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Unusual price action considering the following. From today's Gartman Letter:

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Regarding US Treasury debt, we do note however that the Chinese have issued a rather disconcertingly blunt statement regarding their holdings currently and their propensity to own more. Speaking via the English language "official organ" of the Communist Party, The China Daily, Beijing said that "China's increased purchases of US Treasury Securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis... The current strong foreign appetite should not be taken by the US government as solid proof of the long term value of its Treasury securities."

This is rather atypically blunt language from Beijing and we take it quite seriously. We see it as a very real and very serious warning that Beijing will not be taken advantage of; that Beijing does indeed understand its position of authority in the current environment; that things can and indeed will change materially at some point in the future, and that Washington has little choice but to acknowledge its tenuous position and adjust its policies accordingly. This does not mean that Beijing shall begin to sell its massive holdings of US treasury securities, for it likely will not do so. However, as we have said countless times before and shall say countless times again in the future, "It takes buying and lots of it to put a market up; it takes a mere lack of buying to put a market down." Beijing is threatening its potential lack of buying in the future, and has put the US on notice.

To that end we note that China remains the largest holder of US treasury debt securities, still far ahead of the 2nd largest holder, Japan. As of the end of October, China held $653 billion of US Treasuries, up from $587 billion at the end of September and compared to Japan's $585.5 billion.
China's lead over Japan has been, is and shall likely continue to widen.
Thus when Beijing speaks, Washington has no choice but to listen...intently.

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