Monday, December 28, 2009

General Economy Stuff in my Head

It's been a while since I did a hardcore financial/economic blog post. So I will just pen down some stuffs that I have in my head.

1. The Chinese Yuan
  • China is determined not to let the Yuan rise as this will make their exports expensive to other countries, thus reducing their competitiveness. This will be disadvantages for many manufacturing countries. Reiterating that eventually China will not lose its grip as the 'factory of the whole' in the years to come.
  • In addition, it also means that large scare manufacturing company will eventually have to move over to China.
  • They can afford to suppress the valuation of the Yuan because of the large amount of foreign reserve which they have, which actually comes from the large sales of their goods to other countries, which in turn increases their foreign reserves. So as you can see, it is a vicious cycle, and China will have the upper hand
  • On a side note,t I noticed while watching the movie 2012, it tells about how the currency to buy a place on the 'Ark' is in Euros and not in USD, and the building of the Arks were also done in China. Interesting...
2. STI

The STI has been inching up,slowly but steadily. However it appears to me that it will be reaching a 'stationay point' (like in math) soon. I.e. the curve is smoothing off to a peak that looks like it's going to be the fibonnaci line of 61.8% at index value around 2949.(Seen from the graph below)

Also, small caps are running like crazy, and IPOs are having big one day jumps in prices. The last time that we saw this occurrence was just before the financial crisis in Oct 2007. This is making we worry. I am currently quite heavily invested in stocks. So I am still contemplating whether to back away from the market soon..maybe in January after the Capricorn effect.


AK71 said...

My favourite currencies, apart from gold, are the RMB and the Indonesian Rupiah. The RMB and the Rupiah are fiat currencies like the US$ but they have not been abused and are not as flawed.

ntuchartist said...

Just found out what Fiat currencies are by googling it.

But didn't the rupiah got attacked during the currency crisis in 1997?

Could you explain a little why these are preferred as compared to say the Euro or Australian dollar?


AK71 said...

Basically, like you said, the RMB is strong because it has lots of reserves backing it. A currency which has lots of debts but no reserves is rubbished.

The Indonesian Rupiah is strong because the economy is strong. It also had very little exposure to the CDOs which plagued the US and the UK. It also has a lot of natural resources which are in demand.

The Indonesian Rupiah, the Thai Baht, the Malaysian Ringgit, the Hong Kong Dollar were all attacked in the Asian Financial Crisis. The Asian economies suffered, trimmed the banking system and emerged with stronger balance sheets. Asia took the bitter pill and we are in much better shape now.

In this last financial crisis, the 3 Asian economies which did not suffer negative growth were China, India and Indonesia. They also have huge domestic economies which kept them powering ahead. So, I guess we should buy the Indian Rupee too. ;-p

Marc Faber thinks the Indian Central Bank is doing a fantastic job buying up gold instead of US Treasuries which he thinks will be worthless one day. The USA is surviving on borrowed money and borrowed time.

The A$ is likely to strengthen as well because the country is rich in natural resources which are in demand.

The Euro is relatively stronger compared to the US$ but some of the EC's members like Spain have problems.

I'm just touching the tip of the iceberg here, obviously. Economists have made a mess of this world, that's what one of my lecturers said once before.

AK71 said...

I forgot to mention that I wrote something related to this in my blog. You might want to check it out:


The economy must start to create some real jobs.