THURSDAY MAY 27, 2010

Where are they going to go?

So, the market is relieved that the Chinese are not going to abandon the Euro.  Really?  Where exactly was China going to go with its euros?  Into the dollar?  I thought they already had too many dollars.  Yesterday, a Financial Times article stated that China was reviewing its euro holdings.  Well, in light of the situation, I hope they would be reviewing their investments.  I hope all investors are.


Europe and the US are the two largest economies in the world.  China makes gadgets and we buy them.  And we pay for them in euros and dollars.  Therefore, China is the recipient of a never ending supply of the currencies.  Unless they want to stop selling into these markets, China will be forced to maintain large reserves in these currencies.  China can and is diversifying its assets, buying commodities such as gold.  But with $2.5 trillion, that's a lot of gold coins...and a pretty big safety deposit box!


I am happy the market is up strongly today, but I think it has more to do with traders covering short position ahead of a long holiday weekend than China's commitment to the euro.

POSTED AT 1899-12-30 12:21:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.