BIGCAPITAL's Blog

December 31, 2009

What’s ahead in the markets for 2010 ?

Filed under: Uncategorized — bigcapital @ 11:52 pm

What’s ahead in the markets for 2010 ?

Wall Street — If the key to successful investing is “buying low”, then an abundance of caution is in order if you’re rebalancing your portfolio.

This year’s rally has sent prices for everything from stocks to bonds to gold so high that easy pickings are unusually hard to find heading into 2010.

“There isn’t that much to be excited about,” says Ben Inker, asset allocation director at GMO, a Boston-based manager of $102 billion for institutional clients such as endowments, foundations and pension funds.

If pros like Inker admit difficulty finding decent investments, it’s especially hard for average investors looking to adjust their mix of stocks, bonds and other assets at year-end. After all, many mistakenly buy when a rally has nearly run its course, or sell in panic near the bottom.

Sure, the market feels safer than it did when almost everything was crashing — to prices so low it seemed there was nowhere to go but up if you were patient.

Those with the fortitude to take money off the sidelines last winter or spring have been richly rewarded. The Standard & Poor’s 500 is up more than 60 percent since bottoming out March 9. A broad measure of the bond market, the Barclays Capital U.S. Aggregate Bond Index, is up more than 7 percent since then. Riskier high-yield bonds, meanwhile, have surged more than 60 percent.

Government policy that’s made it easier to borrow has helped fuel some of the gains for more speculative investments, from junk bonds to racy emerging markets stocks. That policy won’t be ending anytime soon — Federal Reserve Chairman Ben Bernanke pledged Monday to maintain interest rates at near zero for an “extended period” to boost spending.

“It’s going to be tougher in 2010, because we’ve had this big flow into risky assets,” Inker says. “They were all cheap last winter, but they’ve all gone up 60 percent-plus.”

Even after those gains, nearly everyone agrees the economic recovery is still shaky. So strategists like Inker are having a harder time figuring out where to put money to work.

“It’s a little bit frustrating, because the temptation is to say, ‘Well, stocks have had a great run, so let’s take some money and put it back into fixed income,'” Inker says. “But then you look at the risks in bonds, you say, ‘It’s not clear what we really want to own.'”

Inker and another asset allocation expert, Rob Arnott, both worry about long-term inflation eroding bond returns. And Arnott — chairman of Newport Beach, Calif.-based Research Affiliates, and manager of the $14 billion Pimco All Asset Fund — doesn’t like much in the stock market, either. He contends it’s “expensive, and priced as if the recession is over.”

 

STOCKS: It wouldn’t be a stretch for prices to modestly climb well into 2010. That’s because it’s not unusual to see recoveries from extreme bear markets last more than a year. Standard & Poor’s says the S&P 500 appears poised to rise 9 percent by next July (sure?), if past patterns coming out of bear markets play out again.

But Inker and Arnott suggest more gains may not be sustainable, since this economic recovery is relying on government stimulus and rock-bottom interest rates that can’t last forever.

Rising stock prices hinge on Wall Street forecasts for a sharp rebound in corporate profits next year.

Inker says he’s nervous about analysts’ projections that profit margins will return to mid-2007 levels by the end of 2011: “They’re saying that by two years from now, things will be as good as the best time ever to have been a U.S. corporation. That doesn’t seem plausible,” Inker says. “The economy is trying to work through too many problems now to believe things are going to be that good.”

 

– Business & Financial Journal-

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Will there be an Economic Depression or Stock Market Crash in 2010 – 2011? How will the World Economy do? – A New Age / Astrology / Prophecy Discussion

Filed under: Uncategorized — bigcapital @ 11:50 pm

Will there be an Economic Depression or Stock Market Crash in 2010 – 2011? How will the World Economy do? – A New Age / Astrology / Prophecy Discussion

In 2010-2011 I think the U.S. stock market and economy will see continued chaos, but I think the U.S. will do better than the much of the world (Europe and Japan may have worse problems). As for Russia, watch out for a mother bear that has lost its cubs– as Russia has lost its former satellite countries. Russia’s economy I think will recover some in 2010, but it will turn into an angry bear under Putin within a few years. This is because Putin is the Antichrist, the Satanic imitation of Christ, who rises to power during a period of world chaos described in the Bible’s Book of Revelation. Note that Putin is likely to use natural gas and oil exports from Russia as a means to manipulate former Soviet Union countries and Western Europe.
During this 2010-2011 time period expect to see economic chaos, wars, terrorist attacks, disease epidemics, great earthquakes, great storms and global warming causing sea levels to rise, and possibly asteroids or pieces of a comet may hit earth. And there may be a major war in Nov. 2010. After that, after 2010, hope for the world will come from the Southern Hemisphere. We are already seeing the trend of hope coming from the Southern Hemisphere with the election of President Obama, whose father is from Kenya on the equator. I think that President Obama’s economic plan will help the U.S. and world economies recover.

