Monday, July 25, 2005

Fleck on China and the Housing Bubble

One of my favorite bears/contrarians is Bill Fleckenstein. I personally subscribe to his daily market review but MSN publishes a weekly column of his under the headng Contrarian Chronicles. Last Friday Bill gave some of his thoughts on China's decision to let the Yuan float (at least to some degree) and its potential implications for housing:

"If [interest] rates trend higher over time -- which they will, all things being equal (though all things never are) -- that will definitely impact the housing market negatively. And, since the housing market, in the form of what I call the housing ATM, is the economy, it will matter to the economy and, by extension, the stock market. But the key is, over time. We just don't know how long all this will take to play out. Of course, market participants can come to conclusions and accelerate the process, or decide it's a nonevent and, in the short term, thwart the process. In fact, the conclusion of the marketplace, in the short run, will probably be more important than whatever it is that the Chinese actually do, especially given the leveraged nature of bond-market speculation. To my mind, we don't know more than we actually do know. We don't know for sure what the composition of the basket is. We don't know how fast the Chinese will try to implement the changes. We don't know long it will take for the negative consequences to unfold. Therefore, the course of action is to just be alert for clues that this change is starting to matter."

Ful story:


Blogger Grunt said...

Ahh, the Asian Equation. Apparently a ton of American debt has been purchased by China and Korea.

It seems to be a butterfly effect but we should still watch ourselves very closely.

8:37 PM  

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