"China's Dollar Dilema" , and Once Again, Financial Preparedness

I cannot tell you how often the issue on the top of my economic and financial worry list, within short order, is the feature article in the Financial Times! I keep worrying the world, particularly China, is going to stop buying ( or start selling ) US Treasuries. Things are already bad, very bad, and not getting any fundamentally better any time soon, but this debt thing is a big problem. I am sorry but I do find it ironic that at the same time we are telling individuals that they were irresponsible and need to work hard to pay down debt, the leadership of this country is doing the opposite on a historic scale. I do understand the many arguments why we NEED to spend out way out of a problem caused by too much spending, but it is still ironic. My husband has been talking about the "China Issue" forever and this article summarizes the key points he has been talking about it a very worthwhile read. He thinks one of the answers is for them to buy GOLD - a lot of it. Who knows, maybe they already are.

The financial markets? I have continually written about the deleveraging process that has taken hold. It is not over and will not be until asset prices find some sort of bottom. What will it take to find a bottom? Consider reading these two pieces (below) by folks a lot smarter and more connectect than I am. Oh... and they also make more money, at this point, likely more than any other person on the planet. What YOU CAN DO is basic financial prepardness. On how to do it, click here. Please consider sending that link around to everyone you know that you think needs help during this historic and difficult times.

The reads.......

Bill Gross of PIMCO - BEEP BEEP. Paul McCulley - Saving Banking.

(if you did read Bill's piece click here... maybe Bill should hire me?)

Job Losses, "Onerous Issuance", the Economy

"Intensifying job losses will put further pressure on consumer spending, raise mortgage, credit card and other debt defaults as households already face wealth loss from falling home values and volatile stock market. Will also reinforce need for fiscal stimulus including tax cuts and unemployment insurance." ( RGE Monitor ) This is the cycle we are in at the moment and there really is not much that can be done about it. The NEED for fiscal stimulus is clear but here is the other side of that, debt. Read this thoughtful piece in the FT that talks about the consequences. ("Onerous Issuance.")

For a thoughtful investment piece - Tips on Surviving 2008 - click here.

For the growing risk of a hard landing in China - click here.

Leading Analysts Forecasts of the S & P - click here. The good news, most are positive.

“China Shares Fall on Beijing Rate Signals”

Shares in mainland China dropped 5.6% yesterday. ( according to WSJ) To put that in context that would be equivalent to a 690 point drop in the DOW. 690 POINTS. Could you imagine what the fed would be doing if we had a day like that???? What set it off according to the journal? Continued bad news in the US ( note that stocks in the US barely moved yesterday) including a poor earnings report by GE, as well as a year over year 16.3% increase in money supply. Excuse me, but can you spell inflation? To put that in even greater context the “Shanghai Composite Index is down 46% from the high reached last October, and down 37% so far this year.” That makes our down 8% ish market look like a blessing.
Now the real question is why? Why are Chinese equities performing so poorly given that there economy is so much stronger than ours? I have not read about a Chinese Sub-prime problem, nor have I read about a credit market meltdown. In fact, I am not sure they really even have any mortgages over there to speak of, and certainly not securitized ones. I seem to recall that people in China actually do save up to buy homes, which for many takes a lifetime. So why? The most common answer I have gotten is because there was a speculative bubble in Chinese equities. After years of off the charts performance it was just time for a breather. A 46% breather.
So now the question is if you were not one of the people caught in the frenzy, is it time to buy? I am not sure, but I am certainly working my way to figuring it out.