Geithner To Get a Spanking in China

Treasury Secretary Timothy Geithner visits China next week.  This does not necessarily mean the currency crisis will be at fever pitch.  We’ve already had a large move in a matter of days in key currency and interest rate levels.  Next week may bring a “sell the news” mood for traders keenly watching the interaction between China and the U.S. The reality is that China calls the shots.  The US does not.

For now, the vicious move is over.  Trading in hard assets has been furious.  Commodity prices, from ags to oil to metals, have been on a tear.  This is a crowded trade in the short term.  Yes, large budget deficits, out-of-control spending, and banana republic-like tactics have pushed the US Dollar over the edge.  Commodity and Treasury prices now reflect those factors.  For those interested in the intermediate to longer-term view, I suggest you wait for the dust to settle before loading additional anti-dollar plays.  When Chinese officials pummel Secretary Geithner and the market sells off, it will be safer to re-establish your core positions.  It may also make the administration wish they had sent the t-bond salesman-in-chief instead.

We still favor the following securities and would be a buyer on pullbacks: Market Vectors-RVE Hard Assets Producers (HAP), iShares Silver (SLV), Marvet Vectors Nuclear Energy ETF (NLR), PowerShares DB US Dollar Index Bearish Fund (UDN), CurrencyShares Australian Dollar Trust (FXA), iShares COMEX Gold Trust (IAU), Goldcorp (GG), PowerShares DB Agriculture Fund (DBA), PowerShares DB Commodity Index Fund (DBC), and Fronteer Development (FRG).

Take advantage of the recent surge to stand down, and feel good about your portfolio.  Nothing goes straight up.  Any sector or security can decline ten percent in a blink.  With markets in a lather, the prudent trader knows to be cautious.  There will be a time to join the fun; it’s just not now.  Good Luck.

Disclosure: long many of the securities mentioned