Doug Noland is Still a Bear, Feeling Bullish

Last week in his market summary and outlook, portfolio manager, Doug Noland, wrote of his concerns over the news we heard last week. It was news of Greece's debt problem with no EU solution known and that China was yet again raising the reserve requirement of its national banks to slow growth of both loan issuance and their internal inflation. (I wrote about China, including the reserve requirement policy of the People's Bank of China, last month in China Economy Clocked at 107mph in an 80 mph Zone.) These had the combined effect of causing investors to pull back on the amount of risk they wanted in their holdings. As a result the S&P finished this week up 0.9% and down 3.6% YTD. I have been looking forward to Noland's article this week expecting he would offer a little expansion of his analysis and outlook, which he did in the Global Reflation Update.

China Economy Clocked at 107mph in an 80mph Zone

The China economy is now the third largest economy, ahead of Germany and seems like a lock to move ahead of the fragile economy of Japan soon. This growth is creating both risk and opportunity. The challenge is to recognize which one at the right time. I have found two sources of insight into the China economy. One is Andy Xie, an economist who has been a guest economist in the Finance and Economics section of Caijing, a popular periodical in China with an English version web site, until November. He has stopped writing there, reportedly as a result of being censored by the government, according to an Asia Daily report. Xie was educated at M. I. T. and was Morgan Stanley's Chief Economist for Asia Pacific from 1997 to 2006. The other expert is Gary Dorsch, a currency expert with institutional trading expertise for many years.

Some of Xie's 2009 articles are still timely and provoking. With the advantage of a little hindsight, we can see that his expectations have been accurate and his timing guesses have been early. I highly recommend taking a few minutes to read his article dated 8/5/2009 titled Andy Xie: China Counts Down to the Next Bubble Burst. He writes about the China economy, its bubbles and sensitivity to the dollar.