dollar demise or surprise?

Presented by Jack CrooksPresident Black Swan Capital

Agora Financial Investment Symposium - Vancouver24 July 2009

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Growth Risk Bid Surprise

Muddle through - IWP

Source: Stephen Jen, Morgan Stanley

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Major “green shoots” disappointment – rethink!

- Double-dip recession- China disappointment- Emerging market crisis

Capitulation out of EMMoney flow out of China European banking risk

Global Rebalancing

Hide in US Treasuries

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Overconsumption <=> Overproduction

CA Deficit Nations <=> CA Surplus Nations

United States <=> China

…an end to the symbiotic relationship!

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Potentially an end to the Export Model

Subpar global growth for years [Industrial production crushed for majors]

Heightened pain for emerging markets

Deflation the problem now, not inflation

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US-China Symbiotic Relationship Single Currency Zone Argument

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US-China Symbiotic Relationship Game Over?

Single Currency Zone Argument

Money Locked Inside the System

US Consumer Wealth Fading

Crunch

Cap Invest@ 45% GDP

Seemingly costless Chinese capital?

Property & Stock Bubbles

X

X

X

X

X

Chinese Government Explicit Stimulus

X

X

Forcing Asian Trade Partners to Adjust[China surplus up, but exports to West down]

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Source: Leto Researchwww.blackswantrading.com

Free Credit Credit Crunch

Lower CA Deficit Means US Requires Less Int’l Funding

Consumption Savings

Implicit Weak Dollar Policy

•50% 6-mo•$35T •Legacy•Non-bank

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Eurostat reports today industrial new orders in the Eurozone declined by 30.1% from a year ago.   In Germany, the decline was 32.2%.  This is the tenth consecutive month of sharp declines averaging above 30% per month.  It seems that industrial contraction in Europe today is twice as bad as in 1929-1930.  The fact that export powerhouse Germany leads the collapse raises questions about the euro, whose exchange rate is literally killing German manufacturing.

Leto Research, 7/22/09

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Front-end load infrastructure build $1.7 trillion spent in first half, in a $4 trillion

economy▪ Massive inefficiencies and excess capacity▪ Bubble Trouble…cap controls and fixed currency

▪ Stocks/Real Estate/Banking Lending

Demand slack and no exports mean… Rising unemployment = Social tension More consolidation of state power and

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Japan Creditor Superpower

1988 BOJ formula as US Current Account Improved1. Boost stock & property market2. Give buffer for export companies to turn inward3. Stock & property trigger wealth effect4. Stimulates consumers & residential investment

China Creditor SuperpowerUS Stock Market

Crash

Credit Crunch

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Commodities get whacked! 50% fall left?

Stocks tumble!The US dollar surges on another

major global risk bid!

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