Chart of the Day: Second Most Stressed Nation?

Chart of the Day: Second Most Stressed Nation?

Statistics about national happiness or stress should be taken with a pinch of salt since emotions are subjective and can be highly conditional and unpredictable to be quantified, and thereby, measured.

Nevertheless, here is a curious finding from the Gallup report on Global Stress as cited by Statista: The second most stressed nation in the world is the Philippines!

Stress comes in many different forms depending on where you live. In parts of the developing world, it can range from the threat of armed conflict to an unstable food supply while in more advanced economies, it can stem from negative thoughts about a difficult day in the office to difficulty paying bills. As part of its 2019 Global Emotions Report, Gallup set out to gauge stress levels in 143 countries, finding that just over a third pf people said they experienced "a lot of stress" the day before the polling was carried out. 

Given its recent economic hardships, it hardly comes as a surprise that stress levels remain especially high in Greece and 59 percent of people surveyed there said they are under a lot of stress. The Philippines and Tanzania had the second-highest stress levels with 58 and 57 percent respectively. The U.S. is also among the ten most stressed out nations on the planet with 55 percent of its population saying they experienced a lot of stress yesterday. That is the same share as three other countries - Albania, Iran and Sri Lanka. 

Over the years, previous editions of the report found lower stress levels among Americans. For example, in 2006, 46 percent said they were under a lot of stress, a number that grew to 47 percent in 2010. Stress levels grew steaduly to 53 percent in 2014 before dropping below 50 percent in 2017. The research found that younger Americans between the ages of 15 and 49 are the most stressed, along with the poorest 20 percent of the population.

Isn’t the Philippines supposedly been booming economically and financially? Isn’t the administration basking in popularity? So why the world’s second most stressed nation?  

Or, which may be close to being accurate, Gallup’s Survey or local media? Could geopolitics be behind these?

Inflationary Boom: US IPOs Best Since 2007

IPOs function as a very useful sentiment indicator. When stock markets boom, IPOs tend to follow.

Referring to the US, a few weeks back, I wrote 

If US stocks continue with its record breaking streak, then we should also expect IPO activities to follow.

Nonetheless IPOs can also serve as beacon to important inflection points of stock markets.

Well here it is; IPOs have been ramping up as expected.

From the Marketwatch.com

U.S. companies are on track to raise the most money through initial public offerings since before the financial crisis, driven by the same thirst for risk among investors that has pushed the stock market to new highs.

Already this year, 64 U.S.-listed public offerings have raised $16.8 billion, according to Dealogic. In the same period in 2012, the biggest year in dollars since the financial crisis, 73 companies raised a total of $13.1 billion. Last week alone brought 11 U.S.-listed IPOs, making it the busiest week for such deals since December 2007.

A more robust IPO market is seen as a potential boon for the economy because it allows companies to raise money that can be used to reduce debt or invest in their businesses. Sellers of stock such as private-equity or venture-capital firms can trim or shed their current holdings, return money to their investors, such as pension funds, and turn their attention to new investments.

Behind this year’s pace is an ebbing of the wild price swings that had been a dominant feature of the stock market since the financial crisis, according to investors, companies and bankers. Instead, stocks have been on a steady grind higher. As markets reach new records, investors are taking chances on shares of new public companies.

IPOs again serve as sentiment indicators or as symptoms rather than THE cause. Expansionary risk appetite function as symptoms of the psychological “bandwagon” effect that are principally driven by price signals. 

On the other hand, current price signals have been heavily influenced by social policies. Thus social policies have produced a boom bust cycle that has been manifested in IPOs

Notice that US IPOs set a record, or boomed, prior to the technology or the dot.com bust. 

Following the bust, US markets went into a hibernation (or consolidation) phase for more than a decade and only broke out recently. The quasi-stock market boom during 2003-2007 only had a tepid response in the IPO market.

Today, milestone highs in US markets have rapidly been attracting companies to go public, and on the opposite end, for the yield chasers to finance them.

The mainstream sees “This time is different” or "Not a déjà vu" to justify the continuation of the IPO winning streak.

The USA today for instance declares that current levels are YET far off the 2000 highs, there are better fundamentals underpinning IPOs, today has a different marketplace where large institutional investors rather than the retail market have been the source of demand, current IPOs  have been subject to heavy discounting and less reliance on a single industry.

If one would have used these argument prior to the peak in 2007, then IPO financiers would have been the greater fool.

