The Chinese 2011 Bubble: Big Trouble In Little China

Chinese Deflationary Breakdown

China's stock market has broken a long-term flag to the downside. Look out below.

As Jim Rogers starts to beg Bernanke for QE3, I certainly do hope that he is teaching his children English as a Second Language.  There may be tough times ahead for China, and he may want to relocate back to the United States if things are to continue.

Jim Rogers spoke to a very dramatic and even more hoarse Bartiromo, touching on old and well-known themes, namely that the administration is essentially using up its last stimulus bullet with the current recession: "When the problems arise next time what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around."

As of 2010, the US is no longer the world's biggest consumer of energy. The new leader, with a 20.3% share of global energy consumption: China.

Since "the China Story" is the foundation of global growth, demand for commodities and ultimately, stock market profits, when China's stock market breaks down it behooves us to pay attention.

One classic pattern is a flag or pennant (a.k.a. a wedge). The psychology behind the pennant is rather transparent. Lower highs reflect a decline in Bullish enthusiasm and buying pressure, as every "buy the dip" fails to match the previous dip-buying

The direction of China's market has been decisively signalled: breakdown. In technical analysis, it doesn't get any better than this:

A massive wave of malinvestment since 2008 is cresting, and the stupendous stimulus provided by gargantuan local government and private lending is expiring.

Corn Prices Near Record - Corn Stocks Drawdown

U.S. corn supplies at their tightest level in 15 years through the fall of 2012

"USDA also forecast a hefty increase in corn use by China -- up 8 million tonnes, or 5 percent, this year and up 13 million tonnes, or 8 percent, in 2011/12. China will draw down its stocks rather than import corn, USDA said."

USDA projected the corn crop at 13.2 billion bushels, a record but 305 million bushels -- 2.2 percent -- lower than its May estimate. With high demand from ethanol makers, livestock feeders and exporters, consumption will exceed the harvest and the U.S. stockpile will shrink.Traders said corn futures prices would rise by 10-20 cents a bushel because of the forecast of tighter supplies.

"USDA must feel comfortable we are going to lose acres, based on satellite (imagery)," said Jack Scoville, analyst for The Price Group. "We know we're going to lose the acres; it just depends how much. They didn't put them in beans."

The corn stocks to use ratio, a measure of supply, would be 5.4 percent this marketing year and drop to 5.2 percent for 2011/12. Both are close to the 5 percent ratio of 1995/96 and represent razor-thin supplies.

"Planting delays through early June in the eastern Corn Belt and northern Plains are expected to reduce planted area, more than offsetting likely gains in the western Corn Belt and central Plains where planting was ahead of normal by mid-May," said USDA.

It projected corn plantings of 90.7 million acres, down 1.6 percent from farmers' intentions, and harvest area of 83.2 million acres, down 2.2 percent.

USDA estimated the winter wheat crop at 1.45 billion bushels, up 2 percent from May. Traders expected a 2 percent drop. "Improved weather conditions during the past month in the upper Great Plains resulted in higher forecasted yields," said USDA.

50 Year Record Drought To 200 Year Record Deadly Floods

the weather has flipped, and heavy rainfalls since June 3 have created floods that have killed at least 52 people led to 32 more missing

"Heavy rains have inundated parts of 12 provinces in central and southern China and affected 4.81 million people so far since the flood season arrived, Shu Qingpeng, deputy head of the Office of State Flood Control and Drought Relief Headquarters, told a conference. Floods have destroyed 7,462 houses and submerged 255,000 hectares of farmland, incurring direct economic losses of 4.92 billion yuan (760 million U.S. dollars), he said.

Wangmo County in Qianxinan Autonomous Prefecture of Guizhou recorded maximum one-hour precipitation of 122.5 millimeters, the most in 200 years, he said.