Flying on One Engine

The Airbus 380 is an ultra-high capacity aircraft that holds over 800 passengers and can fly over 9000 miles. It has four gigantic engines and requires almost 2 miles of runway.

Now imagine you’re the pilot at the end of a long flight. You’re low on fuel. You need to put the aircraft down soon, but there are only two airfields available with runways long enough. And one of those runways is under repair.

Kind of limits your options, doesn’t it?

That’s where the Chinese find themselves right now. Every month they export $20 billion more to the US than they import. They already have $3 trillion in investments. Prudence would dictate that they diversify, and not just buy US bonds and stocks. But the Euro’s a problem right now, what with the threat of a Greek default, tensions between the core and the periphery, and solvency issues in the financial sector.

That runway is potholed and under repair.

And the other places they might invest—Australia, Brazil, New Zealand—are too small. The entire New Zealand economy is only $126 billion. That’s just six months worth of surplus. They can’t dump that kind of money around without destabilizing those markets. Those runways are too short.

The only choice is to line up for the one runway that can handle the traffic: the US. And hope that the air doesn’t get choppy.

Bigger may be better in some things. But when it comes to trade, it can be a pain.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By | 2014-09-11T12:05:03+00:00 May 11th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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