Yuan: US Sees Some Yuan Flexibility, Wants More - CNBC

China is starting to let its yuan currency rise more rapidly to curb inflation but needs to move even more swiftly toward a market-driven exchange rate, U.S. Treasury Secretary Timothy Geithner said on Tuesday.

Speaking ahead of top-level talks with Chinese officials in Washington next week, Geithner also said Beijing should stop favoring its giant state-owned enterprises by keeping their borrowing costs low and warned it may face a protectionist backlash if it does not do so.

Geithner and Secretary of State Hillary Clinton co-chair two days of talks next Monday and Tuesday with China's Vice Premier Wang Qishan and State Councilor Dai Bingguo.

The once-a-year Strategic and Economic Dialogue covers various economic and diplomatic issues but currency tensions are always on the agenda. U.S. manufacturers complain China's managed yuan gives its producers an unfair trade advantage.

Geithner said the yuan [CNY= 6.4955 -0.001 (-0.02%) ] has risen about five percent against the dollar since last June when Beijing loosened a peg on its value and suggested that China's knowledge that it must let it rise more to fight inflation was to U.S. advantage.

"Fundamental forces are now operating in an overwhelming direction of encouraging China to to let the exchange rate move more rapidly in response to market forces," he told the U.S.-China Business Council. "If they don't do there is greater risk that inflation accelerates."

Inflation Spur

In the past, Beijing has resisted U.S. pressure on the yuan, arguing that too fast a rise in its currency could upset economic stability. Geithner suggested China needs to reassess that policy.

"There are risks in gradualism, not just risks in moving, and China has to figure out how to balance those risks," he said.

China's central bank guided the yuan up by 0.9 percent against the dollar in April compared with 0.4 percent in March, accelerating its appreciation as the dollar fell to three-year lows against a basket of currencies.

The U.S. Treasury was scheduled to issue a semi-annual report on April 15 on the currency practices of U.S. trade partners that, in theory, could have labeled China a foreign exchange manipulator.

It has been delayed indefinitely and it is likely the Obama administration will opt for continued verbal persuasion but avoid harsher actions such as saying that China deliberately keeps the yuan undervalued to gain a trade edge.

"Our judgment is that it would be better for the world, more fair for us and I think in China's interest to let the exchange rate appreciate more rapidly than they've been doing," Geithner said. "Hopefully they'll make that same judgment and feel more confident now as they see inflation accelerating."

Geithner took aim at China's practice of fostering so-called "national champions" among its industrial sector — essentially state-owned companies that compete globally.

By controlling bank deposit and loan rates, China effectively channels low-cost loans to state-owned enterprises, known as SOEs, and gives them an advantage over both domestic and private firms.

"The financial distortions that give preferential advantages to SOEs add to trade tension and to calls for protection among China's trade partners," Geithner said.

U.S. Undersecretary of State Robert Hormats also blasted China for pumping up the ability of state-owned companies to a receptive audience at the U.S. Chamber of Commerce, a frequent critic of Chinese currency and trade practices.

He said 41 Chinese state-owned enterprises made the 2010 list of the 500 biggest companies in the world, and three made the top 100.

"It's imperative that our companies have a level playing field on which to compete, not just in China but around the world," Hormats said. He added the United States would press in both bilateral and multilateral forums for rules establishing a "competitively neutral environment" for state-owned enterprises in China.

Bin Laden Compound Likely to Reveal Al Qaeda Contributors - CNBC

Computers taken from Osama Bin Laden's Pakistan compound could reveal a motherlode of information on Al Qaeda donors and has probably already dealt a serious blow to Al Qaeda fund raising, according to a Middle East law expert.

George State University College of Law professor Jack Williams said new data, potentially in hard drives and other materials taken by the U.S. special forces, could reveal a new list of Al Qaeda contributors. Williams also works for Mesirow Financial as a senior managing director and company practice leader in investigative services.

"In many prior situations, where we have captured and/or captured and killed a high level target, particularly those who have been in place for a little while, we found computers with that type of information, and we've been able to glean a lot about the financial structure, flow of funds an the mechanisms by which Al Qaeda and groups raised funds to finance their activity," he said.

Williams said there have been at least four jihadi fatwas issued since the death of Bin Laden. While none were major, one was a fund raising plea. Fatwas are religious decrees issued by a cleric.

"I think there are going to be some companies that are concerned, not necessarily with their names showing up but with the names of their agents or vendors, suppliers or customers, on that Al Qaeda list," said Williams.

"The folks whose names are in those computers as substantial contributors to Al Qaeda causes — they nonetheless will pull back into the shadows to at least assure they don't cause any new undo attention that might be drawn to them. It will have an affect on their donor rate," said Williams.

Williams said Bin Laden was not the biggest contributor but his image was an important selling point, used around the world in places where Al Qaeda is active. "He was certainly the image around which the Al Qaeda mother ship surrounded itself. He was in a fund raising capacity both an emissary and an image," he said.

