Triangulating Asia

This Week’s Topics:

  • Lunar New Year Distortions or Simply a Weaker Outlook for Global Growth?
  • Entertaining Elections in Hong Kong and Australia
  • Are the Ratings Agencies Fearful of Downgrading Japan Further? 

Lunar New Year Distortions or Simply a Weaker Outlook for Global Growth?

As Asian equities, FX, and corporate credit climbed higher in the YTD, both investors and the legacy media have written off the region’s generally-nasty JAN economic growth data as merely a function of Lunar New Year calendar distortions – in full anticipation of a return to higher growth rates in FEB and beyond.


While we certainly agree that there has been a fair amount of distortion resulting from Lunar New Year (and the resulting week of holiday) being on JAN 23 (vs. FEB 3 last year), we don’t think it pays to overlook the string of sour data as a one-off – particularly given where the slope of regional inflation is likely headed with Brent prices > $120/bbl. Asia remains the world’s largest consumer of crude oil from a regional perspective, at just over 30% of total world demand.


A quick look at Asia’s JAN export data highlights the general trend of weakness we are referring to:

  • China: -0.5% YoY vs. +13.4% in DEC;
  • Japan: -9.3% YoY vs. -8% in DEC (en route to worst monthly trade deficit on record);
  • South Korea: -7% YoY vs. +10.8 in DEC;
  • Hong Kong: -8.6% YoY vs. +7.4% in DEC;
  • Singapore: -2.1% YoY vs. +9% in DEC;
  • Taiwan: -16.8% YoY vs. +0.6% in DEC;
  • Vietnam: -11.1% YoY vs. +25.4% in DEC;

We’ve created an aggregated index for Asian export growth which weights each country according to its share of regional exports; on this metric Asian export growth slowed to -4% YoY in JAN from +6.4% in DEC (generously holding Indonesian, Filipino, Thai, Malaysian, and Indian readings flat sequentially due to the lack of reporting at the time of publication).


Triangulating Asia - 1


Again, we don’t want to make too big a deal out of Asian growth data slowing in JAN because of the obvious effects of the Lunar New Year calendar shift, but it’s worth mentioning that the U.S. and E.U. combine for roughly a third of Asian export demand and 40-50% of intra-regional trade is meant for re-export outside the region, likely upping the U.S. and E.U. share of Asian trade to ~2/3rds. With the developed world accounting for 60-70% of Asian exports, a negative YoY JAN export growth reading for the region portends negatively, to some extent, for the slope of Western demand in over the intermediate-term.


That’s something to at least keep in the back of your mind as you ponder what the slope of global growth is likely to look like at these currently-elevated energy prices.


Entertaining Elections in Hong Kong and Australia

It’s very hard to spot a parliament that rivals the 112th U.S. Congress in being dysfunctional. That said, however, Australia has certainly thrown its hat into the competition in recent days.


Kevin Rudd, the country’s now-former foreign minister (he recently quit) seeks to challenge incumbent prime minster Julia Gillard as head of the Labor Party in a FEB 27 referendum (2nd one in 20 months), which Gillard called to determine once-and-for-all who will lead the party into next year’s general election. Currently her Labor Party is Australia’s least-popular ruling party in at least 27 years, capturing only 26% of a SEP primary vote and only 32% in a recent poll (vs. 46% for the rival Liberal-National coalition, who appears poised to challenge for ruling party status next year under the leadership of Tony Abbot).


Rudd, who enjoyed record popular support during his tenure as prime minister during 2007-10, has been known to ruffle quite a few feathers among his colleagues. So much so that key officials such as Treasurer Wayne Swan and Defense Minister Stephen Smith have publicly stated how difficult it was/would be to work under Rudd’s leadership again. To be fair, Rudd has launched a series of campaigns documenting his changed behavior and he does have the public support of some key members of the Labor Party, such as Immigration Minister Chris Bowen.


Looking ahead, while next Monday’s referendum will do little to change the intermediate-term slope of Aussie fiscal and regulatory policy, it may have an impact on the perception of the party among voters, as a less-than-decisive victory by either candidate broadcasts a signal of low intra-party confidence. From a longer-term perspective, the party may be forced to employ more populist policies ahead of the 2013 elections to make up ground vs. the Liberal-National Party. Adopting a history lesson from 1992, the Labor Party did come from behind to secure a victory in the general elections of MAR ’93 by collectively refocusing on the enemy rather than its own internal issues.