The reality is that today’s stock markets have hardly been driven by fantastic fundamentals but by a mania—yield chasing frenzy driven by debt. Yes fundamentals have also been rendered opaque by zero bound rates and QEs.

Like all zeniths in the US stock markets, they all have been accompanied by ballooning Margin debt.

And while there are hardly any definite threshold levels for an inflection point, current levels of margin debt suggests that US equities markets have reached a very fragile state vulnerable to a meaningful downturn. (chart from Bloomberg)

Of course much will depend on actions by the US Federal Reserve when volatility emerges. Will the FED destroy the US dollar to send US equities to the sky?

People have frenetically been reaching out for yields such that the markets have been paying high yield or “junk bonds” at the closest spread ever to “risk free” US treasuries.

In using the Merrill Lynch High Yield (Junk) Master Index as gauge against US sovereign bonds, the Bespoke Invest observes that,

At a current level of 5.24%, investors have never been paid less to own high yield debt.  Yields are so low, in fact, that five years ago the yield on the 10-Year US Treasury was higher than the current yield on junk bonds.  In the chart, the red dots on the blue line represent periods going back to 2000 where the yield on the 10-year US Treasury was higher than the current yield on the High Yield Master Index.  With yields this low, high yield bonds are anything but high yielding.

Risk doesn’t seem to exist anymore. Markets have been jaded and has essentially lost its function as discounting mechanisms. Yield chasing have become the ultimate drivers.

Ah but…

Booming US stock markets are beginning to put pressure on interest rates. Yields from government bonds, particularly 1 year (UST1Y), 5 years (FVX), 10 years (TNX) and 30 years (TYX) have markedly risen. If such a trend should continue, then there will be pressure not only on margin debt on US stocks, but also on all forms of debt that have been used as leverage to finance such mania.

As a final thought, I pointed out of the increasing interdependency between US stock markets and the bond markets, where much of the buybacks and dividends that has driven the markets to record heights have been financed by the latter. This means that a bear market or even just a prolonged selling pressure in bonds will also affect the stock market. 

We are living interesting times indeed.

Art Markets: Record $120 Million for “The Scream”

Image from Wikipedia.org

From Yahoo

Edvard Munch's painting "The Scream," one of the world's most recognizable works of art, sold for $120 million at Sotheby's on Wednesday, setting a new record as the most expensive piece of art ever sold at auction.

The sale at Sotheby's Impressionist and Modern Art auction featured other works by Pablo Picasso, Salvador Dali and Joan Miro, but Munch's vibrant piece was the centerpiece of the auction in a salesroom packed with collectors, bidders and the media.

The vibrant pastel from 1895 was conservatively estimated to sell for about $80 million at Sotheby's, but two determined bidders drove the final price to $107 million, or $119,922,500 including commission, during a 15-minute bidding war.

One of four versions by the Scandinavian painter, which was being sold by Norwegian businessman Petter Olsen, "The Scream" easily eclipsed the old auction record held by Picasso's "Nude, Green Leaves and Bust," which went for $106.5 million at Christie's two years ago.

I have been pointing out that symptoms of bubbles have not been limited to towering skycrapers, but also to art and wine prices.

The record sale of “The Scream” which coincides with today’s easy money (zero interest rate) environment and central bank QEs, I believe has been highlighting this.

Nevertheless “The Scream” whose artist Edvard Munch described as…

I was walking along a path with two friends – the sun was setting – suddenly the sky turned blood red – I paused, feeling exhausted, and leaned on the fence – there was blood and tongues of fire above the blue-black fjord and the city – my friends walked on, and I stood there trembling with anxiety – and I sensed an infinite scream passing through nature.

…seems to be a propitious theme in today’s sharply volatile politically influenced markets, as driven by serial bubble policies, unwieldy debt, politically desperate actions manifested through rampant inflationism and financial repression.

Anxiety channeled through the "sense of an infinite scream passing through nature" seem to be part of the world we are living in.

Wine Market as Bubble Meter

I previously pointed out that the Art Markets can signal the phases of a bubble cycle here and here

The wine markets appear to be manifesting some signs too. That’s according to this report from Bloomberg,

Surging demand for Chateau Lafite and other French trophy labels, especially from Asia, has pushed both prices at auction and wine futures to records. Not all wine dealers are happy.