But how about in the past, were there any particular planetary alignments during times of economic problems? Yes, there is a general pattern we shall discuss here. During the October 1987 and October 1929 stock exchange crashes, the Planet Saturn was in the Astrological sign of Sagittarius. The significance of this is that Sagittarius, the combined horse/man, with Saturn having a connection in Greek / Roman / Etruscan mythology to agriculture as well as weghts and measures and coins, means that Saturn in Sagittarius represents the third Horseman of the Apocalypse, economic depression. When Saturn is in Sagittarius you may get the trigger event, such as a stock market crash, that begins an economic depression. Saturn will not be in Sagittarius for many years, but you can still expect great economic chaos in 2010-2011 as we will then be in the seven year End Times period, including a major war in August-November 2010.

Other cases of economic problems when Saturn was in Sagittarius:
(1) Saturn was in Sagittarius in 1782, when an economic decline began that resulted in economic depression in the U.S. from 1783 to 1787.

(2) Saturn was in Sagittarius from 1838-1841, a severe economic depression, lasting seven years, began with the panic of 1837, caused by a series of bank failures.

(3) Saturn was in sagittarius on Sept. 24, 1869, when a Gold Market panic, “Black Friday”, began an economic decline that resulted in a severe recession for the U.S. 1873-1879.

(4) The Panic of 1893 resulted in a severe recession until 1897, when Saturn entered Sagittarius, in this case at the end of the recession.

Generally, the U.S. economic pattern of recessions or depressions every 30 or 60 years is related to the 29.4 period of revolution around the Sun of the planet Saturn.

 

-Revelation Magazine-

 

 

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December 23, 2009

New Zealand Economy Continues To Slowly Move Out Of Recession

Filed under: Uncategorized — bigcapital @ 8:07 am

 

 
 
(Update with comments from finance minister and economists, currency and market reaction and earlier comments from Fitch Ratings on current account)

 
WELLINGTON — New Zealand’s economy continued to expand in the third quarter as the country’s gradual move out of recession gathered momentum, but economists said the tepid growth is unlikely to spur the Reserve Bank to immediate action.

Statistics New Zealand said Wednesday that real, seasonally adjusted production-based gross domestic product expanded 0.2% on the quarter in the three months ended Sept. 30, after it expanded a revised 0.2% in the second quarter.

Initially, Statistics New Zealand had said the June quarter GDP expanded 0.1%.

The quarterly figure compared with the median 0.4% expansion forecast in a Dow Jones Newswires poll of nine market economists.

The weak, but positive, growth “gives the impression of an economy crawling, rather than springing, out of recession,” said Goldman Sachs JBWere NZ strategist Bernard Doyle.

The data are “unlikely to light a fire under the RBNZ” in terms of need for rate hikes, said TD Securities economics strategist Ian Pollick.

The economy technically pulled out of recession in the second quarter, snapping a five-quarter streak of contractions and the longest downturn since the recession caused by the first oil shock in the mid-1970s.

Earlier this month, the Reserve Bank of New Zealand kept the official cash rate at 2.5% but signaled it would start raising interest rates in mid-2010 rather than the previous guidance of the second half of 2010 if the economy continues to recover. The central bank had expected the economy to expand 0.4% in the third quarter.

Most economists expect the central bank to begin hiking the rate in March or April and money markets have fully priced in a 25-basis-point rate hike in March.

ANZ senior economist Khoon Goh said, however, that Wednesday’s data don’t justify a rate hike in March, despite current market pricing.

“June is very much the central case, but it all depends on how the data flows,” he said.

“The recovery is in train, but has been off to a subdued start,” Khoon added.

The New Zealand dollar fell nearly half a U.S. cent to a three-month low of US$0.6977 after the data. A forex dealer in Wellington said there was some disappointment as the currency market had anticipated a stronger number than economists were forecasting. The currency was trading at US$0.6992 at 2325 GMT. Interest rate swaps also eased back as the market saw the data as dovish, a Wellington trader said.

Finance Minister Bill English was cautiously upbeat about the data.

