The enclosed link will take you to the latest fund letter from Paolo Pellegrini's new fund. Pellegrini was John Paulson's right hand man when he did his greatest ever trade. http://www.marketfolly.com/ . There is lots of good meet in this letter. In particular, it makes a logical case for US corporate taxes rising. US corporate is the only sector of the economy that is increasing its cash holding, yet capex and employment continue to be light. Therefore hitting this sector with higher taxes could play to the larger electorate and helps plug a fiscal whole. As Hewlett Packard's results made clear, corporates are not spending a lot on new computers, growth is still coming from consumers and emerging markets. A rise in taxes has not been factored into US equity valuations yet.
I thought the following paragraph, which argues for a one off Yuan revaluation, was also interesting:
We all know a revaluation of the RMB is likely and there is at least one New York listed ETF I know of that gives exposure to this trade. The interesting thing is then what happens? Commodities will rise, that's a given because of the impact on the dollar. However, a revaluation surely signifies a more concerted move to tilt the Chinese economy away from exports and fixed asset investment to consumer. As this sinks in will commodities continue to be strong?
Another -though unlikely thing to look out for - is that if the revaluation was much more than 5% it could hit other Asian exporters. China adds little value, it is essentially an assembly point for parts and subsystems supplied by the rest of Asia. A sharp revaluation of the RMB therefore runs the risk of hitting Asian exporters .