So I countinue to stand behind my China recovery strategy and suggest you watch FXI, DBB, and UDN. Part of this outlook includes the devaluation of the US Dollar and its subsequent replacement as the global reserve currency. Think of this post as part 3 of the emergence of a new global currency- the previous two posts are:
Perhaps you are familiar with a chart pattern called a double bottom. It looks like this and is quite common.
Well, we are setti
ng up for another major double bottom as was seen in the US during the late 1920's and early 1930's.
ng up for another major double bottom as was seen in the US during the late 1920's and early 1930's. As we are right at where the red line is pointing. The next leg down is all set up because the fundamentals that caused the downturn have not been remediated. [click on chart to enlarge]
The first leg down which occured during late 2007 and followed through until today, was the typical pattern where the US "gets a cold" and everyone else "gets the flu". However, now that the top of the "W" has formed the next leg down will show a decoupling between the US and China. The US will go down due to fiscal and monetary policy while China will minimally softland and recover (ie: No "W" formation).
Why will decoupling occur? (1) because China is creating its own "consumer class" to be less dependent upon the US consumer and (2) China is trading its US "paper" for raw materials from Russia, Africa and Latin America-- better to own hard assets at the time of currency collapse.
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