“New Zealanders can go into the Christmas break feeling more positive after two quarters of economic growth, but more work is needed to ensure a strong sustainable recovery,” he said.

He noted that the recovery remains fragile and any further problems abroad could weaken New Zealand’s growth prospects.

“That is why it is critical we improve the competitiveness of our exporters and address structural imbalances in our economy,” said English.

The positive GDP news add to Tuesday’s better-than-expected current account deficit data.

Fitch Ratings said Wednesday the current account, which showed a deficit of NZ$1.413 billion in the three months that ended Sept. 30 against the median forecast of a NZ$1.78 billion deficit, was a positive surprise and made it less likely it would downgrade the country’s sovereign rating.

“It (the improved current account) makes it (a downgrade) less likely, but one swallow doesn’t make a spring. I think we would want to see a few more numbers and whether this is the beginning of a more fundamental trend and change in the underlying structure of the New Zealand economy,” David Riley, the agency’s head of sovereign ratings told Radio New Zealand.

In July, Fitch Ratings revised the outlook on New Zealand’s foreign currency AA-plus sovereign rating to negative from stable, saying it had concerns about the country’s growth outlook, current-account deficit and overseas liabilities.

 
From: Dow Jones Newswires

December 22, 2009 18:52 ET (23:52 GMT)

December 22, 2009

US Real GDP 3Q Growth revised down, weaken the speculation higher interest rates in the near future

Filed under: Uncategorized — bigcapital @ 10:05 pm

 

US Real GDP 3Q Growth revised down, weaken the speculation higher interest rates in the near future

Real gross domestic product rose at a 2.2% annual rate in 3Q, from a estimate of 2.8% from an originally reported 3.5%. Economists were expecting the GDP revision to show growth of 2.7%. The latest numbers showed downward revisions to nonresidential fixed investment and to private inventory investment

Fed-funds futures trim rate increase expectations for mid-2010 as data show 3Q GDP growth is lower than expected. July contract prices in 46% chance for FOMC to raise funds rate to 0.5% at mid-June meeting vs 50% chance as priced in just before data came in.
 

Source: DOW JONES NEWSWIRES

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December 21, 2009

China sovereign wealth fund to receive more capital: report

Filed under: Uncategorized — bigcapital @ 5:10 pm

 

China sovereign wealth fund to receive more capital: report

 

TOKYO — Sovereign wealth fund China Investment Corp is expected to receive another injection of capital from the country’s foreign-exchange reserves in the coming months, according to a report citing unnamed government officials and people familiar with the fund.

While a final decision has yet to be made, the CIC would likely receive a similar amount to the initial $200 billion it was given at its founding two years ago, the Financial Times reported on its Web site Sunday.

Chinese media have also reported the government is considering a new capital injection of that amount for the fund, the report said.

The CIC, established in September 2007 with funding from China’s large foreign-exchange coffers, garnered global attention with high-profile losses from early investments in Morgan Stanley and Blackstone Group.

But the CIC stayed mostly in cash last year before switching into highly liquid U.S dollar assets as the greenback bounced back in November 2008 and again in March this year, the report said.

As the global economy began to recover earlier this year, the fund was quick to make investments in commodities-related assets that benefit from a rebound in Chinese growth, the report said.

Beijing has repeatedly expressed its intention to gradually diversify away from low-yielding U.S. government securities, which now make up the bulk of its foreign reserves.

Another factor influencing the decision to give CIC more money is the expectation that China’s largest banks will raise roughly $50 billion in new capital over the next couple of years to meet tighter regulatory requirements, the report said.

Since CIC holds controlling stakes in most of China’s largest banks, the fund must provide much of this capital to avoid seeing its holdings diluted, it said.

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Source: MarketWatch.com – Dec. 21, 2009, 12:05 a.m. EST

December 18, 2009

Fed To Leave Rates Low For ‘Extended Period’

Fed To Leave Rates Low For ‘Extended Period’

 

WASHINGTON — The Federal Reserve pledged Wednesday to hold interest rates at a record low to drive down double-digit unemployment and sustain the economic recovery.

The Fed noted that the economy is growing, however slowly. And turning more upbeat, it pointed to a slowing pace of layoffs.

Still, Fed Chairman Ben Bernanke and his colleagues gave no signal that they’re considering raising rates anytime soon. They noted that consumer spending remains sluggish, the job market weak, wage growth slight and credit tight. Companies are still wary of hiring, they said.

Against that backdrop, the Fed kept its target range for its bank lending rate at zero to 0.25 percent, where it’s stood since last December. And it repeated its pledge, first made in March, to keep rates at “exceptionally low levels” for an “extended period.”

