“All war is based on deception.” – Sun Tzu
FX Trading – China Panic!
China is dead in the water without exports. They are in panic mode. That is why they are flooding their economy with massive amounts of capital and suppressing any hint of decent everywhere. That is why they have chased out the major financial news outlets, and forced them to take all cues from the state. But no matter how many bridges they build, excess capacity they expand, stock market propping they do, dollar reserve currency jawboning they employ, or internet sites they shut down, it doesn’t change the fact that exports have crumbled and until Mr. US Consumer starts buying again, it will get worse instead of better. The brunt of global rebalancing is upon, as it is for all those so dependent on exports.
Our piece earlier this week warning of falling BRICs is based on China as the major disappointment that could trigger another major run out of emerging markets. And that means the dollar (likely yen too—more on that from our special guest below) catches a major risk bid.
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Given that China seems to be the corporate earnings touchstone, the impact of disappointment would most likely rippled through the earnings forecasts of all those companies who believe that stimulating infrastructure, property, and stock markets, is the same as stimulating either domestic demand or exports. We think analysts will learn that GDP growth and the real stuff that makes an economy work can at times be two completely different animals. That new realization would likely hammer US stocks in its wake—green shoots morph to brown weeds.
Bottom line: we think there is only one thing you need to know about what’s happening in China, and it is this…
What is interesting is that these are OFFICIAL statistics! It makes one wonder—a skeptical mind that is.
Ed. Note: Go HERE to read Jack Crook’s guest piece today from Yves Lamoureux, Investment Advisor, Blackmont Capital Inc.
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