Turning to Hong Kong, the short-to-intermediate term implications of its upcoming election are far more serious in nature. The territory – which has never experienced universal suffrage under Britain nor Beijing’s leadership – is seeing its system of transferring the highest-ranking title of Chief Executive via the vote of a 1,200-member election committee (a collection of largely old-money shot-callers ranging from property tycoons to legislators to mainland representatives) challenged en masse by the 7,098,800 citizens who will remain on the outside looking in come election day on MAR 25 (as an aside, they’ll finally get to participate in 2017).


The widespread discontent with the process is largely being driven by the scandal surrounding one of Beijing’s approved candidates, Henry Tang Ying-yen, who, up until a week ago, was the front-runner to replace the incumbent Donald Tsang. Now, a discovery of his illegally-built, overly-lavish 2,200-sqaure-foot underground luxury chamber has completely cost him his ethos with Hong Kong’s populace.


In a recent poll, Tang Ying-yen received only 16% of the popular support vs. 63.9% for former gov’t advisor Leung Chun-ying, another Beijing-approved candidate. Moreover, 77.8% of respondents identified the scandal as having a negative impact on his integrity and the proportion of those who favor his withdrawal for the election increased to 66% from 51.3% last week. Still, Tang vows to proceed on, having already secured a pledge of support from 31.5% of the election committee members – most notably the votes of Li Ka-shing (H.K.’s wealthiest businessman), Thomas Kwok, and Lee Shau Kee, each of whom control one of Hong Kong’s four-largest property development companies.


All told, Tang’s confident bullheadedness and big-money support underscores a rift of rising socioeconomic inequality within the territory – a key issue as recently as last year when the Tsang’s gov’t was literally forced to respond to public demonstrations by broadly increasing cash handouts. Should he ultimately win the office, we think it could lead to widespread public discontent with Beijing’s heavy hand in Hong Kong politics, as well as a renewed public vigor against income disparity and wealthy elites. The policy ramifications of such an outcome are many and worthy of an additional note at some point in the future.


Are the Ratings Agencies Fearful of Downgrading Japan Further?

Over the past week, both Moody’s and Standard & Poor’s have both come out with public statements affirming Japan’s Aa3/AA- sovereign debt rating. While we don’t look to the ratings agencies to lead our interpretation of a particular sovereign’s credit risk, we have been vocal about their ability to spark a JGB sell-off in recent months – particularly due to their importance in determining capital bank capital requirements under Basel II standards.


For example, Japanese banks, which hold ¥4.7T in Japanese government debt on their balance sheets (through DEC ’11), would be on the hook for roughly $75 billion in capital raises should Japan get downgraded to single-A status. As recently as this week, Bank of Japan governor Masaaki Shirakawa said a +100bps increase in benchmark yields would cause a ¥3.5 trillion ($43.2B) loss on bank balance sheets at current holding levels. The estimate, which is up from a figure of ¥200B in OCT, highlights just how difficult it is to wrap one’s head around the implications of a loss of confidence in nearly 1 QUADRILLION yen (and counting) in Japanese government debt.


Triangulating Asia - 2


For now, Japanese banks – which are the largest holders of JGBs – remain seemingly unfazed by these projections, given that they simply have nowhere else to invest their excess liquidity into (¥165.7T as recently as JAN 31). Additionally, the returns on JGBs (+2.2% in ’11) far exceed what Japanese lenders can garner via traditional spread lending (average net interest margin at the nation’s three largest banks = 100bps). It remains a challenge to pinpoint the timing of when Japanese banks start to favor risk aversion vs. return seeking regarding this particular asset.


Triangulating Asia - 3


To that point, we’re not sure what exactly will trigger a crisis of confidence in this historically-bulletproof market. One avenue we’ll explore in greater detail on next Friday’s conference call (email our sales team if you don’t have the invite) is increased inflation expectations stemming from A) a dramatic rise in imports costs due to structurally-higher expenditures on crude oil as a result of lost nuclear power generation (+25.2% in 2011); and B) a dramatic uptick in Bank of Japan participation in financing the nation’s debt issuance.


It’s among the best-kept secrets in all of Global Macro that Japan, laden with Z.I.R.P. since ’99, has among the highest real interest rates in the developed world, proving a strong inflation-adjusted return for holders of Japanese sovereign debt. An erosion of this tailwind, particularly stemming from a rise in long-term inflation expectations, could force the Japanese state to pay a higher nominal price for capital to fund its largely-fixed operating budget (debt service and social security account for 53.5% of total expenditures in the FY12 budget).


