we have to find a way to spot the man.

China 2010.01.28 China's information used to be very concealed and illusive. The bamboo curtain has been lifted many decades ago but the perception prevails. As the result, many people do not research to back up their analysis but just alleging a lot of empty fact. One of the most recent one is alleging Chinese government pumping too much liquidity and creating housing bubble, commodity bubble and equity bubble which will hurt the rest of the world. (Since when China becomes so influential?). The article Chinese Dragon Rattles Commodities, Gold, Brazil, - January 22, 2010  by Gary Dorsch, Editor, Global Money Trends  published at http://sirchartalot.com/ recounts the effort how Chinese government controls the liquidity in the market since 2007.