Joining the Crowd

This whole Yuan revaluation deal is one of these classic moments where everybody in the investment industry and blogosphere feels the need to comment in order to show how Byron Wien-ishly up on events they are.  Most go like this ...

The Chinese authorities have clearly become more confident of a global economic recovery.  Combine this with a desire to deflect criticism ahead of the G20 meeting, and the growing understanding of the need for the Chinese economy to become more integrated with the world, and the need for this revaluation becomes clear.  This ensures a soft landing for the Chinese economy and has the additional benefit of increasing the purchasing power of the average Chinese citizen, thus easing pressures of social unrest.  With heavy gold purchases expected this summer in India, Chinese authorities want to deflect rising tensions with their Indian counterparts ahead of what is likely to be an especially bad monsoon season.   As the ECB is well into its purchases of Greek, Spanish, and Irish bonds, the Chinese Central Bank wanted to send a clear signal that they will hold their proportion of Euro reserves at 18%.  Additionally, the Polish elections over the weekend gave a clear signal that historically high sunspot activity is going to make it essential for political leaders to assure that copper stockpiles in the export-dependent Guadong province remain high.   ...
 

This is clearly one of those opinions are like assholes, we've all got 'em moments.  Its all pablum.  If you want to read more of this crap, search out someone like Jim O'Neal.  Jim is a GS guy and has staked out a position as the Larry Kudlow of China ("a state-controlled economy is the best way to prosperity").  Maybe he's right, maybe he's not, but he makes Kudlow-ite Ned Riley look like Bernard Baruch.

As someone who is long the Aussie interest rate markets and planning to get short the Aussie currency, I have a great deal of interest about the direction of the Chinese economy, since China is the marginal bid in pretty much everything Australia produces.  I will humbly interject a couple of comments/questions into what has mostly been an absurd discussion:

• Pretty much all of the punditry on the planet assumes that the Yuan must appreciate versus the dollar.  Given that, we can assume that a lot of money has been positioned for this appreciation.  It is well to remember that there are no one-way bets in this world.  Is it possible that the Yuan falls in value?  What would be the implications of that?  Since no one expects this, might there be some incredibly cheap options on a Yuan devaluation out there?  I plan on closely looking into this.  Watch this space.

• Why is it that the same folks who decry the slightest bit of central planning in the US (omigod Obama wants to run the auto companies and health care, and Congress might actually regulate the banking system!!!) seem to believe that some Communist Party hacks in China can not only perfectly divine the direction of the global economy, but also pull a few levers and expertly direct the fate of their own 8 trillion dollar, billion person economy?

• Why is that the equity prices, resource prices, and resource currencies have moved in a straight upward line over the past two weeks.  Is it possible that this announcement, like pretty much all other government announcements, found its way into the markets before it hit Bloomberg?

Before I go to bed tonight, I plan on re-reading Vic Niederhoffer's classic discussion of Delphic Oracles from Education of a Speculator.