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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • 2013: The Rise Of Asia 0 comments
    Jan 1, 2013 9:40 AM

    We just had news yesterday that China's PMI went positive to 50.6, even by the standards of HSBC. This means that the GDP growth per year of China is going to increase. It is estimated that China will have a GDP growth above 8% in 2013.

    I think that's going to be a certainty. We can already see that base metal prices are rising as I pointed out the correlation between China PMI and base metal prices in this article.

    I believe the copper price is in break out mode (Chart 1).

    (click to enlarge)
    Chart 1: Copper Price

    The iron ore price is increasing again after one year of downtrending(Chart 2).

    (click to enlarge)
    Chart 2: Iron Ore Price

    Shanghai real estate prices are soaring to new one year highs (Chart 3).

    (click to enlarge)
    Chart 3: Shanghai Real Estate

    Even the Shanghai Composite has made a big shift upwards after a multi year decline (Chart 4).

    (click to enlarge)
    Chart 4: Shanghai Composite

    And all of this is because the U.S. is in big trouble due to the unsterilized buying of bonds through plain money creation out of thin air and expansion of the federal reserve balance sheet. This unsterilized buying is the most inflationary action the federal reserve can take. It is even more inflationary than the ECB's sterilized Outright Monetary Transactions (O.M.T.) buying of European bonds. That is because the money supply doesn't increase when you perform sterilized buying. Then we have the fiscal cliff which will be an enormous burden on the middle class citizens in the U.S. It is estimated that the 3% GDP growth will at least slow down to 1% due to the fiscal cliff situation. And don't forget the debt ceiling, which is already taking its toll on government workers in the Pentagon.

    This is why the money is flowing to other assets in this world (Asia) and even into the euro right now.

    We need to acknowledge that the U.S. doesn't have any bullets left at this moment...

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