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Presented by Jack Crooks
President Black Swan Capital
Agora Financial Investment Symposium - Vancouver
24 July 2009
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Risk Bid
Growth
Surprise
Muddle through - IWP
Source: Stephen Jen, Morgan Stanley
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Major “green shoots” disappointment – rethink!
- Double-dip recession
- China disappointment
Global Rebalancing
- Emerging market crisis
Capitulation out of EM
Money flow out of China
European banking risk
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Hide in US Treasuries
Overconsumption <=> Overproduction
CA Deficit Nations <=> CA Surplus Nations
United States
<=> China
…an end to the symbiotic relationship!
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
Potentially an end to the Export Model
 Subpar global growth for years [Industrial
production crushed for majors]
 Heightened pain for emerging markets
 Deflation the problem now, not inflation
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US-China Symbiotic Relationship
Single Currency Zone Argument
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US-China Symbiotic Relationship Game Over?
Single Currency Zone Argument
Chinese Government
Explicit Stimulus
X
Cap Invest
@ 45% GDP
US Consumer
Wealth Fading
X
X
Crunch
X
Money Locked
Inside the System
Forcing Asian Trade
Partners to Adjust
[China surplus up,
but exports to West
down]
Seemingly costless
Chinese capital?
Property
& Stock
Bubbles
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X
X
X
Source: Leto
Research
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•50% 6-mo
•$35T
•Legacy
•Non-bank
Consumption
Free Credit
Implicit Weak Dollar Policy
Lower CA Deficit Means US Requires Less Int’l Funding
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Savings
Credit Crunch
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Eurostat reports today industrial new orders in the Eurozone
declined by 30.1% from a year ago. In Germany, the decline
was 32.2%. This is the tenth consecutive month of sharp
declines averaging above 30% per month. It seems that
industrial contraction in Europe today is twice as bad as in
1929-1930. The fact that export powerhouse Germany leads
the collapse raises questions about the euro, whose
exchange rate is literally killing German manufacturing.
Leto Research, 7/22/09
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
Front-end load infrastructure build
 $1.7 trillion spent in first half, in a $4 trillion economy
▪ Massive inefficiencies and excess capacity
▪ Bubble Trouble…cap controls and fixed currency
▪ Stocks/Real Estate/Banking Lending

Demand slack and no exports mean…
 Rising unemployment = Social tension
 More consolidation of state power and belligerence
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China
US Stock Market
Crash
Japan
Creditor Superpower
Creditor Superpower
1988 BOJ formula as US Current Account Improved
1.
2.
3.
4.
Boost stock & property market
Give buffer for export companies to turn inward
Stock & property trigger wealth effect
Stimulates consumers & residential investment
Credit Crunch
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


Commodities get whacked! 50% fall left?
Stocks tumble!
The US dollar surges on another major
global risk bid!
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


Black Swan Capital Website www.blackswantrading.com
Black Swan Email – [email protected]
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