Where’s The Beef? A Potential Global Economic Freeze Around The Corner…

There’s an avalanche of bad economic news coming out of different parts of the world. In Asia, China is cooling off due to tightening policies put in place by the Chinese government to fight rampant inflation.

Over here in Europe, government officials and monetary authorities are eagerly in search for a solution for the indebted countries, with Greece only a few weeks away from a total collapse. Such an event could trigger an economic armageddom in the EU, with contagion effects in every possible corner of Europe.

And as of late, the US economy is starting to wobble. The most recent GDP figures (1.8%) came in below expectations (2%), the housing market is about to ‘double dip’ and consumers are throwing in their towels.

Via AP:

NEW YORK (AP) — Americans are losing faith that the economy will keep improving, according to a monthly survey.


The Conference Board’s Consumer Confidence Index fell to a six-month low of 60.8 from a revised 66 in April, a sign of the toll that high gas prices, a choppy job outlook and a moribund housing market are taking on people’s psyches. Economists had expected an increase to 67.


“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects,” said Lynn Franco, director of The Conference Board Consumer Research Center. She said fears of inflation that had eased in April picked up again in May.


The index, released Tuesday, is still far from the reading of 90 that indicates a healthy economy. It hasn’t approached that level since the recession began in December 2007.


The results paint a different picture than earlier this year, when many hoped the economic recovery was gaining steam. In February, consumer confidence hit a three-year high. But since then, consumers have started paying more for food and gasoline and are seeing a “double dip” in the housing market.

… and so stagflation enters the US!

It seems that a global economic freeze is just around the corner.

Commodities which are extremely sensitive towards consumer demand have been lagging. While copper prices are in a ‘muddle through’ phase, demand for high-end products like beef is falling, which translates into sharp price declines for Live Cattle entering Q2 2011. This spells even more ‘doom & gloom’ ahead for the economy as cutting back on ‘luxury’ foods means consumers in a saving mode again.

Meanwhile, stocks are zooming higher, as can be seen on the chart below.

We are suspicious of the current evolution of the stock market. The fundamentals are breaking down everywhere. This will slip into company results in the coming quarter(s), probably sooner than later.

If Live Cattle prices can be any guide, better fasten those seatbelts, as companies could start to send out Q2 profit warnings as soon as next week!

>>> Smart Money Europe

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