Thursday, March 10, 2011

China Trade Worries Rattle Wall St

In the end the numbers never lie:

"Exports rose 2.4 percent in February from a year before, the least since 2009, as Lunar New Year holidays disrupted shipments, and imports climbed 19.4 percent, customs bureau data showed yesterday. Central bank adviser Li Daokui said that the full-year trade surplus will shrink from the 2010 level."

My Take

The wizards of Wall St hate it when the math reveals itself because it makes things much harder for them as they try to sell us boatloads of worthless stocks.

We all know that pretty much everything we consume comes from China.  Just about every other country can say the same thing.  Just take a look at the chart from The Wall St Journal:

As a result of this shift in trade, you must focus in China's trade data if you want to gauge how the consumer and the economy is doing globally.

Wall St took a look at the numbers today and puked when they realized that Chinese exports rose only 2%. 

What happened to our glorious global recovery?  Wall St's job of pumping stocks just got a whole lot tougher.  As I have warned before, stocks are priced for PERFECTION with P/E's at 24 versus the historical average of 16.

This means the market can't remain lofted at such high levels without mind numbing growth.  2% growth just isn't going to cut it, and stocks reflected this today.

The Bottom Line

The S&P 500 sold off by almost 2% on the trade data.  The deflation trade is now back on as Wall St begins to worry about slower global growth.

As a result, commodities got clobbered as bonds and the dollar both rallied. 

I find these violent reactions to be quite amusing.  The market acted like it was shocked at today's news of slower economic growth.  My reaction to this is how could you not see this coming?

I am amazed at how mesmerized investors get when the market rallies.  The reality here is stocks rallied but the economy never really did.  Government spending soared after the recession and was used as a replacement for the the collapsing private sector.

In other words the US government was able to hide this economic disaster for a couple of years by printing and spending money like drunken sailors.  We would have seen a depression in this country without all of the stimulus.

I still think were going to see one because nothing has been fixed. 

The banks are still bankrupt.  The housing market remains in tatters.  Americans continue to lose jobs, and the people that manage to find new ones are usually making considerably less money. 

SAdly, the stimulus was spent in all the wrong places.  Most of it ended up going right into the pockets of the uber wealthy of this country as the financial system got bailed out.

What's scary moving forward is the public sector is about to slammed as the Republicans begin to cut spending.  Just take a look at Wisconsin if you want to see what that looks like.  I say more power to the Republicans on this issue.  The union thugs had this coming, and it's about time they get treated like the rest of us in the private sector.

I don't know about all of you, but I am tired of working like a slave in order to finance my local toll booth collector's six figure annual pension.

Watching these union idiots up flip out up in Wisconsin over slight pay cuts is a complete joke.  Are frickin kidding me?  I am just happy to be employed at this point, and these nimrods are whining about pay freezes.  Go grab yourself a 401k and start saving like the rest of us.  There is NO FREE lunch!  Grrr...This gets me so mad.  Unbelievable!

There were other reasons why we sold off today that I will get into that later.  Go Google "Spain downgrade" and "Saudi Arabia" and you will see why Wall St is worried.  Until next time!


getyourselfconnected said...

Great post, the China trade deficit was missed by almost everyone as a catalyst.

Jeff said...

Thanks Get

I happened to be up when that data was released. The markets overseas plunged once that came out.

Carry Trader said...

Inflation is a problem worldwide, but Food inflation would have a greater impact on the developing markets. For example United States only spends on average 10% of income on food, while a developing country like China spends almost 40%. I'd be watching this space closely going forward.

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