THE U.S. BOND MARKET IS LOSING STEAM U.S. bonds fell last week as the weekly bond offerings to finance the deficit met with weak demand. It seems that Japan and China have been absent or muted in their recent demand for U.S. bonds. This could be a substantial problem since they are the two largest holders of U.S. debt. Some argue that Japan’s absence from the market is temporary, attributable to the fact that the Japanese fiscal year ends on March 31. China on the other hand has been gradually changing the composure of their investments. They have, in . . .
Continue Reading: MANY WORLD STOCKS ARE TEMPORARILY OVER BOUGHT, BUT BUYERS ARE CONTINUING TO TARGET THEM
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INTEREST RATE INCREASES ARE BEGINNING IN STRONG GROWTH COUNTRIES India raised interest rates in a surprise move on Friday, March 19, 2010. This followed recent interest rate increases by Australia and Malaysia, all three countries are experiencing strong economic growth and rising fears of inflation. There are of course consequences of rate increases, especially as they spread to more countries, some time in the future rising interest rates will lead to the moderation of the strong economic growth that Asia is currently experiencing. In our opinion, this will not happen until Asia has dragged the world out of much . . . Like many people and governments, China does not like to be told what to do. If the U.S. Government wants to succeed in getting the China to up-value the Yuan, it should refrain from pressuring the Chinese Government, and certainly not resort to threats. If you read China’s pronouncements, it is clear that the Government is sending out repeated signals that it is willing to raise the value of its currency, yet will delay doing so if the U.S. or any other major nation threatens or pressures it to take action. China, like all nations wants to keep its . . . In our opinion, investors are looking for a way out of European currencies and into the Canadian, Australian, and even the U.S. currency. This is why European money continues to flow into these sectors. Europeans are seeking better returns in non-European currencies and in non-European bonds and stocks. BONDS Many European investors are becoming aware that although the Euro could rally at anytime, the current structure of the European community makes it almost impossible for weak countries such as Greece, Spain, Ireland, and Portugal to improve their fortunes. They cannot devalue their currencies to export more because the Euro’s . . . |
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