Dollar Demise or Surprise?
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Dollar Demise or Surprise?. Presented by Jack Crooks President Black Swan Capital. Agora Financial Investment Symposium - Vancouver 24 July 2009. US$ Index - Where are we?. US$ Index/Commodities/EM Stocks. The dollar smile! Three scenarios!. Source: Stephen Jen, Morgan Stanley. - PowerPoint PPT Presentation
Transcript of Dollar Demise or Surprise?
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Presented by Jack CrooksPresident Black Swan CapitalAgora Financial Investment Symposium - Vancouver24 July 2009
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Source: Stephen Jen, Morgan Stanleywww.blackswantrading.com
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Major green shoots disappointment rethink!
Double-dip recessionChina disappointmentEmerging market crisis
Capitulation out of EMMoney flow out of China European banking risk
Global RebalancingHide in US Treasurieswww.blackswantrading.com
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Overconsumption Overproduction
CA Deficit Nations CA Surplus Nations
United States China
an end to the symbiotic relationship!www.blackswantrading.com
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Potentially an end to the Export Model
Subpar global growth for years [Industrial production crushed for majors]
Heightened pain for emerging markets
Deflation the problem now, not inflation
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US-China Symbiotic Relationship Single Currency Zone Argument
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US-China Symbiotic Relationship Game Over?Single Currency Zone Argument
Money Locked Inside the SystemUS Consumer Wealth FadingCrunchCap Invest@ 45% GDPSeemingly costless Chinese capital?Property & Stock BubblesXXXXXChinese Government Explicit StimulusXXForcing Asian Trade Partners to Adjust[China surplus up, but exports to West down]www.blackswantrading.com
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Source: Leto Researchwww.blackswantrading.com
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Free CreditCredit Crunch Lower CA Deficit Means US Requires Less Intl Funding Consumption SavingsImplicit Weak Dollar Policy50% 6-mo$35T LegacyNon-bankwww.blackswantrading.com
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Eurostat reports today industrial new orders in the Eurozone declined by 30.1% from a year ago. In Germany, the decline was 32.2%. This is the tenth consecutive month of sharp declines averaging above 30% per month. It seems that industrial contraction in Europe today is twice as bad as in 1929-1930. The fact that export powerhouse Germany leads the collapse raises questions about the euro, whose exchange rate is literally killing German manufacturing.
Leto Research, 7/22/09www.blackswantrading.com
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Front-end load infrastructure build $1.7 trillion spent in first half, in a $4 trillion economyMassive inefficiencies and excess capacityBubble Troublecap controls and fixed currencyStocks/Real Estate/Banking Lending
Demand slack and no exports meanRising unemployment = Social tension More consolidation of state power and belligerence www.blackswantrading.com
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Japan Creditor Superpower1988 BOJ formula as US Current Account ImprovedBoost stock & property marketGive buffer for export companies to turn inwardStock & property trigger wealth effectStimulates consumers & residential investment China Creditor SuperpowerUS Stock Market CrashCredit Crunchwww.blackswantrading.com
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Commodities get whacked! 50% fall left?Stocks tumble!The US dollar surges on another major global risk bid!
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Black Swan Capital Website www.blackswantrading.com Black Swan Email [email protected] Black Swan OfferingsCurrency Currents: Daily Free Global Macro Commentary Subscription-based letters:Options Forex & FuturesEmerging Market CurrenciesCurrency ETFsManaged Currency Accounts
The virtuous circle could soon turn viciousChina is the world supply sourceAmerica is the world demand sourceChina sells goods to the US consumerThe consumer sends dollars to ChinaChina parks dollars in US bondsLower bond yields subsidize the US consumer spurring demand and investmentUS consumer demand leads to investment into Chinese manufacturing
At the core of this virtuous circle is credit expansion. But we know that is changing. China is hiking rates and the US is in recession. Rising interest rates in China and falling US demand are the feedback loop that will suppress Chinese growth.
*The virtuous circle could soon turn viciousChina is the world supply sourceAmerica is the world demand sourceChina sells goods to the US consumerThe consumer sends dollars to ChinaChina parks dollars in US bondsLower bond yields subsidize the US consumer spurring demand and investmentUS consumer demand leads to investment into Chinese manufacturing
At the core of this virtuous circle is credit expansion. But we know that is changing. China is hiking rates and the US is in recession. Rising interest rates in China and falling US demand are the feedback loop that will suppress Chinese growth.
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