(Mike Larson is off today. Boris Schlossberg, a new member of the Money and Markets team, has filed this special report. Mr. Schlossberg, along with Kathy Lien, has vast experience forex trading and has been a regular commentator for CNBC and is widely quoted in the financial press.)
As January recedes into memory and capital markets finally start to show a modicum of tranquility, investors are being lulled into a false sense of complacency. But believe me — the storm has not passed. It’s just saving its strength for a much bigger attack on your assets.
Market Roundup
Over the next few weeks, you will no doubt see a parade of talking heads try to reassure you that the worst is over, that growth is just around the corner and that China has found its footing.
Because ultimately when you talk about global growth you are really talking China. Where else is growth going to come from? The Middle East — where $30/bbl oil is creating conditions where Saudi Arabia could run a budget deficit one-fifth of it GDP? Europe — where sclerotic growth is now exacerbated by a refugee crisis and the rumblings of a bank run in Italy could ultimately create $1 trillion in write-offs at the region’s banks? North America — where Canadians suddenly can’t even afford a flight to Fort Lauderdale, and Americans appear to be locked in a political equivalent of an comic opera and have essentially stopped spending money at the mall?
|
|
| Are the lights about to go out on economic growth in China? |
No, when it comes to incremental growth China is the only game in town. It’s the net marginal buyer of everything — cars, movies, iPhones. Just ask Tim Cook, who looked dour and depressed at this week’s quarterly earnings call, despite Apple making more money than most countries in the world. Cook sees the writing on the wall. The go-go days of easy money and endless growth in China are over. The Shanghai market meltdown blew up a lot of wealth and whatever is left is leaving the country by any means possible.
A few months back, Bloomberg ran an amusing story about how the Chinese will use anything from money-changers in Hong Kong to human mules with stacks of yuan taped to their bodies to smuggle out more than the $50,000 limit allowed by Chinese law. The story would be amusing were it not a telltale sign of deep trouble in the Middle Kingdom.
Having been born in an authoritarian country I learned a key lesson very early in life. If you want to know the truth in a closed society, don’t listen to the man on TV, watch the guy on the street. And what that guy is saying right now in both Mandarin and Cantonese is — run and get my money out!
Why else would Vancouver real estate rise by 15% at a time when Canada’s key source of income has fallen by nearly two-thirds and the currency is quickly approaching 65 cents to the buck? Why else would New York developers build not one, not two, but three high-rise apartment buildings right across the street from me at a cool $4.5 million per unit, blithely ignoring the fact that these building sit right next to a NYFD firehouse that blasts sirens 24 hours a day, 7 days a week. The Chinese are clearly not looking for return-on-capital; they are just looking to preserve whatever they can.
The talking heads will make all sort of soothing noises. They will claim that China’s FX reserves are so large that they can withstand all this capital outflow. They’ll say that the capital account still generates $400 billion of surplus a year. That all of the recent clamp-downs by the authorities have bought the country another 12 to 18 months worth of peace.
Perhaps.
| “China will have to devalue the yuan and the fallout from that move will be felt on this side of the Pacific.” |
But here is the only fact that you need to know. Over the past three years, China used more concrete than the U.S. did in all of the 20th century. Just think about that for a second. More than all the pre-WW2 years of constructing the Empire State Building and Woolworths and all the post-WW2 years of building the National Highway System and all the skyscrapers of Chicago and New York. In just three years. That’s probably the greatest example of mal-investment in the history of mankind. And it’s not going to end well.
The junkets to Macao, the ghost cities, the massive theft and corruption by the party elite. It’s already starting to catch up with the country and the first point of pressure will be the currency. As debt-fueled projects begin to collapse, China will have to devalue the yuan and the fallout from that move will be felt on this side of the Pacific, despite the misleading assurances that trade with China represents only “1% of our GDP.”
It may happen soon, or it may take a few quarters to truly unwind, but it will happen as surely as the sun rises in the east, which is why complacency will be very expensive for investors who remain lulled by Wall Street’s soothing noises.
Best wishes,
Boris
(P.S. Registration for next week’s three-part series — “3 Shocking Forecasts for 2016” with Kathy Lien and me is closing! Make sure you click this link to register before it is too late!)
|
Mike Larson will be back Monday with his reactions to your comments from this week.
|
Global shares rallied overnight after the Bank of Japan moved one of its main interest rates into negative territory in an aggressive step to re-inflate its economy. The BOJ said it would charge 0.1% for excess reserves and may cut rates further if necessary, a policy resembling one already taken by the European Central Bank. Moves such as this aim to give banks an incentive to boost lending, which in turn should help fuel economic growth.
