From the New York Times' DealBook blog:
When Mark L. Hart III, a hedge fund investor based in Texas, makes an investment bet, he does it in the style of his home state: big time.
Since 2007, his winners have included high-risk, high-return wagers that the United States housing market would collapse and that Greece would go bankrupt.
But Mr. Hart’s most audacious gamble to date may well be the one he is making on China. He is betting that the mini-devaluation of China’s currency last month was a mere appetizer to a 50 percent currency implosion that he predicts will come when foreign investors pull their money out of China.
Such an extreme drop in China’s currency, the renminbi, would propel a broader rout in emerging-market currencies — from South Korea to Turkey to Brazil — and result in a sustained global slump as China’s borrowing binge grinds to a halt.
“Extreme credit growth usually leads to a credit bust,” Mr. Hart said in an interview on Real Vision TV — a new media venture in which sophisticated investors and financial experts offer their insights to fellow practitioners in a Charlie Rose-style format. In the video, which was produced a year ago — well before the recent currency devaluation — Mr. Hart explained how investors pulling their money out of China would lead to a collapse of the renminbi. “It is the story of 1997 and the Asian currency crisis,” he warned.
A growing number of investors like Mr. Hart have concluded that a dollar that strengthens with the United States economy will have a devastating effect not only on China but on emerging markets in general. Their view is that the trillions of dollars that chased risky investment opportunities in China, Brazil, Turkey and other countries are swiftly exiting and that the pace will pick up when the Federal Reserve eventually raises interest rates.
The result, they say, will be plunging currencies, corporate defaults and a sustained growth slowdown over the next few years. This week, emerging-market currencies continued their decline, led by Brazil, Turkey, Mexico and South Africa....MOREFor a contrary opinion, September 6:
Roubini Dismisses China Scare as False Alarm, Stuns With Optimism
We seem to have entered a phantasmagorical vortex of shape-shifting market madness.
Or something....
