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Two Ways To Play: Uncertainty, Inflation in China


Strengthen your portfolio in good times and bad.

According to the Wall Street Journal, economists are growing more concerned with the complexity of China's inflation. Food prices appear to be stabilizing and some expect further declines due to an easing in key items such as pork.

However, some believe risks for the country have actually increased as more uncertainty has developed with the cyclone that hit Myanmar, a major rice producer. Regardless, the most disconcerting evidence is the price increase in other goods and items. Core inflation had been running at 1% or less for much of 2006 and 2007. Now the consumer price index, less food and energy, has risen to 1.8%, likely reflecting how higher labor and raw material costs have fed into a broader range of goods.

Economists at J.P.Morgan forecast nonfood inflation to average 2.5% for all of 2008. With China being a key global supplier, this could have implications around the world (See Two Ways To Play: Inflation Reaches Tech).

From the Bull Pen: The bulls have a new tool to consider as a hedge against inflation: the E-Tracs UBS Bloomberg Long Platinum ETN (PTM), which made its trading debut today. Professor Lance Lewis warns of the credit risk in the ETN for investing purposes, "but as a trade, it might make sense."

From the Bear Cave: Chinese Bears can consider going long the Ultrashort China ETF (FXP) which tracks the inverse of the FTSE/Xinhua China 25 index.
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