Chinese Fly Over
Research for Online Investors

by John Dalt

7/13/11

Fed Chairman Ben Bernanke appeared before the House Financial Services Committee this morning.  It was typical sparring over Fed policy from conservatives and justification for past spending from democrats.  Bernanke kept the option of QE3 on the table if the economy softens and needs “additional policy support.”  Maxine Waters (D-CA) made her usual foolish appearance to ask how many African-Americans received TALF funds.  Bernanke answered they didn’t track recipient company’s shareholder’s race.

The U.S.’s May Trade (IN)Balance increased 15% over April to a deficit of $50.2 billion.  April’s number was $43.6 billion. May’s was the largest monthly trade deficit since October 2008  Exports declined 0.5% to $174.9 billion and imports rose 2.6% to $225.1 billion.

Gold and Silver are “shooting for the moon.”  Gold hit a new high in Euro terms earlier this week and broke through to new highs in dollar terms this morning.  Silver has been trailing along like a “red-headed stepchild.”  Our Long-Term subscribers have a position in the AGQ, the ultra long silver etf.  We are of the opinion it won’t take much in ‘animal spirits’ for silver to take off again.

This morning, GLD traded its average daily volume in the first couple of hours.  SLV shares were at about 60%, but the AGQ was pushing the average daily volume.  It looks like the ‘risk-on’ trade is back in the market.

China’s National Bureau of Statistics reported the economy grew at 9.5% in the second quarter year-over-year.  This was down slightly from the 9.7% in the first quarter.  The government has raised interest rates and increasing bank reserve rates multiple times since last fall.  China’s GDP was growing 11.9% in 2010, and spurred inflation in food and energy costs.

Economists were surprised, expecting a 9.3% to 9.4% reading.  Lu Ting, with Bank of America said “It supports our view that the Chinese economy is on track for a soft landing despite rising market concerns of a hard landing.”  Industrial production in China grew 15.1% in June, up from 13.1% in May.

Sheng Yunlai, a spokesman for the Bureau of Statistics said “It’s not an easy job for China to maintain fast and steady economic growth in a complicated and volatile international situation and with an increased dilemma of domestic macroeconomic management.  Our efforts are commendable.”  There is a guy that knows who he works for.  One of the White House advisors couldn’t have said it any better, except their ‘dear leader’ doesn’t deliver the goods.

It looks like the Chinese “soft landing” will actually be a “fly-over.”  Commodities are all trading higher on expectations of continued buying pressure to feed the Chinese juggernaut.

After rallying it looks like the markets are starting to roll over at noon.  We are not sure what has changed in the world.  China is growing, Europe is imploding and the U.S. wants to decide which road to chose.  Should we continue pursuing the progressive’s dream of a welfare state like our European brethren or embrace the Federalist system of small government our founders created?  We wonder if it is too late to turn back from the precipice.

The mailbag:
I really loved what subscriber F.J.  had to say  I would vote for him if he ran for office ,,,but he's actually more like a prophet.—subscriber J.P.

John’s reply:  A Prophet?  A populist perhaps, a progressive for sure.  I am not sure Isaiah would agree.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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