Yet another stockbroker

The Chinese growth was 11,1% for the first quarter and the core inflation was up 3,3% which is twice as much as 6 month ago and the risks have been increasing in the Chinese economy.

The China central bank, The People Bank of China, will probably start increasing the interest but there might not be enough and I predict that China will start appreciate the Yuan and by that try to balance the economy and keep the inflation on hold. With a 25% increase in investments on Chinese soil the challenge to keep the economy in balance and the inflation low without appreciate the Yuan is in my view not possible.

Interesting numbers when it comes to GDP is that studies have pointed out that 5000 GDP per capita is an level where the economy increase there growth helped by the consumers starts moving up as an important force to keep the growth strong. When looking at the GDP Numbers region by region some interesting data can by found.

Regions as China, India and many countries in the Eastern Europe region have for an example been achieved the 5000 GDP number per capita or are very close to do so. Private consumption is and will always be a very important issue for wealth and economic growth and when regions as China and India is getting there where more than 1/3 of the worlds population lives, that will have a global effects on growth and wealth.

The market theory mentioned as the “supercycle” where there will be a soft landing or no landing at all before the growth coming back and pushes the global economy forward might be a fact. The US economy have been weakening but there is not any definite signs of an recession and good signs from Japan and Europe and the fact that Russia and China moving on stronger than ever eases the fact that the US economy have been going into an slowing phase.

The US housing market is still something that worries the market but the today’s tighter lending policy helping the housing market getting out of hand. The GDP numbers in the US for the first quarter is down two 2% growth, down 0,5% from the weak fourth quarter 2006. We don not want any more downside on the GDP numbers to keep the markets confident up.

To make money at this stage there seems to be wise to going short the US. Mentioned before the dollar is a strong case going short and long the Chinese Yuan as well as other Asian currencies seems to be a rather high probability to make some money, bur other currencies can be very interesting as well.

The companies are overall rather positive regarding the future and big things are happening. GM are no longer the worlds biggest car manufacturer and China have becoming Japans, (the worlds second biggest economy) most important trading partner and the Dow Jones is pushing through 13000.

Is the “Supercycle” a fact or is there the 2000^{th century} “new economy” in a new shape and form?

FED seems in this stage to keep the rates on this level through out the year of 2007, the inflation is still to high to consider any cuts and the slowing growth makes it unlikely that FED will risking going in to recession with another increase.

There might be many things to be worried about the US economy but the market still moving up week by week. The IMF is though overall positive regarding the economy and predicts that the global economy only slightly will be affected by the slowing US growth. The global growth will sliding down to 4,9% for 2007 from 5,4% for 2006. That means that the global growth will be around 5% for the fourth year in a road, the strongest growth in 30 years. I think that much of that comes out that the start of the 20th century was the toughest for a very long time.

So why is the market keep on moving up when the US economy is slowing? At this stage it seems like Europe and Asia is taking on the US weakness and the growth for in example Europe and Japan have been moving up from 1,5% to over 2,5 % in a short amount of time. Another fact is that the slowing US economy is because of the housing market, the big effect comes if the private consumption coming in weak further on.

Considering the impact of the US weakness the global economy is not as sensitive as most people thinks. Chinas export to the US is only around 6% of the total GDP, but it is though increasing.

The market seems to think that FED is closer to an interest decrease than before, that FED is more worried for a recession than the inflation getting out of control.

Global Stockmarket

This part will consider regions as the US, Europe, the Nordic region, Eastern Europe, South America and Asia. A strong global growth have been moving almost all markets to good result for 2006 and below is quick overview of areas for the 2007.

Another good week for the Balkan region. The Nordic region also holding up and Japan had a good week though the start of 2007 not been strong though the fundamentals for a good 2007 seem to be there.

Raw materials been coming in focus when as I been giving focus the last month metals is been moving up strong with Copper in the lead. China is the answer to the copper price move, the China import of copper is almost 60% higher than the same period of 2006.

Currency

Last weeks predictions that the dollar should be moving sideward for a while before taking off again was wrong and the dollar just keep on weakening and the market seems to looking forward to that the weakness in the US economy will make FED cut interest rather sooner than later. The best case for speculating in currencies right now seems to be taking on China versus the US. The US seems to be trying to keep on taking a short cut to handling there great deficit by letting the dollar weakening to make the export getting stronger and by that hold the deficit under there arms. China on the other side might revalue there currency to stop the increasing inflation rate being seen the last couple of months. This scenario will keep the trend intact.

Time will tell if I am right.

Happy Easter !!

No market letter this week.

Volatility has been high the last week which creates uncertainty. The US housing market is still in focus and Standard & Poor reports that institutes focusing on subrime mortage loans have indicated that weak creditors having problem paying there loans. The weak housing market will follow us week by week the next couple of month though this is one of the most important issues if US should go in to a recession or not.

Other important issue is that the unemployment levels are not increasing so the consumption can be intact and help the US getting a soft landing of the economy. As long as there is only the weak creditors having problems there will not effect the US economy overall but if there is signs that the important US middle class person having problems it will have great effects on the US and the global economy.

Global Stockmarket

This part will consider regions as the US, Europe, the Nordic region, Eastern Europe, South America and Asia. A strong global growth have been moving almost all markets to good result for 2006 and below is quick overview of areas for the 2007.

The first quarter is to an end and the strongest regions so far have been the Balkan region. Singapore been also moving up strong and looking at interesting sectors Shipping and New energy been remarkable strong.

Currency

No change in the strong momentum for the dollar to have another year when it will be taking off versus the most other currencies in the world. As mentioned before, expectations that the FED is getting closer to stop increasing the interest will help the dollar keep on coming off. The signals from the FED the last couple of weeks have though been difficult to interpret so that may keep the movement on hold till more information regarding the interest hits the market.