Diamonds and Dogs
Giant Tail Wagging the Little DogGiant Tail Wagging the Little Dog
An ominous headline this past week in the Wall Street Journal spoke about the recent arrests of four employees of Rio Tinto in China. Arrested on suspicion of bribery and stealing commercial secrets, the one Australian and three Chinese Nationals have been in detention in China since July 5th. Investors should take this information seriously, because although the consensus is that Chinese growth represents world growth, witness the recent run-up in commodity prices based on the Chinese infra-structure stimulus, there will be strings attached. The risk is that this recent retaliation via arrests that may have been provoked by Rio Tintos' profits at the expense of the Chinese, will affect investment in and out of China and right now, that is something, unfortunately, that US investors can't have. Sensitive areas are energy, natural resources, and even US interest rates.
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