Monday, June 13, 2011

Is Chinese economy a rosy picture?

Not according to Nouriel Roubini who has recently been making waves about the possible meltdown (hard landing) in China.

“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.” -Professor Roubini

Roubini points to U.S. unemployment, prolong high oil and food prices, rising interest rates in Asia, and the effect of Japan's trade disruptions from the Earthquake as major catalyst to the global economic woes that are likely to continue according to the New York University professor.

"China is now relying increasingly not just on net exports but on fixed investment" which has climbed to about 50 per cent of GDP, he said. "Down the line, you are going to have two problems: A massive non-performing loan problem in the banking system and a massive amount of overcapacity is going to lead to a hard landing."

Stocks worldwide have also lost more than $3.3 trillion since the beginning of May and this comes at a time of elevated commodity prices. Oil currently near $100 and gold is above 1500.00 (although both have been retreating). Food related commodities (Wheat, Corn, Sugar, Soybeans, ect.) all at very elevated levels. Good if your in that business but not good for a large civilization. Most corporations have been effected (some severely and even fatally) by the economic slowdown and high oil prices.

Jim Rogers however has always been high on China and says that the US may face fresh recession in 2011-12 worse than before. economictimes

"While Fed's Bernanke believes the second half of the year will be better for the US economy, you've got others like economist Robert Shiller saying the US is on the brink of a possible double-dip recession. Which side would you agree with?

Rogers: Bernanke has never been right. He's been in Washington for 7-8 years. Please go back and do a study of his record. You will see that the man has never ever been right. Don't pay any attention to Bernanke.

The economy is slowing down. We're going to have another recession in the US in late 2011 or 2012 or 2013 and it's going to be worse than the last time around, because America has shot all of its bullets, printing money and spending money we don't have. Be very careful."

Dow Jones Industrial Weekly Bollinger Bands:

Dow Jones Industrial Weekly Fibo Moving Averages:

Dow Jones Industrial Weekly (Special Chart) Click to zoom:

Rogers Position & Opinion:
**Gold & Silver - Not interested because it's at or near all-time highs but if it comes down he will buy more.
**Sugar - Optimistic for the next 3-4yrs (holding sugar) because of it's use as fuel and people are more prosperous in China and will buy more sugar than ever before.
**Currencies - He is Long but didn't give specifics. He seems to be pretty much anti-US dollar though.
**Commodities - He says he is Long on commodities but didn't give specifics.
**Emerging Market Stocks - He is Short.
**Technology Stocks - He is Short.
**US Bonds - He is Short.
**Short a large bank in the US - didn't specify which bank.
**Rogers is in the camp that the world is running out of Crude Oil. He believes that although OPEC cheats constantly against each other that they have very little power compared to what they used to have.
**Rogers says the US will start printing money again but after the 2012 election and they may call it something other than QE. So according to him QE3 is not out of the question it will just have another title and method but will be necessary do to economic woes.

---my opinion--- Economic stimulus is necessary to support the stock market at current levels unless better economic news comes out in the form of earnings, jobs numbers, or some other major factor that verifies the economy is recovering. This is my guess and I do not profess to know the future. I am a chartist first and news events are secondary or rather verify my technical analysis.

Sugar Day Chart:

Crude Oil Day Chart:

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