America’s iconic Xerox Corp. (XRX) will separate itself in two businesses and give several seats on the board to activist investor Carl Icahn, leading to an end of its historic efforts to combine business services with copiers and printers, the Wall Street Journal reports. Xerox will become two publicly traded companies, the report said. Icahn will receive three seats on the services company’s board. The billionaire said in November that he would seek talks with the company about its future. Icahn’s hedge fund has an 8.1% stake in the company and is now the second-largest shareholder after index giant Vanguard Group.
Authorities allege that the suspected mastermind in the escape of three inmates from a California jail had help from a woman whose English classes he was taking while locked up, authorities allege. Escapee Hossein Nayeri, 37, became acquainted with Nooshafarin Ravaghi, 44, during English-language classes in the Orange County jail, the sheriff’s department said. That led to her helping him and the others to break out of the jail and led to her arrest Thursday, the authorities said. One of the three escapees surrendered to police Friday, authorities said.
The Money and Markets team
{ 76 comments }
YOUR RIGHT ON- House of cards. When the Chinese domino falls we all go with it!!!
No. Wrong. Catastrophic mistake. China is NOT the bull in the China shop. The country to watch today is Saudi Arabia. If that country – which is fuming because, despite its flooding the market with oil, it has still not managed to bring the entire U.S. oil industry to its knees, and which is screaming with rage because America (unbelievably) has thrown in its hat with the Shia (meaning Iran) rather than with the Sunni (which is Saudi Arabia) – decides to withdraw from its “petrodollar” agreement with the U.S. and begins selling oil to China for Yuan, to India for Rupees and to Europe for Euros, then within a very few months the USD will be in a most precarious situation and the global repercussions will be far more serious than those that could stem from a slowdown in China and the temporary withdrawal of some capital from that country. Ignore this development at your peril, and don’t forget to stock up on precious metals, which will soar when the USD collapses..Saudi Arabia is not beyond upsetting the 40-year apple-cart in this manner. Its moves will be emulated at once by all of the oil-exporting Gulf states.
Que voulez vous dire à vos risques et périls ne me faite pas peur en plus pourquoi les chinois Martyne Poirier See you later Mr Larson.
Why did Chase sell its 50 story vault in NYC to the Chinese – Is this where the party elites will park the riches they are pulling out of China protectIng what they have fled with like their own citizens are attempting to do?
Takes a little bit of effort to fill this building so wonder how many pallets of gold billion fit in the belly of 747’s hitting the tarmac @JFK from Beijing that are filling up that 50 story vault?
Same applies for other vaults worldwide
Since the yuan is now in the IMF list of creditable/transferrable currencies and the bleeding of currency leaving China rules in an imbalance in the ratio of reserves to debt , the IMF will support an entourage to assist the Chinese to maintain the compliance to have the yuan remain on the list of creditable/transferrable currencies. The findings of the IMF will make recommendations which may include such measures as shed debt and call in loans – these loans are called US Treasury securities.
The IMF supports the measure which furthers the redistribution of wealth to dissolve debt w/o them losing equity – th calling of the T securities causes the dollar to sink which increases the value of the yuan and the world bank is slowly made whole. If Uncle Sam then secedes from the UN, the IMF and the world bank from them attempting to make this paper transaction indicating Uncle Sam cannot make good on his obligations; this then deride the dollar as reserve oil currency and there will no longer be reason to convert to dollars to buy oil – in fact, then the Iranians can be paid directly by the Chinese for the oil that will be provided through the pipeline being built from Iran to Pakistan and then north over the Himalayas to the western border of china where their empty cities are – in turn, china then ships goods back down the roads along the pipeline and ship goods out of the port in Pakistan that Pakistan denied the use of for the US military to transport the combat vehicles out of Afghanistan – this is all enabled by the Iranian nuclear deal which allows Iranian oil to flow to China and the Iranian people get to use their electric dishwasher powered by nuclear reactors.
It’s a long way around Asia and China needs a 2nd egress point since the south china sea appears contested and going over the Himalayas is closer to India and the Pacific trade partners in the new pacific trade treaty being supported by the same guy who championed the Iranian nuclear dwal.
you are spot on, this is the beginning of the end for America as we now her… now how do we play this grand scenario???
