Editor’s Note: In this new series of articles, we include important or interesting articles from various newspapers with brief comments. Please let us know whether such articles are useful to you.
This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.
1. China – Watch The Body Language – Wall Street Journal – June 4, 2009
The past 3 weeks have seen an eruption of concern about China and how its actions would affect America’s AAA rating, the US Dollar. Fears that China will cut back on its purchases of US Treasuries have created a violent sell-off in the Treasury markets.
If you worry about any of these issues, this article by Andrew Baston in the Wall Street Journal is a must read for you. The article argues that China has little choice but to park the proceeds in U.S. Treasuries. A couple of excerpts are below:
- “It is in expectations for inflation that China’s influence is really being felt. Its manufacturing surveys have turned into positive territory well before those in the developed world. Perhaps more importantly, China is gobbling up commodities:”
- “Yet China has made no secret of the fact that it has been taking advantage of lower prices to build up reserves of oil and metals. If that stockpiling falls off in coming months, and isn’t matched by a pickup in real demand from developed nations, current expectations for rising commodity prices might start to look stretched.”
2. Germany Blasts ‘Powers of the Fed’ – Wall Street Journal – June 3, 2009 and Merkel for the Fed – Wall Street Journal – June 4, 2009.
The German Chancellor Angela Merkel delivered a rare rebuke to the US Fed, the European Central Bank and the Bank of England in a speech on Tuesday, June 2, 2009. This is an important subject and this article is definitely worth a read.
We totally disagree with Ms. Merkel. Germany like China is an exporting country and it lives off other countries in the world, mainly America. If you do not believe us, read what former German Chancellor Schroeder said last week at the International Economic Forum is St. Petersburg, Russia. He is expecting a tough year-two years in Europe led by weakness in Germany. In his opinion, Europe is so dependent on exports & export markets that they will suffer due to the lack of ability & desire of American consumers to spend.
The second article is a more detailed article and is a must read in our opinion. Below is Ms. Merkel’s statement and Dr. Bernanke’s response.
- Merkel – “I view with a great deal of skepticism the extent of the Fed’s powers.”
- Bernanke – “The U.S. and global economies, including Germany, have faced an extraordinary combination of a financial crisis . . . plus a very serious downturn. I am comfortable with the policy actions that the Federal Reserve has taken.”
We are totally on the side of Chairman Bernanke. We respect him and trust him. In fact, as we have written before, we would even morally support a “Bernanke for President” slogan.
Media reports have surfaced that there is stiff tension between Chancellor Merkel and President Obama. It is well known that Chancellor Merkel was close to President Bush. The fact that Obama has dismissed any talk of tension between them of course confirms the severity of the tension.
May we respectfully suggest that Chancellor Merkel devote her attention to the financial crisis brewing in Sweden and Latvia.
3. Latvia Fails to Sell Debt, Sending Tremor Around Baltic – New York Times – June 4, 2009
This may appear as a distant problem to many readers. But, unfortunately it is not. We encourage all readers to read this article. Below are two excerpts:
- “Latvia failed to sell nearly $100 million in short-term debt Wednesday as bidders shunned the small Baltic nation, whose economy has been one of the hardest hit by the financial crisis in Europe, and whose currency, the lat, is threatened with devaluation.”
- “The failure of the debt auction hurt bank shares in Sweden, as well as the krona, and raised fears regarding the economies and currency stability of other former Soviet states, from Estonia to Romania, that are now members of the European Union, The Daily Telegraph reported.”
4. Uneasy Engagement – Australia, Nourishing China’s Economic Engine, Questions Ties – New York Times – June 2, 2009
This is the first in a series of articles examining stresses and strains of China’s emergence as a global power “And suddenly, Australians are stepping back, realizing that their new best friend is someone they really do not know very well, much less trust”. This is an article worth reading.
This is not just theory. This week, the much criticized deal between Chinese Company Chinalco and Rio Tinto fell through. Under this deal, Chinalco was to pay $19.5 billion dollars for an 18% stake in the Anglo-Australian mining giant. Now capital is more readily available after a rip-roaring rally in equity markets and metal stocks. So Rio Tinto walked away from the deal and signed a Joint Venture with the Australian Giant BHP Billton.
5. Bollywood dispute hits India’s movie fans – BBC.com – June 4, 2009
Bollywood has been withholding films from release in recent months because of a dispute over box office takings. BBC’s Prachi Pinglay in Mumbai reports on how the dispute is affecting movie fans. The ongoing strike between film producers and multiplex owners has gone on for more than two months. This strike is creating serious withdrawl symptoms among Bollywood fans in India and around the world.
We are suffering as well and hope that this strike ends soon.
6. Analysis: Why Attack Lahore? – BBC.com, May 27, 2009
This is a sensible article that looks at the reach of the Taleban and the new struggle between the Taleban and their one-time sponsor ISI, Pakistan’s Intelligence Service.
“Lahore is the only city in Pakistan which has remained relatively peaceful since the 9/11 attacks,” says a security official. “It has been Pakistan’s saving grace, and whoever wants to destabilise the country or the government, would go after Lahore,” the official says.
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