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Friday, February 8, 2013

The BRICs and the global economy

I hear a lot of optimism not only about the U.S. economy, but also China and other emerging markets.  I was wondering if all that optimism was really justified since I am clearly a skeptic, LOL.  Here is a monthly chart combing the BRIC ETF EEB along with the copper, industrial metals, and steel ETFs.

We can see that the BRIC stock prices correlate real well with the industrial metals prices.  They are almost in lock step.  I marked the month of Sept. on these charts as that was a time of great excitement with infinite QE.  Despite the run up to new highs in SPX and European markets we can see that none of these ETFs are above their Sept. peaks.  They keep telling me on TV this part of the world is going to help get Europe out of a recession and help the U.S. economy.  These charts are not displaying much excitement about the global economy to me.  The best thing I can say about them is that they have not broken down to new lows.  I don't see anything that indicates they are taking off to the upside.  Maybe they will, and maybe they won't.  I think this is a simple case of the Wall Street hype machine searching for bag holders.  I don't believe reality will match the hype and markets will ultimately reflect that.


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