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Wednesday, December 14, 2011

China To Change Investing Tack: Will Buy Hard Assets, Not Bonds -- Will China Buy the Entire Bakken?

Reuters link here.

My understanding is that oil companies are pouring $2 billion/month into the Bakken.

China has announced it will spend $300 billion on hard assets -- like oil reserves.  Let's see, 300 divided by 2 --> 150 months, or more than ten years of the Bakken.
It's the clearest sign yet of Beijing's waning faith in bonds issued by Europe and the United States. Europe's festering debt debacle, record low yields on U.S. Treasuries and a depreciating dollar all add weight to the view in China that the time is ripe to change investment tack.

"China has decided that real assets are better than broken debt fix promises and low interest rates,"...

China had actively bought euro assets to guard its $3.2 trillion reserve pile against over-exposure to U.S. dollars, which have lost about a third of their value in the last 10 years as U.S. Treasury yields have sunk to record lows.

Reuters reported last week that the People's Bank of China plans to create the new vehicle with two funds, one for Europe and one for the United States, ...

"They want underlying assets. Equities, corporate bonds, real estate -- anything that governments want to flog," said one source involved in foreign exchange trading for official institutions such as central banks.

"One idea is that China could buy up agricultural land. They've also eyed ports in the past. They just don't want to do anything that's politically unpopular."
I don't know: would buying the entire Bakken be politically unpopular?

2 comments:

  1. It's for this reason alone that I passed up leasing to a company, that in turn sells to China..

    ReplyDelete
  2. I was using a bit of hyperbole to get folks' attention of what's going on in the world, both with bonds (purely financial) and with oil (China's buying up more and more reserves).

    ReplyDelete

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