Triangulating Asia - 4


Triangulating Asia - 5


Ironically, its Japanese politicians, including recently-elected Prime Minister Yoshihiko Noda, that are demanding that the BoJ adopt a more bold stance in its efforts to end deflation via increasing its underwriting government debt, among other alternatives. Earlier this month, the BoJ bowed to mounting political pressure by setting an inflation target of +1% “for the time being”. We applaud Shirakawa and his team for resisting calls to adopt a +2-3% target, given that such a level of inflation would likely erode demand for Japanese fixed-income assets to a dramatic extent – especially considering that Japan has averaged -0.2% YoY deflation over the last ten years!


Briefly turning our attention back to the ratings agencies, we are a bit puzzled by their decisions to not downgrade Japan, given that each of their criteria for a potential downgrade(s) have been or look to be met at some point over the long-term TAIL. For now, they remain comfortable with the status quo of slow-moving train wreck. Time will tell if the markets, again, force them to move just as they did in the U.S. MBS market and the European sovereign debt market. Getting front-run by three financial crises in five years would go a long way towards eroding what little credibility these organizations have left.


We’ll discuss their criteria in more detail on our conference call next Friday. For now, enjoy the weekend with your respective families.


Fundamental Price Data

All % moves week-over-week unless otherwise specified.

    • Median: +0.8%
    • High: Vietnam +5%
    • Low: Indonesia -2.1%
    • Callout: Indonesia -2.5% over the last month vs. a regional median of +5.2%
  • FX (vs. USD):
    • Median: flat wk/wk
    • High: Thai baht +1.6%
    • Low: Japanese yen -1.8%
    • Callout: The Japanese yen is down -5.9% in the month of FEB ahead of a massive sovereign debt maturity spike in MAR ($705 billion needs to be rolled over)!
    • High: Philippines +53bps
    • Low: Vietnam -16bps
    • Callout: China’s 1yr sovereign yield +35bps YTD as rising inflation expectations erode easing speculation
    • High: Indonesia +21bps
    • Low: Vietnam -5bps
    • Callout: Australia +43bps YTD vs. India -36bps
    • High: Thailand +14bps
    • Low: Philippines -48bps
    • Callout: China (10s-1s) spread has narrowed -25bps YTD
  • 5YR CDS:
    • Median: -1.5%
    • High: Australia +2.4% ahead of Monday’s referendum
    • Low: Malaysia -4.8%
    • Callout: Japan +8.1% over the last six months vs. a regional media of -8%
    • High: Indonesia +45bps
    • Low: Vietnam -30bps
    • Callout: China -7bps wk/wk
    • High: China +15bps
    • Low: Vietnam -67bps
    • Callout: India -50bps wk/wk
  • CORRELATION RISK: Asia, the world’s largest crude oil consumer, needs a  strong dollar to shield its economic growth from rising energy prices. The MSCI AC Asia Equity Index has developed an immediate-term -6% correlation to the U.S. Dollar Index, vs. -70% over the LTM. The receding of this once-high inverse correlation is a leading indicator for a positive correlation – which is exactly what we began to see around this time last year. The buck can only be burned to a point before it’s really, really bad for global growth.

Darius Dale

Senior Analyst

GPS: 3 Factors Not On Radar Screens

Here are three points that we think are important to keep in context when looking at GPS’ 4Q results.


It’s tough to get too excited when a company beats, but still has EPS down 26%. There are three things to consider with GPS…


1) The 10% margin guidance target for this year actually might be within a stone’s throw of achievable. It’s so tough to tell with this company given the extreme volatility it sees in its business day to day. But its SIGMA shows a fairly encouraging trend after building inventories throughout the past eight quarters. BUT, the wildcard still remains in JC Penney’s hands. We’re already seeing stepped-up promotional cadence at JCP and KSS. More mid-tier retailers (even Macy’s mid-tier) will follow. To think that this won’t impact GPS is downright wreckless.


GPS: 3 Factors Not On Radar Screens - GPS SIGMA


2) We get the whole Lampert-esque stock buyback model here. But the reality is that GPS is almost out of gas. Having net cash of $1.5-$2bn and buying $1bn each year is a pretty good place to be. But GPS is flirting with having net debt as opposed to cash. The company announced a new $1bn program yesterday, but we’d be surprised if it executed on it.


