01/21/10 Baltimore, Maryland – Barely a week ago, we called it the China Sneeze Play. Once again, world markets catch cold after China starts sniffling.
Rumors abounded yesterday that the China Banking Regulatory Commission asked several banks to stop making loans. The CBRC’s chairman denied it, but then the Bank of China — one of the country’s biggest banks — announced it is curbing its lending.
Today comes word that Chinese GDP grew an annualized 10.7% in the fourth quarter, moving China ever closer to eclipsing Japan as the world’s second-largest economy. Consumer prices jumped sharply in December.
All that stimulus is getting the world’s armchair economists hot and bothered… now they’re afraid Chinese authorities are going to start running a cold shower.
Lo and behold, the “safety trade” is back in play. The major US indexes fell over 1% yesterday, and continue to slip as we write. Gold tumbled the most in a month, slipping below $1,100. But Treasuries rose and the dollar index stands at 78.5 — up a full point since Tuesday.
“There are two main emotions that drive investors – fear and greed,” explains Bill Bonner. “Lately, greed drives them to buy emerging markets, stocks generally, and commodities. Fear drives them to dump all their risky investments and head for cover. They believe cover is found in the dollar and in U.S. Treasury bonds – traditionally, the world’s safest credits.”
Not that this alters the sell side of our new Trade of the Decade. Fear will overwhelm U.S. Treasury debt. Just not right away. Just remember how giddy everyone still felt about U.S. stocks in January 2000.
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