The prices for some of the most expensive bottles are starting to discourage even billionaire collectors, said dealers -- some of whom had warned in January of a bubble that could burst in 2011. Chinese and other buyers balked as some Bordeaux producers raised prices as much as 80 percent last month for the new vintage offered “en primeur,” when it is still in barrels.

“En primeur sales have halved,” Simon Staples, fine wine and marketing director of the London-based merchants Berry Bros & Rudd, said in an interview. “It’s a combination of high prices and the fact that the chateaux released less than last year.”

Sales growth is also slowing at auctions. Takings at the biggest three wine auction houses in the first six months of 2011 were up by 46 percent on the same period in 2010, according to Bloomberg calculations, down from the 88 percent sales increase in 2010…

Chinese consumers continue to spend millions on older vintages in bottles at specialist auctions. Sotheby’s (BID), Christie’s International and Acker, Merrall & Condit took a record $258.3 million in wine sales in 2010, more than double 2009. About two-thirds of the most expensive lots were selling to Asian bidders, according to both Christie’s and Acker.

Wealth from globalization is one thing. Conspicuous consumption from boom bust cycle is another. One would know the difference ex-post or after the bust.

(hat tip: Dr. Antony Mueller)

Philippine Phisix: Ongoing Rotational Process Amidst Overbought Conditions

For the week, the Philippine Phisix had been one of a few bourses that had escaped the interim cyclical correction. The bullish momentum appears to have prevailed, which eked out marginal gains.

On a year to date basis, the Phisix grew by 1.2% as of Friday, coming off this week’s .25% advance. Remember that in early 2011, the Phisix was down by about 15%.

Parsing on market internal activities, despite this week’s marginal gains, profit taking appears to have taken hold as decliners led advancers by a modest margin.

Yet the market leadership in the Philippine Stock Exchange (PSE) has clearly shown an ongoing process of rotation.

Two weeks ago the service sector became the market’s darling. Last week, the property sector grabbed the spotlight. This week, market leadership had been shared by the mining & oil and the holding sector.

The holding sector had been lifted by the material gains of the peripheral components: property, energy and mining holding company DM Consunji [DMC +9.14%], property banking and agricultural Filinvest Development Corporation [FDC +7.06%] and property, water, road and infrastructure based Metro Pacific Investment [MPI +3.93%].

Meanwhile, the mining sector has been singlehandedly buoyed by Lepanto Consolidated (LC +15.7%, LCB +17.54%).

On the losing side, the Industrial sector posted hefty losses (-2.45%) mostly due to energy company San Miguel Corporation [SMC-11.56%] which voluntarily suspended trading its shares as the company undertakes a fund raising program via sale of convertible bonds and shares[1].

San Miguel’s loss had been accompanied by electric utility Meralco [MER] which likewise shed 4.61% over the week.

Daily Trades As Sentiment Guidepost

One would note that even when the Phisix underwent a correction phase (blue vertical line) during November of 2010, the number of daily trades remained significantly above the levels during the first half of 2010.

This only implies that the correction then had NOT been a general phenomenon, and that there had been significant activities over the broader markets.

During full blown bear markets, the fall in equity values are transmitted to trading activities which likewise would exhibit substantial declines, as the public losses interest on “speculative” activities. So a feedback loop mechanism occurs, falling equity prices equate to falling trades and falling trades amplifies the price declines.

The reverse is true in bullmarkets: Higher prices translate to more trading activities and more trading activities are likely to magnify gains of equity prices. I say “likely” because there are exceptions to the rules.

The point is daily trades function as indicators of the sentiment of trading participants or of the general market.

Resolving The Overbought Levels of the Phisix

The Phisix seen from a technical viewpoint is still largely overbought.

Almost all indicators, I use, suggest that this has been so: The Phisix trades way above the 50 day Moving Averages (MA) shown in the main window, the Relative Strength Index (RSI), MACD (moving average convergence diverge) and the Full stochastic (Full STO) shows of overextended levels.

So it would not be a surprise for us to see some profit taking activities that may take hold.

But the technically overbought levels of the Phisix might also be resolved through a consolidation phase. This means the Phisix could go rangebound but the overbought levels will be resolved by specific issue related actions, as expounded last week[2].

And this week’s actions appear to reflect on these dynamics. Issues that had been overbought were sold, while issues that have lagged became market darlings. This defines the rotational dynamics.

Obviously the general trend determines the specific issue performance, but the actions are dissimilar (degree of movements) and spread through time (shown by diverse intervals—some issues take long before market attention shifts on them or some are inherently volatile or etc.).

