How to Profit from China’s Next Move

Posted by Chris Gaffney - The Daily Reckoning

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04/13/10 St. Louis, Missouri – Data released yesterday showed that the US posted a budget deficit for a record 18th straight month. The budget gap was $65.4 billion last month, which was wider than the $62 billion figure predicted by most economists. The data proves we are still on path to reach a record $1.6 trillion shortfall this fiscal year. The only good news from the report is that revenues were slightly higher than a year ago, but the problem is that government spending continues to outpace any increase on the revenue side.

If the deficit ends up coming in right where the administration predicts (it will likely be even higher), the $1.6 trillion would represent 10.6% of the US Gross Domestic Product. This would be the largest deficit as a percentage of GDP that the US has run since World War II.

The growing deficits will eventually drive Treasury yields higher, as our government continues to flood the market with US debt. But for now, global investors continue to eat what we are cooking, so the markets pretty much ignored the report. The stock market rose above the important psychological level of 11,000 and the 10-year treasury moved higher also moving yields down below 3.85%.

Today we will get a report that will probably show the trade deficit increased to $38.5 billion from $37 billion the month before. We will also get a report that will reflect import prices and the ABC consumer confidence numbers. I don’t expect any of this data to ‘move the markets’, as most traders will be focusing on a plethora of data to be released here tomorrow. Wednesday is shaping up to be a big day…

… more HERE (beginning 2/3rds of the way through the 4th paragraph.