The title Garbage Man has many implications as it relates to investing and careers. For me, it was actually my first job. Yes, this former hockey head and now Macro Analyst started his working career as the Garbage Man back in his home town. I'm not sure I learned a whole lot about investment analysis while digging through the garbage barrels back in Bassano, Alberta, but what I did learn is that as you dig through all that garbage, every once in a while you find a little treasure.

As I sit here drinking my second cup of coffee, listening to Pandora (that's what the Millennials use to get music these days!), and reviewing the global macro news streaming on to our floor here in New Haven, there are a few little treasures that are emerging:

The Chinese central bank is noting this morning that they view gold prices as very high and they will be wary of "bubble" assets. It is interesting that the so called "Communists" see bubbles before He Who Sees No Bubbles (Bernanke) and the purported free marketers at the U.S. Fed do. From a fundamental perspective, this is negative for gold demand in the intermediate term as China is potentially a large buyer of gold to diversify her reserves, though presumably not at bubble prices.

In stark contrast to concerns over Dubai's debt issues, both Latvia (GDP down by 18.4% in Q3) and Senegal are marketing bond offerings this morning, which suggests the market for emerging market debt is strong and open. Additionally, the spread between U.S. Treasuries and emerging market debt is at 315 basis points, which is in line with levels before the Dubai restructuring was announced. The implication is obviously that, for now, Dubai appears to be a blip on the radar screen and credit markets continue to open globally even for weak economies like Latvia. Free money and easy credit continues to flow.

The less traditional gauge of employment, the Monster.com employment index, which is a monthly gauge of online job demand fell one point sequentially to 119 in November. However, on a year-over-year basis it declined 17%, which is actually the lowest rate of annual decline since September 2008 (so a positive on balance). Interestingly, the occupation that gained the most in terms of "Top Industries Looking for Employees in November" was Transportation and Warehousing. On the margin, this report does look positive and year-over-year compares will look great starting in January. Accelerating year-over-year employment numbers should also be additive to inflationary pressures, as will emergency level interest rates.

Another topic I want to discuss this morning is China, which we refer to as "The Client." As many of our faithful readers know, we've been all bulled up on China this year and rightfully so given its massive stimulus program, high growth, and low inflation, but I thought it might be interesting to lay out the bear thesis on China. This thesis comes from well known short seller Jim Chanos. A short seller is sort of the Garbage Man of global investing, if you will. He or she is always sniff sniff sniffing for that company, or in this case an economy, that doesn't quite smell right. With a batting average of 85.1% on shorts since inception, we too know a fair bit about the dark art of shorting.

Chanos' thesis on China, according to reports, is as follows. First, given the enormous size of the stimulus of China, $900 billion, versus the size of the economy, $4.3 trillion, Chanos and the China bears postulate that the Chinese reported GDP expansion of 8.9% in Q3 is actually less than should be expected. Second, there appears to be some disconnect in official statistics coming out of China. As one example, while the growth in car sales is massive, as we have noted, Chanos and the bears are noting that there is no commensurate increase in gasoline sales. Finally, they theorize that there is massive over capacity being built in many Chinese industries. An example given is in the cement industry, where there is an estimated spare capacity of 340 million tons, which is more than the consumption in U.S, India, and Japan combined. Forbes columnist Gordon Chang has also been questioning China's reported GDP numbers.

As of yet, we have not changed our bullish stance on China, but we are concerned about the potential for a first half of 2010 slowdown in China. Certainly, any bull should know which garbage pails the bears are pawing around in before they become "trendy," or worse before their long positions get "punked."

Good luck out there today,

Daryl G. Jones

Managing Director