Whether pictures of Bin Laden, after he was killed, would be useful to Al Qaeda is unclear, but Williams expects the U.S. government to ultimately release them. The question authorities are grappling with is "will disclosing these pictures put more American lives at risk."

CNBC's Fast Money: Weiss: I Was At Ground Zero On 9/11 but I’m Still Not Trading on Bin Laden - CNBC

My wife was the first to see the news.

She was very happy, much more so than I was, perhaps because she was in the dark on 9/11 as to my whereabouts, while I knew exactly where I was—at Lehman Brothers headquarters across the street from the World Trade Center.

It took a couple of hours before I could get through to her, but the uncertainty was such a small price to pay versus the sacrifice of others.

Four months later, the FBI was in my driveway as my wife came home from picking the kids up at school. They wanted to know why I didn’t show up for Flight 93, my relatively last-minute decision not to make a business trip to San Francisco. It beat any investment decision I ever made.

I often still wonder why I had never realized I was to be on that flight that day until the FBI told my family. Every night from then on, as I put my daughters to bed, they would ask me to promise them that I wouldn’t be flying the next day.

I was back at work early on 9/12 in our administrative offices across the Hudson River in Jersey City, N.J. I was there with 20 others trying to figure out how we were going to stay in business while watching our building burn across the river.

The air was still acrid and ashes floated above us the following day as I returned to the Ground Zero neighborhood with a colleague to look at vacant office space offered to us by another company. But the firm quickly decided that we couldn’t bring our people back to that area.

Of course, Lehman stayed in business through hard work and teamwork, only to ultimately be brought down by a much stealthier attacker: the twin forces of leverage and greed.

While Bin Laden’s death is a cause for celebration, it is perhaps more a day for reflection and gratitude for those who have given their lives, both innocently and in service of our country.

But Bin Laden’s death is not an investible event unless the satisfaction of his demise leads to a more optimistic outlook from a personal standpoint. But I would caution against this approach, since the first lesson of investing is that there is no place for emotion in analysis.

In order to justify trading off this event, one must assume that Bin Laden had some influence upon the markets that has now been eradicated—and that’s not the case.

Stock Market and Investing: Silver's Shine Is Fading Fast - CNBC

Silver's shine is fading fast, and the market for the precious metal may have reached a top in a speculative, mad dash by ETF investors.

"The last move higher over the last month or so has really been driven by the strength of the retail investment demand, so the levels up here are not supported," said Suki Cooper, precious metals analyst with Barclays Capital.

"At levels above $40, we've seen some concern rising on the industrial demand side. The last leg higher has been investment-driven, rather than fundamentally supported. In that respect, the correction was due. I would say from a demand support point of view, we have levels that have been tested in other metals, but we haven't had a chance to test that in silver," said Cooper. "I think now prices are going to test where physical support comes in."

Silver [SICV1 41.055 -1.521 (-3.57%) ] has tumbled in the last two days, with Comex futures losing 10 percent on Tuesday alone, and the July contract finishing at $42.585 an ounce. Silver came within reach of $50 an ounce last week, and its all time nominal high, just above that level. The popular iShares Silver Trust ETF [SLV 40.58 -2.25 (-5.25%) ] lost more than 5 percent Tuesday, on volume of more than 211 million shares.

Moves by the CME to curb speculative buying with three increases in margin requirements in the last week have helped cool the metal's run.

"When something's on fire, there's lots of finger pointing. You've seen it in oil, and you're seeing it now of course in silver," said John Stephenson of First Asset Investment Management, in an interview on "Fast Money," in response to a question on the increase in margin requirements. Stephenson does not think silver's best days are behind it, and he expects the metal to reach $60 an ounce by year's end.

"The last two days have been pretty disappointing for people like me who are bullish silver," he said. But he added the world's awash in money looking for a home and gold [GCCV1 1536.70 -3.70 (-0.24%) ] and silver will continue to be magnets for it.

A larger-than-expected interest rate hike Tuesday by India and a slowing in Chinese manufacturing data earlier this week also led to selling in silver, which helped pull down other commodities. Commodities were also lower with emerging markets, on growth concerns.

Silver, up 150 percent since August, has been one hot commodity and it has been dubbed the "poor man's gold," as investors flocked to it while gold prices rose to $1500 and higher.

On the industrial side, silver is used in photography, solar panels, cell phones, computers and cars, in addition to jewelry. Cooper said at $50 an ounce, silver becomes 16 to 17 percent of the cost of producing a thin film solar panel.

Cooper said the latest buying frenzy was driven by investments in ETFs and silver coins and bars. At the end of April, for instance, eight silver ETFs held 15,486 tons of the metal, up from 14,582 tons in February. The April total was up just 10 tons from March, but at the same time, speculative accounts declined.

Speculators, which would include hedge funds, held 3,887 tons as of April 26, down 1,877 tons since Feb. 8. The all-time high for speculative holdings was 10,904 tons in late 2004, she said

"At the moment, the floor is going to be provided by a pickup again in retail investor interest, or it's going to be provided as we've seen in other metals, where physical demand comes in to buy support," she said.