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Tag Archives: China

America…….look at yourself!

Let’s look at some foundational and basic facts about the USA

  • Only 40% of the population has a basic degree or higher.
  • Less than 30% of the population is skilled labor
  • 18% of the population is above 65 and growing rapidly
  • Manufacturing is barely 10% of the total GDP and less than 10% of the workforce is employed in manufacturing.
  • Exports of goods are US$2Trillion or less than 8% of GDP
  • While exports of services are US$1Trillion or 3% of GDP which leads the world significantly
  • China is the second largest holder of US treasuries in the tune of US$800 billion.
  • The USA is the country with the largest household consumption expenditure of US$18.8Bn, followed by the EU of US$9.8Bn and China at US$6.7Bn.
  • 40% of Americans are OBESE!

What does all the above tell us?

The USA is the largest economy in the world for now, followed closely by China.  The USA is a matured, developed and ‘greying’ economy, whereas China is still growing strongly.

As a matured and developed country, the USA was smart in the past 50 years to move up the value-chain and engaged in high value-added manufacturing and relocating all low value, low end manufacturing offshore in developing countries.

Unfortunately, in the past 30 decades, the Americans did not keep pace with the economic maturity of the country.  There are far too many Americans who are illiterate, low skilled or now skill, how do you survive in a matured and developed country?

The education system is broken, and worse Trump is dismantling the Department of Education.

If you look at the Rust Belt or the Mid West, where towns and cities was once bustling with numerous manufacturing industries, are all now ‘ghost’ towns and cities, left behind by the progressive economic train.  Recently, I saw a few youtube videos where reporters were interviewing Americans in the Rust Belt and the Mid West.  One gentleman in his 30s, said his grandfather was a forklift driver, his father was a forklift driver and he himself was a forklift driver till the factory was closed and moved offshore.  Can you imagine, after three generations, nothing has changed???!!!  I mean shouldn’t this young man be educated or highly skilled and be relevant to the current US economy?!  No, he just wanted to continue to be a forklift driver!

With such a high percentage of illiterate, low skilled or unskilled Americans in the USA, this labor force is irrelevant to the USA of today and with minimum wage of US$13/- per hour, how can any low end, low value manufacturing survive?! Coupled with the fact that 1 in every 2.5 Americans are obese…….how are you going to hire these people to work in the factory???!!!

The structural and fundamental problems faced by the USA today are all self-inflicted, so Trumpy and gang stop blaming China and the rest of the world for your own mess.

Focus on rebuilding deteriorating infrastructure all over the country, boost education, ensure that young Americans either have a degree or a skill so that they can be relevant to the country and to themselves.

Capitalize on what you have an upper hand, that is, high end high value-added manufacturing in semiconductor, electronics and chips.  Schools and the government should work together to put programs and policies in place to continue feeding and nurturing innovation and inventions.

Enough of blaming others, if anything stand in front of the mirror, look at yourself and blame yourself……………WAKE UP AMERICA!

Black Monday……Grey week of August 24th????

Thanks to China, my AUDUSD call option expiry this Friday, August 28th will be worth nothing and I have basically lost my premium of US$3Million.

No wait a second, I didn’t.  Apologies for the silence the last two days as you can well appreciate the financial markets, that is, the equity markets and the fx markets were crazy.

Given, all the bad news coming out from China; devaluing the renminbi, slowest growth in the past 5 years, PBOC cut interest rates twice and then again today, no short selling on 500 stocks in Shanghai and Shenzhen markets, lowering bank reserve ratios, buying less raw materials such as metals and ores, lowest exports in the past 4 years……………..all these pointed to China going down South!

This means SELL SELL SELL SELL AUDUSD!

So, silly me decided to be brave and stupid and chase the market, but of course with stop losses as well.

The deterioration in the AUD since last Friday from 0.7353 and downwards…………

The drop off the cliff on Monday at about 9pm Asia time, gapped from 0.7232 down to 0.7032, then, stabilising at 0.7142 and went back up to a high of 0.7232, right back where it started.

Last night, at about 8:50pm, my Ichimoku told me to sell the AUD, after cutting up and down two times within the last 24 hours, so I short the AUD at 0.7207.  By 2am in the morning, the AUD has fallen to 0.7157.  I decided to take profit and go to sleep for a trading profit of $1.25Million or 50bps on a nominal size of $25oMM.

So, I have now improved my call option losses from $3MM to a lower $1.75MM.  You really can’t win all the time………life!

The real issue now is where do we go from here?  Do we look at shorting the GBP and the EUR?  Well, let me share my thoughts with you in my next article on ‘Thoughts’.

I also have a thought provoking view that a conspiracy was started by China to encourage if not compel Janet Yellen from raising interest rates next month.  Again, I will share my thoughts with you soon, so stay tune.