The Perfect China Indicator?
While most bears view the US as the weak link in the world economy, I am firmly convinced the fools gold can be found in China. China has uncontrolled money supply growth the likes of which have never been seen in the US. 85% of investment in China is in overindustrialization and China is providing loans to the American consumer to provide an outlet for their overindustrialization. All of this is happening at a time when the advanced economies of the world are moving out of an old-line industrialization phase. I'm not sure how bad it will get in China but I know how bad it *could* get. The worst case scenario is that China experiences a major social upheaval. The socio-economic conditions are building for such a scenario. History has taught us there is nothing more dangerous than a disillusioned society which has tasted success.
I'm quite confident the hiccup in May was a sign of things to come in Asia and not the US. The tremors were the most pronounced in Asia and the emerging markets who rely on Asia for their basic materials and commodities. Now, that said, it is a time of heightened risk globally. But, while the US will emerge from this cycle stronger, I do not believe the same conclusions can be so easily drawn with respect to China.
Two stocks I view as the ultimate bubbles predicated on China's continued industrialization are Caterpillar and Nucor. Both are among the best managed and most innovative companies on earth and signs of American dominance in old-line industries of steel fabrication and industrial equipment. Today Caterpillar broke support in a perfectly built bearish triangle. Is Nucor next? When Nucor and Caterpillar started dropping months ago, their respective senior management teams were dumbfounded. Both made public comments that their businesses were vibrant and they saw no reason for the stock weakness. To the contrary, I've warned of both before. So, are these normal corrections or are they ominous signs along with the weakness in commodities and oil that weakness in China is close at hand? Remember, China is not in control of its own economic future. That is not a good thing.
I'm quite confident the hiccup in May was a sign of things to come in Asia and not the US. The tremors were the most pronounced in Asia and the emerging markets who rely on Asia for their basic materials and commodities. Now, that said, it is a time of heightened risk globally. But, while the US will emerge from this cycle stronger, I do not believe the same conclusions can be so easily drawn with respect to China.
Two stocks I view as the ultimate bubbles predicated on China's continued industrialization are Caterpillar and Nucor. Both are among the best managed and most innovative companies on earth and signs of American dominance in old-line industries of steel fabrication and industrial equipment. Today Caterpillar broke support in a perfectly built bearish triangle. Is Nucor next? When Nucor and Caterpillar started dropping months ago, their respective senior management teams were dumbfounded. Both made public comments that their businesses were vibrant and they saw no reason for the stock weakness. To the contrary, I've warned of both before. So, are these normal corrections or are they ominous signs along with the weakness in commodities and oil that weakness in China is close at hand? Remember, China is not in control of its own economic future. That is not a good thing.
<< Home