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The Bull 'n Bear on the end of QE2, revisiting the yuan



April 25, 2011 – Comments (2) | RELATED TICKERS: BRK-B , SLV , GLD

Last week, I mentioned China's efforts to internationalize the use of the yuan. Lo and behold, last week witnessed the first yuan-denominated offshore IPO. Indeed, Li Ka-Shing, the Hong Kong real estate billionaire floated a REIT in Hong Kong. Personally, I prefer to avoid buying when property billionaires are selling, but that's another matter (sort of like when Blackstone (NSYE: BX) went public).

On a related note, a hedge fund manager interviewed in Barrons' this weekend suggested that a significant proportion of oil transactions would be denominated in yuan within the next few years (oil is still quoted in dollars nowadays). I very much doubt that this will occur that quickly, but who knows?

There is a cornucopia of articles on the end of QE2 in todays WSJ. I didn't read all of them; the one that caught my eye opposed Bill Gross of PIMCO (bearish on Treasuries) with the top bond fund manager at BlackRock (NYSE: BLK) (I forget his name -- he's not as media-friendly as Gross). However, the article appears to miss the point by focusing on the immediate impact of the end of QE2. I follow PIMCO/ Gross pretty closely and my understanding is that his bearish position is based on a long-term outlook and relates only partially to the Fed's actions. Gross has made his concern regarding the size of the U.S.'s unfunded liabilities (which do not appear in official public debt figures) quite clear. I do not see these liabilities as a near-term risk; however, they pose a significant long-term risk -- and the long-term will inevitably become the short-term at some point. Get on it, Washington!

Enjoy your day!

Alex Dumortier

Word count: 276

2 Comments – Post Your Own

#1) On April 26, 2011 at 11:26 AM, mtf00l (46.64) wrote:

Good luck on your word count quota.  I hope it's going well.

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#2) On April 26, 2011 at 11:42 AM, TMFAleph1 (93.09) wrote:

Ha ha ha... There's no firm quota. These posts are part commentary, part writing exercise. The idea is that I have only ten minutes and I have to get as much down as I can. I try to aim for roughly 300 words, but, strictly speaking, I was told the exercise requires you aim for 500. 

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