Saturday, May 9, 2009

"There Will Come a Time"

"There will come a time where the lack of Chinese participation may have a significant impact," said Illinois Congressman, Mark Kirk recently after touring the Bureau of Public Debt. In a recent AFT article
China Cancels US Credit Card, Kirk, a co-chair of a group of lawmakers promoting relations with China, said that China was discretely shifting investments away from US denominated Treasury Securities. Kirk further said that China's concerns were legitimate.

We have noted in early reports how China has been less than discrete at times concerning excessive US debt levels as well as the expanding US money supply. China has been diversifying away from US investments, investing heavily in other Western Hemisphere countries. While they have continued to participate in treasury securities purchases, they have focused more on short termed maturity paper, moving away from longer-termed debt issues.

This week, the US markets, received quite a wakeup call even while stock prices were rallying. Both long term bonds and the US Dollar fell sharply. Our mantra for the year has been to be short the dollar and bonds and long oil, gold and commodities. We are going to review our positions this weekend now that momentum might be starting to develop. Until now, the dollar has been considerably strong as have long term bonds, despite the heavy monthly supply of debt amounting to more than $100 billion per month!.

For those, especially outside of the US, with heavy US dollar exposure, it could be time to review your risk parameters and consider applying hedging techniques to protect your wealth.

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