The risks of a shift in Chinese currency policy are heightened by the still-polite but increasingly palpable tension between China and the U.S. revolving around Taiwan's hints at independence. It doesn't help that the Administration is filling important international finance and diplomatic posts with judgment-impaired political hacks rather than individuals with suitable talent to address the risks.
In short, international interest rate spreads are useful to watch here. In addition, credit spreads (corporate minus Treasury or low grade corporate minus high grade corporate) are also important. At this point, a further deterioration in credit spreads would be a very strong signal to batten the hatches.
The information is always in the divergences.
Monday, March 28, 2005
Hussman
From this week's Hussman report.
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