Singapore Exports to Decline as Asia Braces for Deeper Slowdown

I don't have a problem in the sell off in commodities on the global slowdown thesis - heck we were proponents of this thesis when everyone was slapping the "decoupling" scenario in our face. In fact we closed some of our Asian ETFs this spring just for that reason [May 23: Smaller Asian Countries Begin to Buckle Under Oil - I'm Closing iShares Singapore (EWS)] Even then as I was buying the very unpopular Ultrashort Oil & Gas (DUG) - which is now very popular of course, I wrote...

While I'm a near term energy/commodities bear [Oil Looks Toppy to Me - Starting Ultrashort Oil & Gas (DUG)] my comments are more longer term in basis. Essentially we are going to go through years of "World of Shortages" in which commodities trail upward on a long wide slope, punctuated by some dramatic selloffs and bubble like runs up. (of which we have just seen one). But at some point as we've been pointing out, it stops making sense to build things due to commodity costs - either steel [Fast Rising Steel Prices Set Back Big Projects] or energy. Only "not truly free markets" are in fact holding us up - Asian and Middle Easterners willing to pay almost any price to keep their growth going. This cannot continue forever or at any price. This is a major distortion and few countries can keep this up or their budgets will be blown up (we don't mind that in the United States of Subprime; we just will print more money to "fix things" when we have massive deficits) - however not every country is so irresponsible so we now are beginning to see the first signs of economics trumping the distortions in the smaller Asian economies. Now if China/India follow suit a lot of things will be changing in this world.

So I get the global slowdown thesis - I just don't get the "buy US retail, auto, consumer discretionary" thesis as the counter balance to the global slowdown. I realize huge amounts of investment money need to go "somewhere" and by default much of it is heading in these directions but from a standpoint of "sense" - there is very little in this trade. Unless we are already discounting out 2+ years to the "recovery".

Bloomberg reports about the slowdown thesis - where are all the decoupling experts who CNBC trotted out all fall and winter? No where to be found....

• Singapore said its exports will fall this year for the first time since 2001, as the city-state joined its neighbors in signaling a deepening economic slowdown. The island's trade promotion agency today lowered its forecast for exports this year, saying they will drop between 2 percent and 4 percent, from an earlier estimate of a 2 percent- to-4 percent growth.
• Gross domestic product increased 2.1 percent from a year earlier in the second quarter, after expanding 6.9 percent in the previous three months, the trade ministry said today.
• The U.S. housing recession that has roiled financial markets is hurting export demand and threatening expansion in a region the Asian Development Bank says will account for more than a fifth of global growth this year.
• ``U.S. consumption is declining sharply and the outlook for export demand will remain weak until 2009,'' said Takayuki Urade, head of Asia economics at Nomura Holdings Inc. in Singapore. (so U.S. consumption is declining sharply but to make any money in this stock market I need to buy US discretionary stocks - got it - only in the stock market does this make sense)
• Australia's central bank today said it expects a ``significant moderation'' in domestic demand that will cut economic growth by half and drive up unemployment.
  
• Japan last week said the world's second-biggest economy is ``weakening'' for the first time since 2001. The country's exports fell for the first time in more than four years in June as growth in shipments to Asia and China eased, signaling the U.S. slowdown is spreading to the emerging markets that helped sustain expansion. (did I miss the Japanese economic "strength"?)
• ``Weaker growth in the major economies, coupled with the need to contain inflationary pressures, will dampen growth in the fast-growing Asian economies,'' Singapore's trade ministry said today. It ``expects the electronics industry to remain soft in the second half of 2008, reflecting weak demand for semiconductors.'' (but I'm supposed to buy technology as the anti-oil trade - even as demand slackens worldwide. Got it.)
• South Korea on Aug. 7 said growth in Asia's fourth-largest economy is easing as consumer spending slows and higher fuel costs stoke inflation. An expansion of 4.8 percent last quarter was the weakest annual pace since the start of 2007. (but as oil goes down, all our problems go away - it's working in the US, why not S. Korea? Aha, the U.S. is the land of magic)
• The Reserve Bank of India last month lowered its economic growth estimate for the year ending March 2009 to 8 percent from a range of 8 percent to 8.5 percent as inflation at a 13-year high erodes spending by consumers and companies. (but Indian stocks were booming last week as oil falls?)

Conclusion: Logic. Check it at the door when it comes to investing in this manic stock market.

Long Ultrashort Oil & Gas in fund; no personal position