Real Holiday Gift From China?

I’m sure you have holiday shopping to do, so I’ll keep this short.
You gotta love articles warning of further market downside after a 15% drop.  When reading this Bloomberg article on gold, I just want to yell, “Where were you $300 ago?”  In spite of maddening phrases like, gold “may” have more downside, they may have a point.  Have a look at this weekly chart of front mini gold contract:
Gold 11 1214 300x174 Real Holiday Gift From China?
If we get a full-blown liquidity crisis like we did in 2008/2009, there’s a ton of downside. Like real estate, gold is a real asset.  Unlike real estate, however, gold took off after 2009 because of massive monetary stimulus.  In recent months, however, central banks have gotten behind the 8-ball and the crisis has outgrown their ability/willingness to increase liquidity.  As a result, all risk assets are getting hit.
All of this is presaging a global economic slowdown.   A horizontal line on this weekly copper chart indicates the “shoulders” of a head-and-shoulders pattern.  This is a decidedly bearish pattern.
Copper 11 1214 300x165 Real Holiday Gift From China?
This is the best indication of a true slow-down taking place in China.  It’s also why the PBOC is going to keep the USD/Yuan exchange rate “stable” in 2012.  This is code for re-establishing a peg in an effort to increase liquity.  In fact, this is one of the few bullish indicators for risk assets.  If China steps on the gas, along with the US, asset prices might not get completely crushed.
This would be a good thing, because commercial real estate is wrapped up in all of this.  The following chart has both EQR and copper.
hg eqr 11 1214 300x227 Real Holiday Gift From China?
There really is no place to hide but cash, especially during a crisis.
Happy Holidays!!
#CRE #finance

1 comment for “Real Holiday Gift From China?

  1. Eric Hawthorn
    December 15, 2011 at 10:40 am

    Thanks, David. It’s interesting to see how this situation is affecting the USD-Yuan exchange rate. It’s weird to see any sort of coordination between these two rival economies.

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