Market place sentiment took a hit when the state proposed margin loans to novice investors. The writing was on the wall when free markets were no longer free. Return on investment became return of capital. It’s not all doom and gloom but, an interesting place to do business.
The doom you are anticipating,will it affect those who depend on loans what about those who use their own money.? Is there any advantage to use your savings only?
What is your recommendation to sell of next week and wait?
How long is the waiting time?
The only question is what will this do to US equity markets? Most likely they will benefit from the flight of capital unlike your implication that it’s doom & gloom. I guess you and Edelson are not on the same page on China. You’re not even in the same library.
Chinese can be very clever. I heard that wealthy Chinese have been buying internet domain names in China for $10 or $15 Million, then traveling innocently to the U.S., Canada, or other countries and selling them there. They may lose something on the deal, but they now have funds to invest in that country – hopefully for an eventual profit. Anything to get assets out of the grasp of the politicians of ANY country.
Should we be selling out of the US stock market while we have a chance?
Totally in Equity for past year or so. I believe the market is in for the biggest stock market crash of all time from a percentage perspective. I predicted the DOW to drop to as low as 8600 and the S&P between 800-900 in 2016 and bottom ivy no later than March 2017.
I wait to buy after a long bottom and only on the rising edge. I also move all my stocks to equity and or bonds on the upper rising edge as well. Always felt that to be a damn good investing strategy until I retire and need the money to survive.
Buy low, sell high and invest only what you can afford to lose and remember history of how quick the market can drop and how long it takes to recover. Remember if the market drops by 20%, it needs a gain of 40%, just to recover. The last crash by 43% in March 2009 did not fully recover by 86% in March 2013, 5 full years, which I felt was pretty quick for someone younger than 50, but not so good for those in their late 50s and early 60s who were retiring or retired and needed their nest egg.
So if you are young leave it ride, it will crash and pop right back up unless the government does not get the inflation up to at least 2%. If you are retiring in the next 5 years and still in the market, you need to cut your losses and put it in equity, or plan on retiring 5 years later than planned.
Bill
Bill
I see your reading a page out of Harry Dent’s playbook. I hope all you people sold into yesterdays rally. Japan has been in the doldrums for 20 years now. I cannot understand investors buying into the BOJ Kool-aid to the extent that they were yesterday. All this shlock has been rolled out previously by various governments and proved to fail what on earth makes investors believe this time will be different. Its obvious investors have a long way to go to see the non transparency of the BOJ and other central bankers. What a bunch of financial junkies clutching onto this outdated overplayed bull crap as a possible fix. As a retiree Bill I am questioning your last statement that people within 5 years of retirement should exit the market and put their money in equity? What equity is out there that will make your money grow its all dead killed by central bankers and their ilk. Your savings is dead money no return. The stock market is the only game left. Roll the dice. If you roll craps go back to work. Governments are now in a box they fudged inflation numbers so low to save money and help banks screw pensioners out of COLA save interest on their mountain of debt and provide cheap money for their big business buddies and created an illusion of cheap money for the rest of us. They now must admit they fudged inflation figures to bring inflation back and guess what it never disappeared or face deflation. Governments today blatantly lie fudge rubber bouncy numbers and investors keep gobbling it up. What a disaster in the making.
Amen,truly it has been obvious for years,creative bookkeeping. Does anyone really believe things/prices are only going up 1% a year? Not really of course not unless all they buy is electronics and gas(as of late)
I AGREE WITH BILL
Bill – you say that, if the market drops by 20%, it needs a gain of 40%, just to recover. Where did you learn your math? If the market goes from 100 to 80 (a drop of 20%), it needs to go up by 20. 20 as a percentage of 80 is 25% (twenty-five percent), not 40%. So it’s not THAT terrible. However, if the market drops by 50%, it has to climb by 100% for you to recover all that you have lost. So you have to decide whether you think the market will drop by 20% or by 50%. Since far too many stocks (including first-rate stocks, like Apple) have ALREADY dropped by 30%, it is pretty improbable that they’ll drop by a further 50% (except in the course of a very short-term panic, which will very quickly correct itself as people realize how silly they were to sell).
OK Bill,I agree with every single word youve said,but youve missed out the timeing which is everything
Late to be asking, but yes. Sell all rallies.
NO way,,,, just play the trend.. what ever is moving .. move with it.. whether it be gold, cash, tech, solar, property, its a new game and market…this is not your grandfathers stock market….
happy investing.!!!!!
