• It's Coming...

    MARKET EDGES

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I remember sitting on a NYC trading desk at around this time last year watching the hedge fund community jockey for allocations on "white hot" Chinese IPO's. How telling the times were...

In July of last year ICBC (Industrial Commercial Bank of China) was assigned a $250B market cap, and the world was in love with everything "Ch-India".

This is not CNBC's lead story, but this morning the ICBC is warning that inflation will remain through 2009, and to expect stock market "see-sawing" (per Xinchua reports) into 2010-2011.

Interestingly, the ICBC is flagging the possibilities of more short term "temporary liquidity shortfalls", and this fits the contours of my morning note today in terms of addressing that supply shocks remain more relevant to inflation than Wall Street's newfound bullish narrative of "demand destruction" to lead commodities lower.

The Chinese government's stated inflation target is under +5%. Using June/July commodity prices as a proxy, they are running close to 2x that right now.

Global Stagflation is here. Beware...

KM