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Monday, April 16, 2012

Here In Trog World It's Cooty Stew

It looks like China is devaluing its currency to help the manufacturers. But those in non-trog-world seem to think this is an epic statement of confidence in the Chinese economy. This makes me want to sell GS.

The thing is, never shall trog and non-trog meet. We can't even communicate because the feeble gutturals of the trog beings cannot even be deciphered by Yale professors, whose ears are attuned to the pure tonalities of Mandarin spoken with a Boston accent.
“The government is confident that China will avoid a hard landing, otherwise why would they introduce the possibility of greater foreign-exchange volatility?” said Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia.
It's an unanswerable question, isn't it?The Swiss central bank is trying to jack its currency down, the Japanese central bank is trying to jack its currency down, heck, everyone's trying to jack their currencies down. Clearly the motive for the Chinese must be different!

Lice-picking lower life forms such as yours truly are occasionally inspired by such brilliance to send Yale professors proposals for a truly sustainable economy based on extensive protein farming of personal parasites, which may explain the occasional red-state screeds you read. They may take me seriously, and truly believe that the traditional GA way to survive economic downturns is to make cooty stew once the squirrel and possum supply begins to wear thin.

Should you have troggy doubts still, China also eased foreign capital controls considerably. They started early this year, and I thought they were trying to offset the effect of trying to edge out foreign carmakers (who gained market share in the domestic auto market against domestic manufacturers last year). But the last move made me think they are trying to keep the local wealthy from moving their money entirely offshore. But that's just trog-grunting, I suppose.

More troggy grunts: China's heavy truck market seemed to reach peak last year, and so far this year appear to be falling YoY. Kenworth in the US is cutting staffing by 10% at the Chillicothe plant. Now being a Yale professor means that you don't have to pay any attention to recipes for braised Palmetto bug appetizers and truck manufacturing stats, but trogs do, and from a trog perspective this means China needs to export more. Chinese passenger vehicles did better in March, but discounting played a role and I'm afraid the domestic models are losing pace faster than the foreign models. Also they are going to have to get production in line with sales soon. I think they are close on passenger vehicles, but I am not so sure about the trucks.

Inflation has been running so high in China that it is difficult to figure out what retail sales figures really mean, but if you look at unit sales figures for cars and then look at the mix, which is shifting toward luxury/larger/high-end, and then look at this graph, one at least gets a feel for why the profit figures took that drop:


China has an export market for both trucks and cars in some of the emerging economies, and I think China will try to push that this year. Chinese industrial production stats are always challenging to parse, but the striking deceleration in electricity certainly implies that something has changed and the volume-measured increases in product output are not that hot for the first quarter. I come up with about 4-5% residual growth impetus, and they can certainly boost that up with some exports and some domestic pumping.

Anyway, my point is that there is a limit as to how much they can push infrastructure/construction, and so they need to expand major product exports. There are obvious advantages to a lower currency.

(Note - much of the ethylene is probably used to make polyethylene, which is used for plastics.)

Comments:
MOM,

It looks like China is devaluing its currency to help the manufacturers.

Are you trying to tell us that the bull market in the WisdomTree Dreyfus Chinese Yuan ETF is finally coming to an end? Lock in those 1.45% average annual returns since inception (May 14, 2008)!

Here's an endorsement from the Yahoo message board.

September 25, 2008
Buying this ETF is a no brainer

Every day is Snark Week on the price discovery channel. ;)
 
I'm loving the Trog references to help describe the situation by the way.

Trog

The performances are rotten, the Trog makeup is so bad it looks, at times, like it will slide right off the actor's face, and everything proceeds at a snail's pace to idiotic situations.

D'oh! ;)
 
Mark, YoY Cooty Chinese Stew in Singapore.
On a y-o-y basis, NODX to China (-0.9 per cent) decreased in March 2012 while NODX to South Korea (+34 per cent), Hong Kong (+15 per cent), the EU 27 (+4.5 per cent), Malaysia (+5.2 per cent), Japan (+6.2 per cent), the US (+4.0 per cent), Taiwan (+4.0 per cent), Indonesia (+2.6 per cent) and Thailand (+0.9 per cent) increased.

I, Trog-M_O_M, grunt and scratch in dirt for signs of edible grubs.

Admittedly Europe is in a pickle, but I am not sure it is in a worse pickle than China.

May G_d or Manifest Destiny or SOMETHING save us from Ivy League professors.
 
May G_d or Manifest Destiny or SOMETHING save us from Ivy League professors.

Why am I on this ice unicycle and where am I headed?

C'mon Zayna, it's up to us to stop those aliens!
 
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