Don’t look here for answers. One expert says buy. Another says sell. Just remember that if you own securities you are risking your capital. If don’t risk capital you can’t lose money but you also can’t make money. Don’t risk more than you can afford to lose.
Agree with Geo. You and LE are sending contradictory messages – who’s right?
They’ve got all bases covered no matter what happens.
Good growth in India without the problems of China and its authoritarian ways
Their entire country is one big bad bureaucratic nightmare. It’s the most difficult country in the world to start a business. Their potential is enormous though. Jim
Steve Yes and if you can invent a cheap toilet to put on every street corner you will make a millions. In five years Indian workers will be clamoring for more money just like Chinese and Asian workers. Yes all the cheap labor businesses will pile in for a while and then hit the road again looking elsewhere for more cheap disposable workers to fill their greedy needs. They are the cannon and we are the fodder.
I would hope that world economic growth would occur s by encouraging and allowing the economy to ignite starting here within the USA.
We need to recover our manufacturing which has in the past provided well paying and plentiful jobs for our people.
Our people want to work which would enable them to buy things and that consumption would ignite our own economy.
Obviously it seems we need to overhaul our government by replacing those politicians who can’t or won’t allow us to move forward without controlling us or taxing us to a standstill. Maybe while we are doing that we might want to let those who have job skills and want to get ahead come to our country to get a job , buy a house and provide a future for their children.
Mike, I always like reading your articles even when I don’t agree with what you say.
Our country started to clean up our economic situation, in my opinion, long before the the rest of the globe and should be further ahead resetting our economy.
The adage ” lead, follow or get out of the way!” should be the the best reason to vote intelligently in November’s coming elections. If members of Congress want to receive a paycheck by working in the House of Representatives and the Senate as well as those aspiring to live in the White house and are not part of the solution they are definitely part of the problem and we should vote accordingly and fix that problem.
We cannot and why would we wait for China to dictate how growing our economy gets back on track.
It would help if we had a choice of someone to vote for except idiots.
Yeah, but they are all better idiots than the one we have now. Jim
Hay, Trump, Hillary & Bernie aren’t the only ones running!
Jim Chuck just gave you the answer in one sentence. Canada has a better way of doing things. Time to do a Canadian Bacon in reverse. Yes Chuck idiots is putting it mildly. The Donald avoids the debate and does a charity gig and climbs in the polls. Never sell him short. The Donald not my favorite person is the best of breed in this race full of nags. I once watched a sulky race standing besides an elderly gentleman reading a racing form. We watched the race go by and then he commented “If you got a $1000 you can buy all of them” Sadly the Hateful Eight have billions backing them but they are still a bunch of worthless nags. I have for 50 years of my life watch this mess develop and grow and fester to 20 trillion dollars. Every 4 years some wonder boy comes along and makes promises out his whazoo. After the pomp and ceremony of inauguration day its back to business as usual. The Merry Go Round never stops folks and your riding a dead horse.
Boris, exceptional artlcle, and to my fellow readers; lots of great posts. I couldn’t help but wonder (having read all of this stuff) what would happen should China call their debt, and want their money back. When things get really tough, and their money is losing value while their loans to the USA are in US dollars, they might see that situation as a means of stabilizing their economic picture. Just a thought. Not a particularly good one, but a caution/thought nonetheless.
Let’s hope China calls the debt although I doubt they have that option It would cause a spike in inflation worldwide and save us a lot of interest
Art
Yes Boris a great read. Well done.
China is aware that jobs are returning to the USA(most at lower wages). Just suppose they use their huge Treasury Holdings to threaten our country. They could : 1) demand higher interest rates or 2) sell a large amount of their holdings and take their money home. Mr. Schlossberg is correct, China is hurting and we will share their pain.
Jobs returning to the USA was the whole plan all along by big business at lower wages of course. They had to take workers to the wood shed to make their case in this case jobs to China. But before you break out the champagne be a bit of a futurist in all this. Big Business is always 2 steps ahead. In 10 to 20 years it will be all 3D printing run by robots. Big business will have to allow governments to hand out free money or no one will buy their products. This is keeping them awake at nights as they hate to share the wealth. It will be a fine balancing act. Invest in the fishing pole business. It will be a great past time. Forget rebelling the governments have beefed up police forces with the same armament that armies have. If you take to the streets they will be waiting. Rebellions hardly we are to side tracked with all the media nonsense and to overweight to put up much of a fight.
2084 anyone. I think George O was a bit early.