GPS: 3 Factors Not On Radar Screens - GPS cash


3) Longer-term margins: I can give a dozen reasons why any kind of respectable margin GPS printed in the past is no longer a reality. But the best chart I can show is below. It shows GPS’ employee count versus operating margin. This is a human capital business – think sales, marketing, R&D, etc… Good companies invest into their infrastructures in order to (re)gain share.  Gap has taken its employee base down by 20,000 employees (13%) over four years.  You want a 12% margin again? Find me 20,000 employees. That’ll cost about $1.2bn, or $1.45 per share. Then that’s GPS’ new base to grow from. Perhaps I’m oversimplifying this. But directionally, it’s spot on.


GPS: 3 Factors Not On Radar Screens - GPS employee count 2

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Comments from CEO Keith McCullough


I couldn’t make up this #1 Headline on Bloomberg this morn if I tried – “STOCKS, OIL CLIMB ON GLOBAL ECONOMIC RECOVERY”:

  1. RUSSIA – which is obviously a PetroDollar Equity market continues to rage higher as inflation expectations do. The RTSI is up another +2.4% this morning and +22% for the YTD as President Obama blames oil rising on “Wall Street Speculators” (dollar down be damned)
  2. COPPER – the Doctor just doesn’t agree with this manic media headline at all – neither does the 10yr UST yield – both are failing at critical lines of resistance of $3.85/lb and 2.03%, respectively, this morning. Those who confuse inflation with growth will be doing it for the 3rd time since 2008.
  3. YEN – How one of the world’s top 3 currencies can collapse like this and it not be called out by consensus is far beyond my reach. The Yen is down -6% for the month-to-date! Its not a straight line down, but its close – reminds me of the Euro falling off its highs in April of 2011 and consensus saying “hey, buy European exporters!” – we continue to see this sov debt maturity spike (March) in Japan as the why on Yen…

I’m net long equities for this morning’s open and I shouldn’t be. High Frequency Gambling at this pt.





THE HBM: YUM, MCD, COSI, DRI - subsecotr 1





YUM: Yum’s Taco Bell will debut a new marketing campaign this weekend centered on a new “Live Más” slogan.


MCD: McDonald’s is offering the McBaguette in France; a Charolais burger served on a baguette.


COSI: Cosi has regained compliance with Nasdaq listing standards.





SONC:  No news hitting the tape but we believe that SONC is a big beneficiary of weather this year – the weekend of February 5thsaw Texas covered with snow from the Rio Grande to the Oklahoma border.


THI: Tim Hortons gained 4% on accelerating volume thanks to strong earnings hitting the tape yesterday before market open.


JACK: Jack in the Box declined on earnings.





DRI: Darden is hosting its Analyst Day in NYC today.  In an interview with CNBC yesterday, CEO Clarence Otis said that shrimp costs are up and also that he sees good fundamentals at Olive Garden.





Howard Penney

Managing Director


Rory Green




TODAY’S S&P 500 SET-UP – February 24, 2012

As we look at today’s set up for the S&P 500, the range is 15 points or -0.69% downside to 1354 and 0.41% upside to 1369. 












  • ADVANCE/DECLINE LINE: 1314 (-1906) 
  • VOLUME: NYSE 763.09 (4.67%)
  • VIX:  16.80 -7.64% YTD PERFORMANCE: -28.21%
  • SPX PUT/CALL RATIO: 2.12 from 2.15 (-1.40%)


  • TED SPREAD: 40.42
  • 3-MONTH T-BILL YIELD: 0.09%
  • 10-Year: 2.00 from 2.00
  • YIELD CURVE: 1.70 from 1.70 

MACRO DATA POINTS (Bloomberg Estimates):

  • 9:55am: UMichigan Consumer, Feb (F), est. 73 (prior 72.5)
  • 10:00am: New Home Sales, Jan., est. 315k, up 2.6% (prior 307k)
  • 10:45am: Fed’s Williams speaks in New York
  • 11:35am: Fed’s Bullard speaks on housing, monetary policy in New York
  • 1pm: Baker Hughes rig count
  • 1:30pm: Fed’s Plosser, Dudley speak on monetary policy in New York 


    • President Obama meets with Danish PM Helle Thorning-Schmidt to discuss European debt crisis in Chicago
    • U.S. Dept of Agriculture discusses crop outlook
    • Mitt Romney addresses Detroit Economic Club, 11:30am
    • House, Senate meet in pro forma sessions
    • NRC advisory panel meets to consider NextEra Energy Inc.’s Turkey Point extended power application, 8:30am
    • FCC meets on provisions of National Broadband plan, 9am    


