Out Fox The $treet

Over the last few months, the markets have been struggling with whether China was headed for a hard landing. The Shanghai Index ($SSEC) recently headed back to 3 year lows on these fears. What though if China was already re-accelerating? Recent reports on bank lending and inflation suggest that the economy has already hit bottom. David Carbon, Managing Director of Economics and Currencies at DBS Bank, thinks China hit bottom prior to the start of 2012. Now with the inflation data picking up (March came in at 3.6% vs 3.3% for February) it signals the economy already turning around. Song Wun of CIMB Research thinks China could expand as much as 9% this year with a target of 8.7%. Remember that the government set an official target of 7.5% though any smart investor should've known this was the lowest possible. Instead, the market sank thinking a hard landing was on the way. Is it possible that just as the European crisis was much to ado about nothing so could the fears of a har...

India's headline inflation plummeted in December following the previously announced sharp drop in food prices. The inflation figure came in at 7.5% down from 9.11% rate reported for November. While generally inline with consensus, the reading provides solid confirmation that India has been able to use monetary policy to slow the inflation rate. Now the real question is how low the rate will drop and whether this will provide enough room for the RBI to drop interest rates. Simple math suggests the rate will see further drops as such a huge drop suggests month over month inflation is flat lining. Of the components, manufacturing inflation remained at 7.4% while fuel inflation only saw a modest decrease to 14.9%. Just don't see how fuel inflation can remain so high if oil is virtually flat this year. Only currency could explain stubbornly high prices and that will reverse in due time. Per CNBC.com report : The wholesale price index (WPI), the main inflation gauge, rose ...

Don't look now, but food inflation in India is now under control. Prices of primary food items r ose only 0.4% in the week ended December 17 from a year ago. Lower food inflation places less strain on the economy and lowers the overall inflation rate allowing the RBI to begin easing monetary policies. Rates were increased 13 times since March 2010 and has started having a major impact on growth. Inflation is expected to drop to around 6% in the next few months and maybe lower if food prices are any indication. As I wrote recently for Seeking Alpha, India stocks are ripe for buying as inflation comes under control. A lot of the fears were misplaced as the sharp drops in commodities from the credit crisis lead to artificially inflated price increases by the start of 2011. Now after some cooling of growth, inflation rates have dropped dramatically and as the world economy goes into 2012, prices for most commodities will show year over year declines. The the deflation calls s...

As I've been saying the last few months, the inflation scare was a tad overdone. A good part of the emerging market inflation had to do with plummeting of prices in 2009 followed by the sharp rise in 2010. This lead to the misleading year over year increases instead of looking at a smoother change over the last 3-5 years. Last night, India reported food inflation had dropped to 4.35% for the week ending December 3rd. This was the lowest reading since February 2008. Amazing that India didn't report any numbers below that for the rest of the crisis especially in late 2008 or early 2009. On top of this,, the economic advisor listed in the Reuters report expects a drop to 3% within a month. We're working on a series of reports focusing on the emerging market opportunities especially now as inflation fears come under control and central banks have begun loosening monetary policies. Not many better investments exist than buying high growth stocks at 1, 2, or 3 year lows ...

Tuesday night, China reported October inflation close to expectations at 5.5%. Though the whisper numbers expected something possibly around 5.3% and could cause a minor market sell-off on Wednesday, the news was wildly bullish. Short term the market always trades off estimates. Long term though, the trading is based on the trend. The trend for inflation in China is clearly downward. Inflation in October eased from the 6.1% annual rate in September with food prices declining 0.2% in the month. Read the full article at Seeking Alpha. Disclosure: Long ANR, FCX, CCIH. Please review the disclaimer page for more details.

Chin'a inflation eased to 6.2% in August from July's three-year high thus allowing China to stop tightening monetary policies. More importantly is that inflation only increased .3% sequentially showing only a 3.6% annualized rate. Part of what investors have missed in this whole inflation scare is that the huge year over year increases are due to the yo-yo pricing caused by the 2008 financial crisis. Are oil prices higher now? Are corn or wheat soaring above the highs seen back then? Unfortunately though these commodity prices are significantly above the 2009 and 2010 lows. Are current gasoline prices in the US inflationary? They are relatively equal to the 2008 peaks so how could it be inflationary when flat for over 3 years? Now inflation has a lot more to do with just pure commodity prices especially in the US. In emerging markets though food prices can have a dramatic impact. One has to wonder if the US would quit burning its corn if food inflation wouldn't plung...

Great post at the Business Insider regarding all the deflation going on. With everybody sweating the soaring prices for energy and food, nobody seems to notice the deflation in housing and transportation. Not to mention that labor costs have been kept relatively flat. Just because your paying more at the pump, doesn't mean that your paying more for every item. The post has some great charts and their is nothing greater then viewing the real numbers and comparing them over the last 20 years. Even the new vehicles prices have risen the last couple of years, but they are still lower than 2003.  If an item has jumped off the 2008 lows, does it really count as inflation. And thats the biggest crux with the inflation numbers now being reported. Don't compare them to the last couple years. Compare them to 2006-07. Maybe the most interesting chart is the household furnishings one. That category is below the lows after the dot com bust. Check out the site for   the other...

Interesting CNBC story on the inflation story in India. The good news is that India inflation dipped in April to 8.66 from an adjusted 9.04 in March. The bad news is that the February number was revised upward by 1.23 percentage points meaning that the April number could possibly be closer to 10 percent. The bizarre news is that the fears for higher inflation consist of a widely expected increase in state-set diesel prices. Maybe its only bizarre to me that goods that have government subsidies would be counted at the subsidy rate and not the market rate. Or at least when factoring inflation, the government should set policy based on what the market rate would be. After all, oil prices have plummeted in May so if anything the country is looking backwards and not forward. Now thats not much of a surprise for India. Emerging market stocks have been weak this year because of the higher inflation fears and rising interest rates, but the plummeting commodity prices should be bullish but...

Last night, China reported inflation numbers for March that were slightly hotter then expected at 5.4% and at a 32 month high. Naturally the market tanked. Or wait, the Shanghai Stock Market was up slightly yesterday after initially falling. On top that, the market is up at breakout levels after having recently broken above a double top at 3,000. So why didn't the market tank overnight? Partially because China has been busy fighting inflation by raising interest rates and reserve requirements for banks. Mainly though because most analysts view inflation closer to peaking. The monetary restrictions combined with a weak market in 2010 leaves China an ideal place to invest in 2011. One of the biggest issues with inflation hawks is that they tend to not let interest rate/reserve changes work their way through the economy. It takes up to 9 months for rate increases to work through the system yet hawks will jump all over this hot inflation number as a reason for more immediate moves...