We've been developing a thesis regarding a global slowdown caused by rising prices everywhere - steel is causing it, crude is causing it (Jun 2: China Leads Asia in Retreat from Inflation Battle), etc. Inflation is a tax on all things, consumers and producers. (except in the US where there is little to no inflation of course). The economic cycle elsewhere has not stopped happening but the overreaching power of 1 economy is truly buffering the cycle.

China remains the inflection point of almost every major bull market at this point; thus we must monitor this Ferrari going at 165 mph down a careening oil slick mountain road. Recall, we are already seeing smaller Asian governments buckle under the global commodity price boom (May 23: Smaller Asian Countries Begin to Buckle Under Oil) and we are seeing the impact of steel (May 17: WSJ - Fast Rising Steel Prices Set Back Big Projects) Just speaking from a local perspective the impact on automotive of this steel issue is simply untenable. Hot rolled steel prices have risen from $830 metric ton in April to $1035 in mid May. Folks, thats in 6 weeks; this product was $500 a few years ago (and $150-$200 a few years in the early part of the decade).

Since those posts even India has begun to buckle (Jun 3: India Warns they too Cannot Subsidize Energy Costs Forever). The open question is when/if China would buckle - when it does, a lot of investing thesis that have caused the most pleasure will see damage in the near term. Throw a "strong dollar" on top of it, and the pleasure from US multinationals deriving huge gains from currency dislocations goes away (be careful what you wish for, strong dollar advocates) along with "huge growth in developing markets". So we could have a rocky road ahead of us in the markets - since if there is a true correction (all it takes is a sentiment shift for stocks to be bludgeoned) in items tied to China engulfing every product worldwide at any price, finding areas to hide in the stock market will be tough. You'll be stuck with financials, retailers, or technology I suppose.