Politics is war without bloodshed while war is politics with bloodshed.Mao

The week-end macro blog today with guest commentary by my friend Yoshi.

Yoshi wrote me nice e-mail last night and the content is the first real "new" research/analysis I have seen in years - you can always trust Yoshi for clear and concise thinking, but first to the order of G-20 communique:

Full text: http://www.pittsburghsummit.gov/mediacenter/129639.htm

Commentaries:

http://www.reuters.com/article/businessNews/idUSTRE58P04Z20090926

The statement was longer than normal and full of promises... the headlines was as expected but the sub-text left me with feeling that the exit strategy is further ahead than market presently perceive it to be...

The financeminister was instructed to work on a transparent plan for exit strategies in their November meeting - and the world "leader" (sorry I can't write it without putting " " around it as it's joke to call them world leaders....) believes growth is back at 3% plus - and certainly the year-on-year numbers vs last year looks good......

Which way to play this? I don't know but.....good friend of mine commented: "... the only way for this to be done in good order would be to let all of the programs run out of time.....".. so the way to monitor this will be to make table of "initiatives" and watch last "sell-date".. if this is THE PLAN, then we are losing a lot of stimulus over the next 3-6 month, and this I think is main point to take away..

Enough about my thought here is Yoshi e-mail to me (which I took the liberty of making public before getting Yoshi's approval - but I deemed the email to be in the interest of the national security :-)

Nice week-end and safe trading,

Steen

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Hi Steen,

I'm fine and amazed at how foolish this mkt is. We are on the verge of
protectionism and in the beginning of the end to the foreign capital
to the US (the Asians are serious about developing their domestic
consumer mkts, which will be far less open than the US).

I really think Obama will go down as even more corrupt than Bush and
his biggest mistake is Geithner who is closer to the powerfuls since
Summers will not pass any confirmation hearing in the Congress.

Right now, my biggest immediate concern is the CFTC's position
restriction on the futures when the interest rate differentials (one
of the major reasons the Asians would hold the USD) are gone. The USD
denominated commodities were acting as the balance to offset the
declining interest income and weaker USD. When the US increases tax to
eliminate the tax rate difference, then fait accompli to the USD.

I am amazed they are even talking about Tobin tax as if someone is
making sure the USD will be dead unless the US wants a new currency to
fraud its way out of the impossible USD liability.

Now, the Europeans are joining in on the protectionism (tariffs on the
Chinese aluminum foil and seamless steel pipes). There is a real
chance the Japanese (they have been quietly reducing the UST holding
for the last ten years) will sell the UST since their trade surplus
with the US is declining and Japan will need any available capital
including its reserve to pay for their domestic needs: free high
school education, the serious pension shortfall for the fastest aging
population and the DPJ's "Welfare Economy" policies.

The serious point regarding China and Japan is they are shifting their
economic models to more domestic oriented economies because they've
given up on the US consumers. If Japan, with the only 10% of the
Chinese population and much smaller land and even smaller natural
resources, would say they accept a strong yen, more domestic
consumption and Asian Economic Comunity, it would only mean one thing.
The US is becoming a liability to them. Look around in Asia, the
Chinese yuan & the Japanese yen swap lines with other central banks
are being extended like a spider web and they are talking about
establishing the Asian Monetary Fund.

As soon as Japan accepts China should take the leading role in the
Asian Economic Comunity and Asian Monetary Fund, I believe they will
becme a reality. It is natural that China leads Asia and would be more
acceptable to other Asian nations because of the stigma atached to
Japan like Germany in the EU.

These developments in Asia are not a part of the Team America. It's a defence mechanism to prepare for the harsh world to come. That's why I think we are near the flexion point in this mkt.

Yoshi