Mexican Shorts Are Working...

On 6/18 I wrote a note titled "Shorting Mexico", and the Mexican Bolsa has dropped -4.3% since. This is the beginning of the decline in Mexican Equities. Do not mistake it for the end.

The Mexican Bolsa Index has outperformed plenty of country indices globally since the "its global this time" Wall Street peak. Since October 18th, 2007, Mexico has only lost -14% of its value. Given their GDP's extremely high historical correlation to US GDP, and my GDP outlook for the US altogether, this remains one of the more precarious looking country's on my dashboard.


(chart courtesy of

Brazilian Equities: Definitely Broken Now...

Despite the fact that Brazil is trading up over +2% this morning, the Bovespa Index remains broken from a quantitative perspective. I'll need to see a closing price over the 61,644 line before I start to give this country the benefit of the doubt again.

As of Friday's close, the Bovespa has fallen -19.2% since May 20th when the entire "Fast Money" community was buying everything Latin American, from fertilizer to food stocks. There is big time risk in running with this "me-too" crowd. Respect it; manage it.


(chart courtesy of

Buy Taiwan? Not Yet...

While this morning's macro data out of Taiwan was encouraging, my greatest fear here is that too many people got levered long this trade too early. I am waiting to buy the Taiwan ETF (EWT) on a down day, closer to $13.11.

Taiwan's June export growth # this morning came in better than expected at +21.3% year over year versus +20.5% reported for May.

New capitalism and trade friendly President Ma is one of the main reasons consider that Taiwan will be able to grow off of China's back. Timing this investment, as with all those we make, remains critical.


(chart courtesy of

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Hang Seng Chart: Bounced But Still Broken...

Hong Kong stocks finally had an up day, closing +2.3%, taking the Hang Seng Index to 21,913. Unless this chart can climb and close above the 23,166 level however, it remains broken from both a "Trend" and "Trade" perspective...

It is global this time, indeed.

(chart courtesy of

China's Concerns Morphing Into Consensus...

There is a lead article in the South China Morning Post today titled "Wrong policy may lead to hardship". While the recap by Jane Cai, Denise Tsang and Adam Chen does not reveal anything that I have not proactively pointed out in notes past, it does give the reader a sense of where consensus has finally morphed to.

The big pre-Olympic catalyst on the Chinese macro calendar is the mid year July 17th economic assessment/outlook. Rhetorically, there is no reason to believe that there will not be linearity between that and the note I just posted on the Industrial Commercial Bank of China's outlook.


China's largest lender says beware...

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...


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