  • Apollo Global, others said to be near deal to acquire El Paso’s oil-exploration business for about $7b
  • Purchases of new homes in U.S. probably rose 2.6% in January to a nine-month high, economists est.
  • Bank of America is stopping sale of new home loans to Fannie Mae
  • Wynn Resorts’s Macau unit ejected Kazuo Okada from its board; Phillipine President Aquino orders probe
  • Lloyds posted full-year net loss that missed est.; Volkswagen reported record profit
  • U.K. GDP shrank 0.2% in 4Q, in line with forecast
  • Apple said to buy search startup Chomp for $50m
  • Watch Watson Pharma; last business day before Feb. 26 PDUFA decision date on Prochieve for prevention of preterm labor
  • G-20 finance ministers, central bank presidents to meet in Mexico City this weekend
  • Warren Buffett to release annual letter to Berkshire Hathaway shareholders tomorrow 


    • Enerplus (ERF CN) 6 a.m., C$0.23
    • Alpha Natural Resources (ANR) 7 a.m., $0.26
    • Endo Pharmaceuticals Holdings (ENDP) 7 a.m., $1.32
    • Interpublic Group (IPG) 7 a.m., $0.39
    • Pepco Holdings (POM) 7 a.m., $0.19
    • Telephone & Data Systems (TDS) 7 a.m., $0.25
    • Warner Chilcott (WCRX) 7 a.m., $0.90
    • United States Cellular (USM) 7:04 a.m., $0.24
    • Eldorado Gold (ELD CN) 7:30 a.m., $0.20
    • EW Scripps (SSP) 7:30 a.m., $0.10
    • J.C. Penney (JCP) 7:50 a.m., $0.67
    • Pinnacle West Capital (PNW) 8 a.m., $0.04
    • Washington Post (WPO), 8:30am, NA
    • American Water Works (AWK) 4:30 p.m., $0.33    


We couldn’t make up this #1 Headline on Bloomberg this morning if we tried – “STOCKS, OIL CLIMB ON GLOBAL ECONOMIC RECOVERY”


COPPER – the Doctor just doesn’t agree with this manic media headline at all – neither does the 10yr UST yield – both are failing at critical lines of resistance of $3.85/lb and 2.03%, respectively, this morning. Those who confuse inflation with growth will be doing it for the 3rd time since 2008. 

  • Copper Traders Most Bullish in Two Months on Demand: Commodities
  • U.S. Soybean Output May Rise to 3.25 Billion Bushels, USDA Says
  • Oil Rises a Seventh Day in Longest Winning Streak in Two Years
  • Gold May Gain in London as Weaker Dollar Spurs Investor Demand
  • Corn Declines as U.S. Acreage Expands, Ukraine Sales to Climb
  • Oenophile Chinese Purchase Bordeaux for $470 Mainland Bottles
  • Copper Heads for First Weekly Gain in Three Before U.S. Data
  • Rubber Caps Best Gain in Five Weeks as Oil Rally Boosts Appeal
  • Statoil $1.2 Billion Tanzania Find May Hold Oil in New Play
  • Billionaires Vie for Railway to $40 Billion Coal Region: Energy
  • Glencore Will Notify EU of Xstrata Bid for Merger Review
  • Baosteel Spurs Dim Sum Revival on Cost Advantage: China Credit
  • Mentor of Central Bankers Fischer Rues Complacency in New Growth
  • Billionaires Vie for Australian Coal Rail
  • Gold’s Bull Run May Drive Price to $5,000, Wyke Forecasts
  • Cotton Exports From India Slows as Crisis Cools Apparel Demand
  • U.S. Corn Crop May Reach Record 14.27 Billion Bushels, USDA Says 









RUSSIA – which is obviously a PetroDollar Equity market continues to rage higher as inflation expectations do. The RTSI is up another +2.4% this morning and +22% for the YTD as President Obama blames oil rising on “Wall Street Speculators” (dollar down be damned).





YEN – How one of the world’s top 3 currencies can collapse like this and it not be called out by consensus is far beyond my reach. The Yen is down -6% for the month-to-date! It’s not a straight line down, but its close – reminds me of the Euro falling off its highs in April of 2011 and consensus saying “hey, buy European exporters!” – we continue to see this sovereign debt maturity spike (March) in Japan as the why on Yen…










The Hedgeye Macro Team


Realist Risk Managers

This note was originally published at 8am on February 10, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“You have to be realistic even if you’re an idealist.”

