Universal Agreement
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Are 100% of the people ever correct about an investment idea?
Well 100% is a tough row to hoe but what about 98% or so?
As best as I can tell from reading dozens of articles and posts on stock boards and discussions with friends, with a single exception (via an email discussion as opposed to a public post) nearly everyone agrees with this article put out today in Commentary by Ryan Detrick on Schaeffer Research.
Here is the relevant snip:
Running under the radar to most investors was word out of China that the government would revalue its currency, the yuan. In my opinion, this was rather big news. The plan calls for a revaluation of the yuan by 2.1 percent and a shift to a currency basket (of which the components have not yet been decided). This move was much expected, and the currency markets over-reacted to a degree yesterday to the "small" move. The reason for the violent moves in some markets is that this move is being viewed as the first of potentially many more adjustments to the yuan. In fact, I've read some economists are calling for a yuan revaluation of up to 50 percent. Makes that 2.1 percent move look pretty weak doesn't it?
An interesting discussion we had here on the floor today is was this just a move to satisfy Washington? Will this move be followed up with another move a year from now? How many more moves could come much sooner? Of course I don't know, but it's worth some thought.
The big loser when you start revaluing the yuan is the U.S. dollar. This is a sign that one of the largest buyers of U.S.-denominated assets is beginning to lose its interest in such assets, this is the reason bonds took such a beating yesterday.
A 50% drop in the value of the dollar huh?
I would be curious to see a list of economists suggesting that and exactly what their credentials are. Here is the key sentence though:
"The big loser when you start revaluing the yuan is the U.S. dollar."
Hey Bernie, got a sentiment reading on that for us?
What percentage of the people think that this move by China will lead to the death of the US$ and/or the death of US Treasuries?
Just Curious.
By the way, in case anyone was wondering about the snapback in treasuries and YEN today the above article might be a clue.
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/