But again if any hiatus surfaces, then this should likely be ephemeral, which should present as buying opportunities for traders, punters or long term investors.

Otherwise, attempting to catch short term waves might lead to missed opportunities.

As Publius Ovidius Naso the Roman Poet popularly known as Ovid once wrote,

“Chance is always powerful. Let your hook always be cast; in the pool where you least expect it, there will be fish.”

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[1] Finance Asia San Miguel gives price guidance for $850 million fundraising, April 14, 2011

[2] See Phisix-Philippine Peso Back In Rhythm, April 10, 2011

Phisix: Panicking Retail Investors Equals Buying Opportunity

“Without education we are in a horrible and deadly danger of taking educated people seriously.” G.K. Chesterton (1874-1936), English author

One of the important sentiment indicators that I use in examining short term trends is measuring the actions of small retail investors.

This group comprise mostly the unsophisticated market participants, whose decisions are mostly swayed by emotions. Market tops (greed) and bottoms (panic) are frequently associated with aggressive actions undertaken by them.

Pigs Get Slaughtered

And there’s even this famous Wall Street axiom which alludes to them: “Bulls and Bears make money, but pigs get slaughtered”.

Pigs, according to Investopedia[1], are high-risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their due dlligence. They get impatient, greedy, and emotional about their investments, and they are drawn to high-risk securities without putting in the proper time or money to learn about these investment vehicles. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

While I don’t have sufficient data to substantiate this phenomenon today, except that market breadth has considerably deteriorated, my sense is that the recent correction in the local markets may have incited some retail investor’s into panic selling.

Figure 1: Net Foreign Trade

Since the peak of the Phisix in October, foreign trade have been mixed (figure 1).

Last week foreign trade reported net buying, reversing almost half of the outflows seen from the previous week. This means that most of the selling pressure came from local investors. With the broad deterioration of the market’s breadth, this likely signals panic selling by retail investors.

And for whatever reasons which may have prompted for their actions I see this as an opportunity to accumulate rather than to flee.

Where weak hands dominate the activities, taking the contrarian stand would be the most prudent path. It seems almost the same case where we successfully called for “top” in the US bonds and the “bottom” in US stocks[2] based on the activities of the Pigs.

Phisix (and ASEAN)-Global Market Divergences

We have to remember market actions have never been a one-way street, as buyers and sellers reacting to perpetually changing conditions, always struggle to tip the scale of balance in their favor.

I’d have to admit that over the short-term even global markets may take a reprieve. As to whether this would materially influence the actions in the local equity market, which appears to have foreshadowed the global trend, is something I can hardly predict.

And gold prices, which in my view, has functioned as a very important barometer of global equities, seems to have augured for this hiatus (see figure 1).

But the point is: the major drivers of global financial marketplace, particularly inflationism and globalization, remain intact which means likely a consolidation phase first, as a consequence to last year’s fiery run up, before the next leg up.

Figure 1: Growing Divergences In The Financial Marketplace?

One thing we can observe, so far, is that the Philippine Phisix, along with our Southeast Asian contemporaries, which has been one of the world’s best performers in 2010[3], appears to be diverging from the trends of the global equity markets[4].

This can be seen in based on the actions of the Dow Jones World Index (DJW) and Dow Jones Asia Ex-Japan (P2DOW), which means bourses of major economies have been sustaining the rise of global markets, via the DJW, aside from the other non BRIC emerging markets.

In fact, many of the today’s best performers have been last year’s laggards, which only implies of the rotational effects on equity asset prices as corollary from central banks inflationism.

Yet with most countries still showing advances more than those suffering from losses measured on a year to date basis, it’s hard to argue for bearishness unless current conditions dramatically degenerate.

Peso-Phisix Divergence

Another source of a slight divergence appears to be in the tight correlation of the Phisix and the Philippine Peso (see figure 3)

Figure 3 Peso-Phisix Divergence?

Almost each time we see the Phisix fumble, the Peso follows. The chart demonstrates this relationship where a peak in the US dollar coincides with the bottom of the Phisix and vice versa.

This week we saw a sharp rally in the Peso even as the Phisix just eked out inconsequential gains. This implies that foreign investors buttressed Phisix as locals sold the market resulting to a broad based selloff.

My point is that if foreign investors increase their accumulations in the equity markets as the locals sell, we should see a consolidation (bottoming).

