Strap in kids, it’s going to be a bumpy ride!
Nomura Holdings joined Goldman Sachs in advising investors to cash out of China and that sent the Hang Seng down 478 points for the day (2%) along with another 2% loss on the Shanghai. “The likelihood of a re-introduction of price controls on food is growing,” Nomura’s Sean Darby said in a report today. “The recent run-up in agriculture prices worldwide and signs of hoarding appear to have pushed the authorities to reconsider draconian measures.” Premier Wen Jiabao confirmed on state television that the cabinet is drafting measures to counter overly rapid price gains. “Command style economic principles generally mean much lower multiples over time on the sector and stocks,” said Darby.
The US has it’s own “command style” economy with B-B-B-Bennie and the Fed commanding our inflation to go higher while China is trying to get their 4.4% inflation under control. The joke is, like Sidney Poitier and and Tony Curtis, our economies are shackled together through the Yuan peg as well as our codependent trading relationship. That has the World’s #1 (falling) and #2 (rising) economies engaged in a Global tug of war that threatens to tear the rest of the World to pieces and it’s just getting worse every day.
With the US pushing top-down QE2 inflation and China’s Premier calling for consumer price controls on food (and soon fuel too as a severe winter is forecast for China) it’s not surprising that Carlsberg’s Chongquing Brewery Company fell limit down (10%) on the Shanghai this morning along with several other food and beverage distributors. Copper, sugar and rubber also went limit-down in China with copper dropping all the way to $3.60 (down 10% in a week) into China’s close at 3am.
Meanwhile Bernanke is like the Sorcerer’s Apprentice: Given the magic hat – he commands his broom army to fetch buckets of dollars to inflate the economy the easy way but his lazy solution quickly turns into disaster as the waters start rising and he finds he has no way to stem the rising tide of inflation. Already, the rest of the world is drowning and not many have China’s ability to bail themselves out. This is not likely to end well…
Europe (who are caught in the middle) is already under tremendous strain with Matt…