In response, commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will remain about 3.25 percent. That’s its lowest point in decades.

Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They’re especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.

Noting the stabilized financial markets, the Fed said it expects to wind down several emergency lending programs when they are set to expire next year. That seemed to strike a confident note that the Fed thinks it can gradually lift supports it provided at the height of the financial crisis.

The central bank made no major changes to a program, set to expire in March, to help further drive down mortgage rates.

The Fed in on track to buy a total of $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac by the end of March. It has bought $845 billion so far. It’s also on pace to buy $175 billion in debt from those groups under the same deadline. So far, the Fed has bought nearly $156 billion.

Its efforts to lower mortgage rates are paying off. Rates on 30-year loans averaged 4.81 percent, Freddie Mac reported last week. That’s down from 5.47 percent last year.

The Fed said it has leeway to hold rates at super-low level because it expects that inflation will remain “subdued for some time.”
Fed policymakers repeated their belief that slack in the economy — meaning plants operating below capacity and the weak employment market — will keep inflation under wraps.

A government report out Wednesday showed that inflation is in check despite a burst in energy prices. Energy prices, however, are already in retreat.

Bernanke, who’s seeking a second term as Fed chief, has made clear his No. 1 task is sustaining the recovery. Last week, he and other Fed officials signaled they are in no rush to start raising rates.

At the same time, Bernanke has sought to assure skeptical lawmakers and investors that when the time is right, he’s prepared to sop up all the money. Some worry that the Fed’s cheap-money policies will stoke inflation.

Some encouraging signs for the economy have emerged lately. The economy finally returned to growth in the third quarter, after four straight losing quarters. And all signs suggest it picked up speed in the current final quarter of this year.

The nation’s unemployment rate dipped to 10 percent in November, from 10.2 percent in October. And layoffs have slowed. Employers cut just 11,000 jobs last month, the best showing since the recession started two years ago.

Still, the Fed predicts unemployment will remain high because companies won’t ramp up hiring until they feel confident the recovery will last.

Consumers did show a greater appetite to spend in October and November. But high unemployment and hard-to-get credit are likely to restrain shoppers during the rest of the holiday season and into next year.

-Financial Post-

December 15, 2009

ECB’s Trichet Says Strong Dollar Is ‘Very Important’

Filed under: Uncategorized — bigcapital @ 12:17 am

 ECB’s Trichet Says Strong Dollar Is ‘Very Important’

 
U.S. stock futures pared their morning gains after ECB President Jean-Claude Trichet outlined an exit strategy from the quantitative easing measures unveiled during the credit crunch. Trichet also noted U.S. government support for a strong dollar was important, which helped to pushed the dollar off its lows and in turn had stocks paring their morning gains. “Right now, the dollar is flying, so futures are selling off,” said Dave Rovelli, managing director of U.S. equity trading for Canaccord Adams. “I would like to see the dollar go up and the market go up, that’s the confirmation that the economy is actually doing better.”

European Central Bank President Jean- Claude Trichet said a strong dollar is “very important” for the euro-area economy.

“We have a very important stake in the dollar to be strong,” Trichet told reporters in Frankfurt today.

The euro has gained 18 percent against the dollar since the middle of February, threatening to slow the region’s recovery by hurting exporters. Daimler AG, the world’s second-largest maker of luxury cars, said yesterday it will shift some production to Alabama from Germany as it seeks to benefit from the cheaper dollar.

Trichet noted with the “utmost interest” Federal Reserve Chairman Ben S. Bernanke’s Nov. 16 comment that the U.S. central bank is “attentive” to changes to changes in the dollar’s value and “will help ensure that the dollar is strong.”

“I consider this speech was an important one,” Trichet said, adding “it is clear” that Bernanke and U.S. Treasury Secretary Timothy Geithner favor a strong dollar.

December 2, 2009

US Dollar is “Likely Source” of Next Financial Crisis

Filed under: Uncategorized — bigcapital @ 6:57 am

US Dollar is “Likely Source” of Next Financial Crisis

The trade deficit of the world’s biggest economy also remains huge. How much longer can the dollar defy gravity?

Last week, America’s currency fell to a 15-month low against the euro, cutting through $1.5050. Against a trade-weighted currency basket, the dollar was also at its weakest since July 2008. The greenback plunged to parity with the rock-solid Swiss franc, then hit a 14-year low against the yen.

