us$ o dear me/ lookout below

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    Wall Street, New York

    Wednesday, October 27, 2004


    *** Foreigners dump the dollar...index makes 9-year low...

    *** A relationship breaks down...oil and trannies go

    *** Bank of Moscow...Indian finance minister...America's
    best real estate...and more!


    By Tom Dyson

    In your Monday edition of the Rude Awakening, we reported that
    India was planning to cash out $120 billion in Treasury
    bonds from the forex vault, and divert the funds into
    lucrative domestic infrastructure projects.

    "That's huge news," said Addison, on entering the office
    yesterday. "A senior finance minister of a large Asian
    country says he is fed up of subsidizing the U.S. economy
    and will sell the nation's dollar reserves..."

    Chris Mayer agrees. We spoke with the Fleet Street editor
    directly. His immediate thoughts went to the 600-pound
    gorilla that has become China. And then Japan. "What if
    they had the same idea," Chris mused, "the dollar would
    take it head-on, at speed."

    It looks like Chris' gloomy prognostication might have come
    true sooner than even he could have imagined: On Monday the
    dollar broke below 85 on the dollar index for the first
    time in 9 years.

    Now a Moscow-based news agency called RBC reports that the
    Russian government is following the Indian's lead.
    "According to commercial bank dealers, the Central Bank has
    not supported the dollar despite a large selling of dollars
    by market participants," RBC wrote.

    A Bank of Moscow expert is quoted next. He says the Central
    Bank's pull back from the market at the end of the week was
    quite unexpected. He surmises the Central Bank has become
    concerned over its inflation-preventing obligations.

    Foreigners are dumping the dollar in droves.

    On Monday, we reported how Wall St. traders had been forced
    to soak up an entire tranche of 10-year Treasury notes when
    foreign bids for the paper failed to materialize.

    Even the head of Treasury trading at Barclays Capital was
    amazed. He'd never seen foreigners turn their noses up at a
    Treasury auction like this before...and his book lost over
    a million dollars on the back of the vanishing act. Central
    banks buy bonds from the Fed to support the local currency
    against a declining dollar. No demand for bonds means less
    demand for dollars.

    Where is Mr. Tanigaki? Why didn't any Chinese finance
    officials turn up at the auction?

    It's because they're investing their reserves in higher
    yielding vehicles, says AP, citing a Chinese consortium's
    recent $5 billion purchase of Canada's largest miner -
    Noranda. "After decades of struggling to prevent Chinese
    companies from spending precious money overseas, the
    government is pushing them to invest abroad," the news
    agency reports.

    China's foreign exchange reserve exceeded half-a-trillion
    dollars last month for the first time. This historic
    milestone may not have been widely noticed by Wall St., but
    not Chris Mayer...he's been following China's progress very
    closely, and now thinks this is the time to position
    ourselves for imminent Chinese dollar-dumping.

    His latest play is a beauty and should benefit as Chinese
    capital moves out of U.S. paper: Get paid by Fortune 500
    companies to own $3.5 billion worth of real estate,
    including large tracts of America's largest China-serving
    port and a 588-acre lot less than a mile from 40% of
    California's trucking and haulage traffic. Read Chris's
    brand new report:

    Surf the Great Chinese Money Wave

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    Think $54 Oil and $2 Gallons of Gas Are Bad?

    Get Ready For Prices Four Times That High!

    The most devastating financial event in 150 years, will
    arrive July 2, 2006. That's my best estimate. And no, you
    won't hear any bells go off. They won't even talk about it
    on the nightly news... until it's too late!

    Do nothing, lose everything. Or you can make as much as
    668% on the two stocks that are set to Soar as the chaos


    Did You Notice...?

    A classic divergence...

    Everyone knows when oil goes up, transport stocks go makes sense and that's the way it's always been.
    Not this year. Something's changed...

    Since May 2003, both oil and the transport index have
    virtually doubled. We offer an explanation...

    Put simply, demand from China has stimulated enormous
    movements of goods and raw materials around the globe.
    Business is booming to such an extent that transport
    companies have been able to raise prices even faster than
    fuel costs.

    Profits this good in an environment of rising energy costs
    is unprecedented. So what's the story? Now we come to the
    crux of the inflation argument.

    Because U.S. interest rates have been held so low for so
    long, China's appetite for raw materials has grown to
    levels previously unimaginable. "This is partly because
    there would have been less demand for Chinese imports in
    countries such as the U.S. had interest rates not been held
    at artificially-low levels," explains the Speculative
    Investor, "and partly because the credit expansion in China
    would not have been as great if it weren't for the flood of
    U.S. dollars into that country."

    The trannies are thriving under inflation. It's only
    temporary, mind you - the benefits of inflation always are:
    Even if the transport industry can shrug off higher energy
    costs, sooner or later, higher haulage costs, higher basic
    commodity costs and higher credit costs will hurt the
    manufacturing sector. Should this scenario come to pass,
    transporters will feel the brakes by default.


    And the Markets...

    This Week




    10-year Treasury

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