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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (12893)	4/30/2004 8:53:40 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

I agree that we will start to see economic weakness and probably fairly rapidly throughout my killing fields period (next several months). But as usual, I draw completely different conclusions from it than you do. For example, I see a Chinese slowdown or bust as inflationary, especially for the US. The reason is that we lose much of the credit subsidized low cost goods coming from China (). I'd have to ask you what's deflationary about empty store shelves? It will look like a rationed war time economy, or a version of late days Soviet Union. On commodities, I've always maintained that China would never be able to grow their resource imports by another 20% this year and live to tell about it. So I think what's happened is that they've hit the wall (the Train Wreck). But hitting the wall on their resource consumption growth rate is not the same as resource plenty. Therefore, I don't expect a price collapse (prices have already adjusted some, and I think overshot on the downside), even if Chinese resource consumption growth goes to zero. It's the same threadbare shelf principal. () The Stratfor analysis I posted earlier explains this concept. The bold is the Train Wreck: Message 20078382 "In forcing exports, the focus is on cash flow rather than profit margins. This means goods are sold near cost -- and in extreme cases below cost -- in order to cover debt service. From the importing country's point of view, this can have a devastating effect because domestic companies driven by return on capital cannot compete in the short run with Asian imports that are indifferent to profit margins. Entire industrial sectors are taken out. At the same time, economic growth in the exporting country -- measured simply in terms of production and sales -- surges. But underneath these apparently astounding economic achievements, the Asian economy is actually hollowing itself out."