The dollar’s weakness is based on fundamentals – not least America’s jaw-dropping debt. It’s a long-term trend. From the start of 2002 until the middle of last year, the dollar lost 30pc on a trade-weighted basis.

It was during the summer and autumn of 2008, though, that the sub-prime debacle entered its most vicious phase (so far). The rescue of Fannie Mae and Freddie Mac, America’s quasi-state mortgage-lenders, followed by the Lehman collapse, sent shock waves around the world. For six months or so, Western investors piled into what they knew, liquidating complex positions and buying plain dollars. The greenback became stronger, spiralling upward during the so-called “safe haven rally”.

All that has now changed. The trade-weighted dollar has lost 22pc since March. One reason is that, since the spring, the Federal Reserve has been printing money like crazy – both to bail out Wall Street and service America’s rapidly growing debt.

Sophisticated investors have also been exploiting America’s ultra-low 0.25pc interest rate to borrow cheaply in dollars, switch these borrowings in currencies where returns are higher, then pocket the difference. This so-called “carry trade” has flooded foreign exchange markets with US currency.

The dollar fell particularly sharply last week, though, as traders were reminded of the patently obvious – that the White House actually wants the dollar to fall. US Treasury officials have lately taken to staring into the TV cameras, puffing out their chests, then stating: “We are committed to a strong dollar.” That’s nonsense, of course, because a weaker currency boosts US exports and lowers the value of America’s external debt.

When the minutes of the Fed’s latest policy meeting were published on Tuesday, describing the dollar’s decline as “orderly”, the markets rightly took that as confirmation of America’s “benign neglect” approach – with intervention to support the dollar unlikely. The minutes also showed the Fed’s key committee members voted “unanimously” to keep interest rates at rock-bottom for “an extended period” – another reason to sell.

In addition, the Federal Deposit Insurance Corporation, the fund that safeguards US bank deposits, warned that the number of “problem” banks grew in the third quarter, leading to speculation it could seek a credit line from the US Treasury. That would mean more borrowing and money-printing, concerns which sent the dollar even lower.

Yet “benign neglect” is fraught with danger. A weak US currency makes commodities more expensive (seeing as they’re priced in dollars). It was when the dollar hit an all-time low of $1.60 against the euro during the summer of 2008 that oil soared to $147 a barrel. Expensive crude damages the economy of the world’s biggest oil user. And as the dollar falls, America’s huge commodity imports cost more, making the trade deficit even worse.

On top of all that, a falling dollar makes it even more difficult for the US government to meet its massive borrowing needs. Just to service existing debt, America must sell $205bn of Treasuries this year, a total set to hit more than $700bn a year by 2019 – even if annual budget deficits shrink. Selling long-term sovereign debt, in a currency expected to fall, is not easy.

Almost every American economist I know dismisses these concerns. Several have contacted me over the last 48 hours, gloating that the dollar has just put on a renewed “safe haven” spurt in the midst of fears about Dubai.

Yet the state of the dollar poses enormous dangers. For one thing, America’s currency depreciation trick could backfire if “the rope slips” and a steadily dollar decline turns into free fall. The cost of US imports would soar, with the Fed being forced to sharply push up rates. The world’s largest economy would then be caught in a stagflation trap – a slump, but with high inflation.

A more immediate concern is that a blind rush into the US currency could cause the carry-trade to go badly wrong – with those who’ve borrowed in dollars suddenly owing more, while their dollar-funded investments elsewhere “are worth less”.

A rapid “unwinding” could cause major losses at financial institutions, posing renewed systemic dangers. Far from being a safe haven, the dollar is the likely source of the next financial crisis

“THE FED IN AMERICAN HISTORY”

In fact, the Fed was specifically designed to create financial crises. It was all plotted in 1910 when minions of J.P. Morgan, John D. Rockefeller, the Rothschilds and Warburgs met on Jekyll Island off the coast of Georgia. In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting. Said Congressman Charles Lindbergh on the midnight passage of the Federal Reserve Act: “From now on, depressions will be scientifically created.”

In order to scientifically create an economic depression, the Fed prompted irresponsible speculation by expanding the money supply sixty-two percent between 1923 and 1929. The so-called Great Depression followed. This depression “was not accidental. It was a carefully contrived occurrence,” declared Congressman Louis McFadden, Chairman of the House Banking Committee. “The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all.”

