Gold News

Heigh ho, heigh ho

Judging by the Shenzen, China's trading all day and working all night...

TODAY IS MAY DAY and the communists of this world would have us believe is a day for the workers of the world to unite.

   And yet the workers of the world have never been more disunited. No, the global labor market has not quite turned into a Hobbesian war of all against all. No one is yet fighting to see who can produce the most for the least. But it sometimes feels like it, and frankly, it has kept consumer price inflation down.

   I just got a nice new $49 pull-over sweater from Myer to prove it.

   In the Catholic calendar, besides being a holiday in most European nations, today is the feast day of St. Joseph the Worker. The adoptive father of Jesus of Nazareth was a carpenter. Joseph would most likely feel out of place in today's Western world, since it favors consumption over production.

   The job of work today is to figure out if China's work (making things) is about to be undone by China's stock market bubble (trading claims on things). Joseph doesn't really have anything to do with it, but it is May Day and it is his feast day. And it reminds us of our favorite quotations.

   "God's world is good. It is only we who are bad," Chekhov wrote. "One must work, and to hell with everything else. The important thing is that we must be just and all the rest will come as matter of course."

   It's a quotation worth keeping in mind if the relentless parade of violence on the television and internet gets you down. It's something Anton Chekhov wrote in a letter after visiting the Czar's prison camp on Sakhalin Island, just off the East Coast of Russia.

   Sakhalin Island, as it happens, is now home to a major liquid natural gas project. But back in 1890, it was a gulag under the regime of Alexander II.

   Heigh ho then, and off to work we go. First stop: we are getting more and more nervous about the massive bubble blowing in Shanghai. The index as up 18%...last month. It's up over 100 per cent in the last twelve months.

   It is hard to find value in the midst of this "melt up". We sent a note to our US-based colleagues at The Daily Reckoning and asked for their take. We heard back from Dan Amoss at Strategic Investment.

   "I second your notion that it's not prudent to pile into anything aggressively at this point," Dan wrote. "I think that the Shanghai Bubble is about where the NASDAQ was in December 1999, but then again, it could only be August 1999. It's gotten to the point where the Chinese are trading all day and then doing their day jobs at night.

   "Over the next few months, who knows? There'll probably be some fireworks, so an allocation of cash is advised. I think you'll get a chance to pick up some quality companies at a discount.

   "I think the Communists are going to continue their feckless attempt at tightening, but will remain like Ben Bernanke – big talk, but little action. They don't really control the local party bosses anyway. They also fear a deflationary spiral so badly – just like Uncle Ben – that they'll risk inflation getting out of hand instead.

   "And over here in the United States, I have a feeling the public will stop buying the 'Core CPI' BS just as soon as the price of food increases 15%-20% in the wake of the ethanol debacle."

   Heigh ho...

Best-selling author of The Bull Hunter (Wiley & Sons) and formerly analyzing equities and publishing investment ideas from Baltimore, Paris, London and then Melbourne, Dan Denning is now co-author of The Bill Bonner Letter from Bonner & Partners.

See our full archive of Dan Denning articles

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