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Thread: Russia rejects US warnings over oil deal with Iran

  1. #31
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    Re: Russia rejects US warnings over oil deal with Iran

    Quote Originally Posted by donsutherland1 View Post
    Trend lines are not "voodoo science" and they are not a matter of subjectivity. They are a statistical tool, and assuming a Gaussian distribution, the sample size should be 30 or greater before the distribution takes on the properties of that curve.
    To draw a trend line all you have to do is pick two points and draw a line through them. And if you want to talk about linear regression and least squares, that is subjective as well, because there is an assumption that the error is distributed in a normal distribution. What that means is that if the errors between what is estimated for the values indicated by slope of the trend line and the measured values do not fall into a bell shaped curve, your trend line is garbage. There is nothing to guarantee that the data will actually fit this assumption, so it is most certainly a subjective judgement to use linear regression in that way.

    Quote Originally Posted by donsutherland1 View Post
    Moreover, China's portfolio diversification and advocacy of reforms does not necessarily preclude its being a net buyer--at least for now--of Treasury securities. For example, China could increase its Treasury securities holdings even as Treasury securities constitute a smaller percentage of its overall foreign holdings. That outcome would be produced if it buys alternatives at a rate that allows for its Treasury holdings to account for a smaller part of its portfolio. In such circumstances, in absolute terms, Treasury holdings increase, but in relative terms they decrease.
    What you have ignored is that China has repeatedly expressed worry that the US may not be able to honor it's debt commitments. I have posted references in this thread that clearly show this. Therefore, it is imperative to view China's diversification in this light. Not only that, but when the data is viewed, we see is that contrary to the great upward trend from 2000 to 2011, since then China is effectively selling as they buy. This indicates that they are not interested in increasing their holdings of US treasuries. To top it all off, they have clearly said that they are not interested in increasing their holdings, as I have posted before.

    PBOC Says No Longer in China’s Interest to Increase Reserves

    The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

    “It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.
    Last edited by MildSteel; 04-13-14 at 02:27 PM.

  2. #32
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    Re: Russia rejects US warnings over oil deal with Iran

    Quote Originally Posted by MildSteel View Post
    To draw a trend line all you have to do is pick two points and draw a line through them. And if you want to talk about linear regression and least squares, that is subjective as well, because there is an assumption that the error is distributed in a normal distribution. What that means is that if the errors between what is estimated for the values indicated by slope of the trend line and the measured values do not fall into a bell shaped curve, your trend line is garbage. There is nothing to guarantee that the data will actually fit this assumption, so it is most certainly a subjective judgement to use linear regression in that way.
    I already noted the assumption about a Gaussian (normal) distribution. Having said that, there's no statistical tool that shows that China is paring its Treasury portfolio at present. Indeed, as previously noted, China's Treasury holdings are greater than they were when Barron's reached a premature conclusion based on the kind of month-to-month fluctuations that commonly take place. Moreover, the 2013 average figure came to $1.278 trillion vs. the old record of $1.165 trillion in 2012. That was a more than 9% increase in the average annual figure.

    What you have ignored is that China has repeatedly expressed worry that the US may not be able to honor it's debt commitments. I have posted references in this thread that clearly show this. Therefore, it is imperative to view China's diversification in this light.
    I've also noted China's portfolio diversification (so I could not have ignored it) in earlier posted messages. For example, in Message #26 in this thread, I noted, "I don't disagree that the rate of Treasury accumulation has slowed, in line with China's goal of achieving greater diversification and in line with its macroeconomic situation." The point is that the Barron's piece reached an erroneous conclusion. China has not yet embarked on a course of reducing its Treasury holdings. Portfolio diversification is not automatically the same thing as absolute reductions in Treasury holdings.

    This indicates that they are not interested in increasing their holdings of US treasuries. To top it all off, they have clearly said that they are not interested in increasing their holdings, as I have posted before.
    China has increased its Treasury holdings by $129.5 billion (January 2014 data) since March 2012, when the Barron's piece was published.

    http://www.treasury.gov/resource-cen...s/mfhhis01.txt

    The numbers speak for themselves.

  3. #33
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    Re: Russia rejects US warnings over oil deal with Iran

    Quote Originally Posted by donsutherland1 View Post
    I already noted the assumption about a Gaussian (normal) distribution.
    Then don't say it's not subjective. The choice of using linear regression for such analysis is a subjective value judgement in itself. Wiener filters are based on the notion of the minimization of the squared error and are indeed a tool used in deconvolution in oil industry. People have wasted millions of dollars drilling wells in the wrong places from not understanding the inherent assumptions.

    Quote Originally Posted by donsutherland1 View Post
    Having said that, there's no statistical tool that shows that China is paring its Treasury portfolio at present.
    Yes there is. I can draw a flat trend line from July 2011 to November 2013.

    Quote Originally Posted by donsutherland1 View Post
    Indeed, as previously noted, China's Treasury holdings are greater than they were when Barron's reached a premature conclusion based on the kind of month-to-month fluctuations that commonly take place.
    China's treasury holdings are down from July 2011.

    Quote Originally Posted by donsutherland1 View Post
    Moreover, the 2013 average figure came to $1.278 trillion vs. the old record of $1.165 trillion in 2012. That was a more than 9% increase in the average annual figure.
    Averages can be deceiving. For example if half of a class scores zero on a test, and half scores 100, the average value of 50 does not say a whole lot about what went on.

    Quote Originally Posted by donsutherland1 View Post
    I've also noted China's portfolio diversification (so I could not have ignored it) in earlier posted messages.
    What you are ignoring is that they have explicitly said that they have no interest in increasing their holdings.


    Quote Originally Posted by donsutherland1 View Post
    China has increased its Treasury holdings by $129.5 billion (January 2014 data) since March 2012, when the Barron's piece was published.

    http://www.treasury.gov/resource-cen...s/mfhhis01.txt

    The numbers speak for themselves.
    China has decreased it's holdings from July 2011. The numbers are saying that they are maintaining a level.

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