And where negative sentiment eases, and locals reverse from selling, we’d probably see a substantial recovery.

By then the Pigs will likely jump on the bandwagon.

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[1] Investopedia.com Stocks Basics: The Bulls, The Bears And The Farm

[2] See US Markets: What Small Investors Fleeing Stocks Means August 23, 2011

[3] see How Global Equity Markets Performed in 2010, January 14, 2011

[4] See Global Stock Market Update: Advancers Still Dominate, January 25, 2011

Media Indicators And Market Reversals

It is said that media coverages could somehow portend the flows and ebbs of the financial markets. The reason for this is that media tends to highlight on the most dominant trend, or the extremes of public sentiment.

For instance, in the past, major market inflection points have been 'captured' by the so-called "magazine cover indicator".

As wikipedia.org defines,

``The Magazine cover indicator is a somewhat irreverent economic indicator, though sometimes taken seriously by technical analysts, which says that the cover story on the major business magazines, particularly BusinessWeek, Forbes and Fortune in the United States is often a contrary indicator.

``A famous example is a 1979 cover of BusinessWeek titled "The Death of Equities". The '70s had been a generally bad decade for the stock market and at the time the article was written the Dow Jones Industrial Average was at 800. However, 1979 roughly marked a turning point, and stocks went on to enjoy a bull market for the better part of two decades. Even after the financial crisis of 2007–2010, stocks remain far above their 1979 levels. Using the Magazine Cover Indicator, Business Week's projection that equities were dead should have been a buy signal. By the time an idea has had time to make its way to the business press, particularly a trading idea, then the idea has likely run its course. Similarly, good news on a cover can be taken as an ill omen. As Paul Krugman has joked "Whom the Gods would destroy, they first put on the cover of Business Week.""

Has the recent upbeatness of markets as revealed by this magazine cover forebode an upcoming reversal?

picture courtesy of The Economist

I am not sure about the consistency or infallibility of this indicator though.

What has been framed has been the coincidences which has exhibited "the right timing" between magazine covers and market inflection points in the past.

What has not been shown has been the success ratio or the statistical 'batting averages' between the general incidences of sentiment revealing magazine covers and market inflection points.

Picking a point or two can be "selective perception" to enforce a bias, rather than applying objective analysis.

Although based on the behavioral framework, there could be some support for this; as mentioned above, the dominant sentiment could mean "overconfidence" or recklessness or deeply entrenched view from the prevailing trend, which is common during bubble tops.

Next, I find another spook story from Business Insider.

It's about the attempt to connect market performance with the upcoming sequel of the 1987 movie-Wall Street II.

This from the Business Insider,

``Some have wondered whether the forthcoming release of Wall Street II movie by Oliver Stone portends a market crash, considering that the last Wall Street was released right before the crash of 1987.

``Actually, this line of reasoning understates the case.

``There was actually another movie called Wall Street that came out in 1929. Of course, the market collapsed that year, too."

Again, correlation doesn't imply causation. It doesn't mean that "Wall Street" type movies would automatically result to another market crash from which the authors tries to imply. It's more representative of the their bias than of a logical argued conclusion.

Nevertheless, given the market's overbought conditions, a retrenchment is likely in the cards.

Phisix: From Bust to Boom?

``We’re in a government-dependent financial system; I never thought I would live to see the day… We’ve got to fight to get away from that.” Paul Volcker, Volcker: China Chose to Buy Dollars

The Phisix stormed to an 11.25% gain over the past week, and was the second best performer over the adrenaline charged Asian equity markets (although it was mostly global affair), see figure 6.

So far the latest rally has pushed up many major stock markets into the positive zone [see Global Stock Market Performance Update: The Charge of the BRICs] led by the BRICS and many EM economies in contrast to the G-7 economies that have still been drifting in the negative zone but has seen vital improvements in their standings.

Figure 6: Stockcharts.com: Performance Chart of Key Asia Bourses

From January 6^th to Friday’s close, only 4 regional benchmarks have cleared the winner’s zone and this includes China (pink), Taiwan (blue green), Indonesia (orange) and the Philippines (bright light green).

While many commentators have imputed the rising equity markets to “increasing risk appetite”, this needs to be qualified. Relative to global portfolio flows to emerging markets, the meat of the year-to-date inflows have only been accounted for just this week.

