Does this make sense? China upegs the Yuan which means half of America's products will now cost 40% more to buy from China and the US administration pushed for this... I don't make to many fundematal calls but selling the retailers would be a VERY good ideal imo.
Yeah, looks bad for the low-margin retailers like WMT and the $-stores. I doubt it's a 40% hit, but it will be difficult to pass those costs on to the public. Margins are going to get squeezed.
What with gas prices where they are, utility prices increasing, rates rising along with rising levels of consumer debt, and now a jump in prices at retail (they can't eat the whole rise)) eventually this is going to impact consumer spending and that has been the rock that the economy has relied on the past few years. At some point the current rosy market perception will have to deal with reality and I don't think it will be pretty. Question is when will that happen, last quarter of the year, or 1st quarter next year? Or further out? Or is capital spending going to kick in and take up the burden?
*adjusting the plastic-rimmed reading glasses lower across the bridge of this nose to feel more intelligent*... Sam, your analysis/trade set-up of this is excellent! However... I trade money 24 hours a day so I'm supposed to know what I'm doing. My understanding of the YUAN deal is this: Don't trade jack-sht based on this crispy-fried noodle de-peg blitz. 1. China did NOT "un-peg" CNY. The news reporters did. 2. China only adjusted the Renminbi for their favor and their advantage only. 3. If Bush wants to trade retail due to this then it's his loss not yours. Bottom line: What we wanted was for those cup-o-soup anal-rententive/obsessive currency traders to FLOAT their friggen money in the open market. It didn't happen. It may never happen. The currency is still under intense artificial manipulation (you got 3 guesses who the manipulators are, and I can tell yah that it is not forex traders and it is not the USA). good luck, the skalp
Why not pass on increased costs? If there are no lower cost suppliers then you will see higher costs passed on to the consumer. What will stop WMT and others from going to other low cost locations, Vietnam, Cambodia, Indonesia, Africa? And, what makes you think China is cutting off its nose to spite its face? China is doing what they think is best for China. The currency is not floating but still being managed in a price range China feels is best for them. DS