Disconnect?

Not sure what's going on in the markets these days. Shanghai and the TIPS have rolled over, which suggests to me that inflation expectations are benign while the Chinese market is slowing. Then again, inflation in China (esp. food inflation) is pushing higher and the Chinese central bank is raising rates to cool the economy. In Canada on the other hand, markets are moving higher and oil is also pushing higher, in direct contrast to what's happening in China. The VIX is poking a little higher but generally signals things are quiet on the volatility front. I think QE 2.0, end of year and the holiday season are throwing things off. It appears the US shopping season (marked by Black Friday) is doing well, suggesting that consumers are opening their wallets a little bit at least. Europe is still a mess (and London is stalled), so no help from this group in the near term. The new year is a different ball game altogether, and I think we will start the year down as people sell in January to avoid paying capital gains in 2010. Longer term the commodity run appears to be intact, copper could touch $5.00/lb in 2011, silver looks really good, gold good and zinc good (2 yrs out). Giddyup!



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