Surprisingly good results in Australian banks

Aussie banks are up 3~5% right now, which may reflect that their credit market is "still" ok. Austrlia has experience the longest housing bull market (15+ years) and house owners are heavily in debt (much more than USA). Let's see how this plays out, can commodity price support a "soft landing"? I do not think so, but I do not have the conviction to short.

Elsewhere in Asia, inflation is still the hot topic. Oil price is not as important in Asia as in US, but soft commodities prices are. It is very simple, you cannot eat less, but you can spend less on entertainment and housing.

I see a lot of risks for China but not much catalyst coming this year:

Export will be affected by - rising RMB, weaker US demand, high raw material price and labor cost increase (new labor law) . The effect may not be apparent in the beginning, as companies can hide it under "recievables" and "inventory". When the slower demand from US, and later from Europe (falling housing market and lowest consumer confident in years); China export must suffer a big fall.

Many people argue that domestic consumption and Asia consumption can compensate for weaker US demand. I disagree, as the goods consumed in USA is not the same as those in China/Asia. While some goods like cloths and sport shoes may be shifted to local consuption, high value added goods are not as easy: car parts, TV/mobile phone parts, goods designed for English speakers.... Furthermore, food inflation in Asia will definately affect spending of consumers, as food is a large percentage of income when compare to consumers in USA. It is precisely those "low value added goods" that can be shift to domestic demand that those people are buying. Now they need to spend more on food items and you still expect them to consumer more to compensate for US weakness? Good luck.

I can only see the very rich Chinese consume more in this high-inflationary environment. They will not need to worry about food cost. However, don't forget those richest people (bankers) are being fired by i-banks. Bear Sterns in HK just fire 90% of their HK staff (today's news). They are like the IT people in 2000, when it was the "hottest job" in town. Last few years IPO boom was very similar to the IT bubble, and attracted a lot of "smart(ass)" young "professionals". With all those big i-banks firing people, they will have a hard time finding a job, buying a new BMW and luxurious apartment may need to wait.

Yes, people spend more and invest in housing in an inflationary environment. However, do you seriously think people will invest more in housing when the inflation is in food??? This time the inflation is not in all the general goods or the luxury goods. It is mainly food and oil. I will let you answer this question yourself.

That's enough for now and enjoy more of my bearish comments next time.

If you listen to my last post and buy put or call/put 3 days ago. I think you can take profit on the put now :). I am not the greedy kind of trader, cash in my pocket is better than money in a warrant.