Wednesday, March 17, 2010

Watch What the Chinese Do, Not What They Say

Hedgeye's Keith McCullough writes:
China selling? Oh, no – they’d never do that, would they? I’ve said this enough times to be as annoying as Chris Dodd telling you he has it figured out this time, but please, for the sake of sobriety – please watch what the Chinese do versus what they say.

China was a net seller of US Treasuries for the 3rd consecutive month in January, selling another $5.8B net and taking its balance of America’s debt holdings down to $889 Billion.

That’s another $889 Billion reasons to ignore the reality that you can just “take me now but know the truth.” If we anger The Client (China) enough, rates are going a lot higher than your “exceptional and extended” Congressman’s sense of self is telling you.
McCullough gets it. We continue to iritate the Chinese, and they start unloading Treasury securities.

I should note, given the debt that the Treasury needs to raise in coming months and years, the Chinese simply not buying anymore U.S. debt will be a problem. If they continue to sell, it will be a nightmare squared, since that other lover of Treasury debt, the Social Security Trust Fund has just become a net seller.

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