-Izzeldin Abuelaish


Ideally, the US stock market would never go down (its biggest down day of 2012 = -0.57%). Realistically, that’s not going to happen.


Ideally, you can wrap a Global Macro Risk Management Process up in a baby blue Tiffany box and slap a white ‘here’s what will happen in 2012’ bow on it for your clients. Realistically, you need to do the opposite of that and Embrace Uncertainty, every day.


The aforementioned quote comes from a book I am in the middle of reading right now called “I Shall Not Hate” – a Gaza Doctor’s story about managing life’s risks – those that are far greater than that of a Greek politician’s career this morning.


Back to the Global Macro Grind


After spending the last few days risk managing with some of our most thoughtful clients in Boston, I came to the simple conclusion that Greece has become a tree within a forest of globally interconnected risks.


The deep simplicity of that conclusion shouldn’t be a surprise. What’s happening to the rest of the world’s Growth and Inflation Expectations certainly didn’t cease to exist because the manic media doesn’t have an analytical process to absorb it.


The Top 3 Risk Management Topics our clients wanted to focus on in the last few days had nothing to do with Greece:

  1. Japan’s Sovereign Debt Maturity spike in March
  2. China’s Inflation Rising Post #BernankTax
  3. Down Dollar = Rising Inflation = Slowing Growth

Unlike some pundit spewing their qualitative views, a Realist Risk Manager (a Buy-Sider) is held accountable to real-time risk ticking on their screen every hour of every day. Being early in this business can also mean being wrong. Being late can also mean you blow up.


Maybe that’s why Japan was such a hot topic on the road. People are no longer allowed to blow up. Blowing up client moneys in 2008 was, allegedly, what “everyone” (other than those of us who didn’t) missed. Getting tagged for another -10-50% loss of capital in 2011, for some, made 2008 + 2011 a trend. And a 3rdtime probably means prepping your resume for an interview at Chipotle.


Why Japan? Why now?


We’ve been making this call since 2010, “The Sovereign Debt Dichotomy”, which attempts to simplify trading the short side of stock markets (long CDS) by waiting and watching for the Keynesian policy makers of that country to bump up against the biggest sovereign debt maturity within their economic region. Timing is critical.


That’s why we got bearish on Spain, then Italy, then France – in that order – in the order that their respective monthly sovereign debt maturities ballooned. After their stock markets imploded, we covered and got out of the way.


In today’s Chart of The Day, you’ll see that Japan’s March Debt Maturity Spike is:

  1. The largest, nominally, that Japan will ever have to bring to market
  2. Larger than any other European debt maturity by a considerable margin

Every client pushed our lynx-eyed Asia analyst, Darius Dale, and I on the next obvious question – why aren’t Japanese spreads and CDS blowing out yet?


A: throughout the entire European Sovereign Debt crisis, they didn’t either. They started to when it became clear to the market that their largest maturities couldn’t be absorbed at lower/stable yields.


Ideally, everyone would be able to price everything’s risk, efficiently, in real-time. Realistically, markets don’t trade that way. They trade on the expectations and emotions associated with last price.


Sometimes markets don’t go down, literally, until the day of the “new news”. Look at China in the last 48 hours:

  1. Inflation Rising = Consumer Price Inflation (CPI) up to 4.5% y/y (versus 4.1% last month)
  2. Growth Slowing = Chinese Exports down -0.5% y/y (down y/y for the first time in 2 years)

On that “news” this morning, US centric stock market investors who are still staring at the tree (Greece), now have to react to “China Slowing” as a Top 3 Most Read Bloomberg story. Unlike the US stock market, which has not yet had a -1% down day in 2012, Hong Kong was down -1.1% on that (Indonesia -1.7%, South Korea -1.3%, etc.).


Ideally, I’d like to sleep once in a while. Realistically, that’s not going to happen either. Global Macro market risk never sleeps.


My immediate-term support and resistance ranges for Gold, Oil (Brent), EUR/USD, Shanghai Composite, France CAC, and the SP500 are now $1717-1761, $114.12-119.02, $1.31-1.33, 2319-2357, 3391-3565, and 1334-1360, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Realist Risk Managers - Chart of the Day


Realist Risk Managers - Virtual Portfolio

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