According to Marketwatch.com, ``Emerging Market Equity Funds tracked by EPFR Global took in the most money since mid-December during the week ended March 25. These funds absorbed $2.3 billion of inflows during the week, turning year-to-date flows positive by $2.03 billion.”

So nearly 90% of cross border flows came only this week. The current cross border flows signifies as marginal in comparison to size of the composite emerging market bourses. Nonetheless it can be seen as an improvement.

Here at the Philippine Stock Exchange (PSE), capital flows remains a net foreign selling for the end of the week, for the rest of the month and for the year.

This means that the recovery in the Philippine Stock Exchange has largely been a domestic investor affair. This also means that that the recent gains could possibly emanate from the transfer of local savings or possibly increased domestic leverage that could have been channeled into the local equity market. For the advanced EM markets, it could be also be due to short covering.

We can deduce such activities as largely a domestic ‘risk taking’ activity and not from the typical cross border flows.

Besides, given that most central banks have been forcing policy interest rates to approach zero levels or negative real rates regime, coupled with the transmission effects of the QE measures in many major economies the opportunity cost of holding cash have been materially rising.

Put differently, policies from the central banks of the US Federal Reserve and Bangko Sentral ng Pilipinas appear to be gaining traction and skewing people’s incentives to soak up more risk.

And faced with the imminent risk of inflation, staying in cash is now becoming increasingly a risky affair, as a sudden surge in inflation could wipe out the Peso’s purchasing power.

Remember except for the external liabilities of the government, the Philippines’ private sector, as segmented into corporation and individuals, are basically underleveraged. Nearly two fifths of our domestic output can be attributed to the informal economy. Thus, there could be a sizeable surge in private borrowing that may intensify the inflation transmission into the financial asset class. On the other hand, a considerable jump in consumer inflation could also be politically destabilizing.

The initial concerns about the corporate direction of PLDT and the corporate maneuverings at Meralco appear to have been overshadowed by the flush of money from global central banks.

From Bottom To The Advance Phase?

Nonetheless, signs are on the wall that the MONETARY risk environment together with significantly improving market internals seems to be suggesting of an important breakaway for the Phisix from its current “bottoming” cycle to the “advance” cycle.

Figure 6: Daily Traded Issues and Advance Decline Differentials

The Pink line represents the daily traded issues. This is one of the market breadth indicators which deals with the broad market sentiment. A surge in daily traded issues could mean broad based buying specifically when corroborated by an improvement in the advance decline differentials as shown at the same chart. Below is the daily traded issues. The green circle shows of the simultaneous progression.Figure 7: PSE Daily Trades: Another Improving Indicator

Another improving indicator is the number of daily trades. This market breadth indicator also reveals of the risk appetite of investors. A rising incidence of daily trades suggest of more market participants and or more churning activities from existing participants.

It essentially reveals of the market’s sentiment or as confidence barometer. In a bear market, a sudden spurt in daily trades frequently signifies panic selling as in the October-November 2008 experience.

For now, all three indicators are seemingly in synch adrift the resistance levels. And this synchronicity hasn’t been the seen for quite sometime.

Nevertheless, a breakout above the 2,100 level for the Phisix alongside with a breakout for these market internal indicators will indeed be very bullish for the Phisix. Of course, this has to be equally matched by improvements in the market’s overall volume.

As a short reminder, I don’t know when the Phisix will breakout. It could be next week or in the coming weeks or months. Sorry but I am not a seer. What we seem to be seeing is a long awaited improvement in the overall activities within the Philippine Stock Exchange. And if these should continue as I expect it would, then a breakout is more likely sooner than later.

And as stated before, the Phisix can’t rise alone. This means that the regional activities will likewise underpin the success or failure of today’s rally. Although given the conditions stated above, China has so far almost singlehandedly led the rally in the region and seems to have “pulled” many emerging markets along with it. Of course, it’s rather insane to suggest that a $4.22 trillion economy will pull the rest the world (US $14.33 trillion, Eurozone $18.85 trillion or Japan $4.84 trillion).

What we are likely witnessing is the impact from “combined” money printing by global central banks more than an economic recovery. If these measures succeed to buoy most of the region’s economies unimpaired by the credit maelstrom, the “super” inflation could be deferred.

Nonetheless today’s seemingly booming inflationary driven environment will also mean a forthcoming bust in the far end of the road (sometime 2013-2015?). But for now, present risks seem to emanate from a super inflation, than a deflationary bust.