In March of 1929, Paul Warburg issued a tip that the scientifically created crash was coming. Before it did, John D. Rockefeller, Bernard Baruch, Joseph P. Kennedy, and other banksters got out of the market
A few years later, the banksters and their minions met in Bretton Woods, New Hampshire, and plotted the creation of the International Monetary Fund and the World Bank. The purpose of these two criminal organizations was to set-up a global Federal Reserve system and wage economic warfare on billions of people. The weapon they used was debt and the loss of sovereignty that follows.

In 1971, then president Nixon fit one of the last pieces into the puzzle — he signed an executive order declaring that the United States no longer had to redeem its paper dollars for gold. It was a great day for the banksters and the global elite. The gold standard ensured predictability and regularity in the economy and the banksters wanted to put an end to that. For the bankers, order and control is realized out of chaos and misery.

Fast-forward to the present day. Bernanke’s Fed has meticulously sabotaged the economy in order to create a crisis in classic Hegelian fashion. The corporate media tells us the crisis is the result of ineptitude and mismanagement at the Federal Reserve. Au contraire. Like the Great Depression, the even Greater Depression now on the horizon was scientifically created.

The Fed is the primary instrument the bankers are now using to destroy the middle class, hand over all public assets and resources to them, implement a crushing austerity, usher in a new era of global corporatist feudalism and build a sprawling planet-wide slave plantation based on China’s totalitarian model.

*The articles and commentary featured on the Daily Reckoning are presented by  Liam Halligan is chief economist at Prosperity Capital Management*

The Fed May Cause Next Crisis, Hong Kong’s Tsang Suggests

Filed under: Uncategorized — bigcapital @ 6:20 am

 

The Fed May Cause Next Crisis,  Hong Kong’s Tsang Suggests

The Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis, Hong Kong’s leader said.

“I’m scared and leaders should look out and watch out,” said Donald Tsang, chief executive of the Chinese city, said in Singapore today. “America is doing exactly what Japan did last time,” he said, adding that the Bank of Japan’s zero interest rate policy contributed to the Asian financial crisis and U.S. mortgage meltdown.

Fed Chairman Ben S. Bernanke, a scholar of the Great Depression, has overseen a record injection of liquidity into the world’s largest economy, pledging not to make the mistake of the 1930s, when policy makers tightened policy. Tsang’s warning contrasts with pledges by the Group of 20 nations that represent the world’s biggest economies to keep stimulus measures in place.

“We have a U.S. dollar carry trade at the moment,” Tsang, 65, said in a speech where leaders of the Asia Pacific Economic Cooperation forum are gathering for a weekend summit. The carry trade is where investors borrow cheaply in one currency and use the funds to invest in other currencies.

Next ‘Problem’

“And where is the money going — it’s where the problem’s going to be: Asia,” Tsang said. “And again you can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals.”

Tsang was working for the Hong Kong government during the 1997-98 Asian crisis, when countries from South Korea to Indonesia were forced to borrow from the International Monetary Fund because of an investor exodus sparked by concerns officials couldn’t maintain the value of their currencies. Authorities intervened to buy $15 billion of Hong Kong stock to successfully defend the territory’s exchange-rate peg to the dollar.

The U.S. currency has tumbled more than 15 percent since the beginning of March, according to the Fed’s trade-weighted major currency index. The dollar has been hurt by a global recovery that has reduced investor appetite for the currency as a haven, and by expectations for the Fed to keep its main rate near a record low into 2010.

IMF Analysis

“There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report last week. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.”

Fed policy makers last week reiterated their pledge to keep borrowing costs “exceptionally low” for an “extended period” to aid the U.S. recovery. APEC finance ministers, in a joint statement yesterday, committed to maintain stimulus efforts “until a durable recovery in private demand is secured.”

“We are serious, we definitely want a strong dollar,” France’s Finance Minister Christine Lagarde said in an interview in Singapore today.

World Bank President Robert Zoellick, also in Singapore for APEC, said that while Asian countries do face some risk of asset prices climbing, it’s up to the region’s officials to act.

“Given liquidity in the international marketplace and given the pace of recovery in East Asia, you could start to see some asset bubbles in particular markets,” Zoellick said in a Bloomberg Television interview yesterday. “There will be a need here, unlike you might have in Europe and North America” to look at actions such as Australia’s rate boost this month, “or other ways,” he said.

U.S. Treasury Secretary Timothy Geithner reiterated his commitment to a “strong dollar” policy while on a trip to Asia this week.

“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar,” Geithner told reporters in Tokyo Nov. 11. After meeting with his APEC finance minister counterparts yesterday in Singapore, he said “we bear a special responsibility” because of the U.S. economy’s global role

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