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Behind BRIC’s Smile, a Scheme to Dump Dollar

By Rick Ackerman Posted on June 19, 2009, 12:01 am EDT Last Updated June 17, 2009, 7:04 pm EDT
The U.S. may still be able to cajole China and Japan into buying our soon-to-be-worthless Treasury debt, but members of the so-called BRIC alliance — Brazil, Russia, India and China — have been easing toward the escape hatch.   A subscriber of ours whose firm trades in far-flung global markets sent us the following dispatch — a cautionary note for all who may have been unduly impressed by last week’s nominally successful Treasury auction. Our correspondent writes as follows:
 
“Stop me if you’ve heard this one.  Four men met in a room (see picture below) yesterday somewhere in Central Russia to discuss how they were going to spend their money. Oh sure, they made a rousing and high-minded statement of their commitment to advance the reform of international financial institutions, asked for a greater voice for emerging and developing countries, and lastly expressed a ‘belief’ that there is a ‘strong need’ for a stable, predictable, and more diversified international monetary system. That last clause smacks of diplomatic delicacy over the words that no one seems to want to speak, the unmentionable US Dollar.

rock-paper-scissors-small

“Let the impact of this meeting sink in, particularly since it was barely covered by U.S. media and in fact the U.S. was not invited. We think these guys actually talked about where their massive US$ reserves are going and whether they are prepared to continue to support our deficits — or are they going to spend their Franklins before they lose value acquiring minerals, assets, and businesses world-wide to support growth in their own economies?  I don’t know about you, but if I had to read between the lines of the slippery official ministerial poppycock, I’d sure bet that all of them went home thinking that door #2 is a much better option for them. Bottom line: Since I can still buy for the equivalent of $12, a meaty T-bone at the Marlin restaurant in Lusaka, you can be sure that someone from BRIC  is also buying copper using their still over-valued US Dollars.”

  • Larry June 20, 2009, 8:09 pm

    As a Vet., I know that the United States is still the most feared in the world! The United States, has by far, the strongest military in the world.Freedom is not Free! Mr. Obama is a smart person, and he need’s the support of our growing Hispanic’s! Our growing Hispanic population come’s to America because they seek economic freedom. As a Catholic, I know that Hispanic’s are America’s future. But for right now, you have this period of right wing hatred toward’s IMO America’s future growth. Mr. Obama may get tired of all this right wing hatred towards him and make a move. I am not sure on how to invest in this situation. I bought TWM on the sell in May and go away theme. I sold half of MFN several day’s ago(as per my previous post). Most of my money is in cash.

  • richard dudley June 19, 2009, 7:33 pm

    Classes for identifying and trading ascending triangles begin poolside in 30 minutes. Pina Coladas will be served.

  • Bradley June 19, 2009, 3:40 pm

    I’ve been watching some of the picks made here for a couple of months now. MSFT puts? (as the stock goes through the roof). GDX calls? (as gold wanders around and drifts lower). Seems like a mea culpa is due for a lot of these things. Who cares about picking EXACT buy and sell points. I’d rather be trading something going the direction I expect it to rather than the other way around….

    &&&&&

    Bradley: Watching from where? In compiling this short list of losers, you have somehow overlooked scores of winning trades, including Pick of the Day selections that have been profitable more than 80% of the time, tradable Hidden Pivots disseminated in the chat room, and daily touts that in the E-Mini S&P alone could have made back fifty times what would have been lost on MSFT, GDX and a couple of others . RA

  • cameroni June 19, 2009, 4:44 am

    And where are all those US dollar hoards welcome?

    Both India and China are aggressively leveraging their Dollars into the the worlds last true wild west. The great undiscovered, unregulated , poverty stricken and open armed economies of Africa.

    Dollar dumping is proceeding at breakneck speed and snapping up resource plays the West is just not prepared to indulge in. It is a good trade for Africa who needs real development dollars, a good deal for Asia who are anxious to support their own future commodity needs. The West is strangely becoming a 5th wheel there because our sentiments don’t encourage real discovery or economic development at the risk of seeming to be exploiters. The public here has so many hang-ups about true African investment and our public companies are loath to get involved in risky politically sensitive gambits despite the very good opportunities available. Asia has no such barrier to market entry.

    China will own Africa this century.

  • Daman Prakash June 19, 2009, 3:40 am

    I dont claim any expertise on B, R and C. But I do know my Country starting with I.

    We dont have huge reserves as being talked about. They are far less than our debt in same currency. The talk of Indian cbank buying Gold reserves is at best an intended disinformation. India’s private sector and public are doing that job merrily saving Gold from catastrophe. Indian Gold Imports were liberalised in 1999 synchronising with worst phase of Gold around USD 250. Since then India has imported 4150 tons of Gold in last decade and provided floor to Gold prices.

    Experts should stop speculating that when four emerging markets political heads meet it has to be anti US. In this dependent world US needs BRICS as much as we need US. Emerging markets are just trying to synergise their capacities and address inclusive growth within their own country through consultation and discussions.

  • Albert June 19, 2009, 2:44 am

    Well IMO when the day comes that this gang of four start pumping Dollar, you should know what they are up to…afterall why pay 1600 for an ounce of Gold while you can still get them at 930’s or even 880’s.

    On the other hand, I don’t see how they can avoid rising rates with 10-30 years rates at near 4 percent….

    One last thing is Crude at 40 is much better than any rebate check for the economy but the same greed that got us here works again. Crude at 70+ imo will kill any green shoots if there are actually any.

    As days goes by, the chance of a 1k Dow drop is more likely, you just can’t hide everything forever.


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