Every heavily armed policeman resides within their community. When taking to the streets where your children and wives are in harms way, grab theirs and put them in the front line. See how quickly they’ll disregard their orders and join your movement!
Prime example is a viral YouTube clip from Baltimore, where a mother saw her son in the melee of protesters and literally walked in, hit him with her pocket book and took him home by the ear while shouting at him through that ear!! Humorous but telling.
Don’t discount the power of family. It works in the middle east as well. But that’s another long story.
Nonsense. The handwriting is on the wall, but one has to be able to read. The USA is following the British model of losing it’s world currency status. Remember history ? The pound fell from $5 per pound to todays plus or minus $1.45. Ten years of double digit inflation followed in Britain after the loss of world currency status, along with related poor showings in GNP etc. Obama’s addition to the National Debt is more than that of all previous President’s combined. Obama congratulates himself on his fiscal prowess and forgets that a 1/2 trillion deficit is not to be countenanced by prudent central banks. He praises the decline in unemployment but ignores the vast increase in the number who have given up and simply dropped out of the work force and who no longer are included in the unemployment statistics. Be wise, invest in yuan …..
what Obama has done to the unemployment figures is a joke your able to collect unemployment for 2 yrs but your only classified as being unemployed for 6 months a great way to rewrite the statistics
Mr Bush spent the money and Mr Obama paid the bill
Classic non sequitur! Jim
ARTY,Bush may have spent some money.but come on,Obama has tripled and more the debt,I dread the final bill before he leaves
George Soros taught Britain a cruel lesson. Gold sounds good. Only down 45% from its high not like the British pound that took a 75% haircut and more could be in store with Brexit. As I glance around the globe I look at many other currencies taking a haircut. Not to worry America the barber will get around to you sooner or late. Of course currencies and gold are all being manipulated but as in golds case you cannot keep it down with paper certificates forever. Sooner or later the jig will be up.
China oh China, where are we going to find ya…. There are the future of this globe and they have already laid out their strategic plan. Let us be smart about this situation and invite them to play with us. China is long term and cunningly patient. They have assets in every corner of the world and can endure more depression than the West can.
Rubit,so China is to blame,so if china starts doing better,we will all be in the pink.The USA is responsible for its own actions,as you and I are,the USA is looking pretty dismal at everything at the moment,where does the buck stop.Yeah,lets blame our local lad,JIM.
Welcome to Boris S. & Kathy L.
1-29-16
Wondering where all this Chinese money is going besides New York & BC? This newsletter has also advised that there will be explosive growth in the stock market caused by the fact that this is the safest place to be on the planet. When are you predicting that’s going to happen? Thank you.
The greatest gains in the stock market usually happen AFTER a crash. See 2001 forward, for example
Whoops, I meant 2009 forward.
Pam you could be right and as Larry states 31,000 is in the cards. Money ebbs and flows but earnings somewhere down the line must be justified by growth and jobs not the ebb and flow of money. If it hits 31,000 on the ebb and flow of money I would be surprised. You cannot have a 31,000 point stock market in America created in this manner and have the rest of the world falling onto its keester. Chinese government money is going all over the world investments in Latin American countries and into Thailand where I live. Yes they come with a friendly face and bags of money. Look at their investments in Nicaragua who wants to build a canal China says here is bags of money go for it but if you cannot pay the money back Bob’s Your Uncle. They are also dumping billions into Africa again if they cannot pay it back well we own you. They are also dumping money into Thailand currying favor. The outcome in a global downturn could be disasterous.
We are not ahead of the game because we have not addressed the national debt in any manner (. Comment by Jim Dusick) but the fracking paid down our yearly deficit until Obama hindered it by not allowing pipelines,by infuriating saudia Arabia into a price war,by supporting the fall of regimes in middle east to destabilize them ,then helping Iran to start exporting oil to further hurt us, and the price of oil .He is doing his best to destabilize our country like Europe by bringing in not stable hardworking immigration that has been clearly checked and vetted like our immigration policy has been since the beginning of this nation. just bring in people who have no intention of assimilating or working,who are terrorists and criminals their own country does not want.As mentioned above the years of Obama were bought at a price economically and socially we will have to pay at great price. but jim is right get busy and grow our jobs and salaries .use our head and allow immigration of the right people get people working not living on welfare .we have the means if we only had leaders and people that could see through the lies and realize the only answer is each man works and keeps most of what he earns with small safty net for those who for no fault of their own can not provide for themselves .this is the way of America and our move away from that policy is what hurts our nation and return to it is the only way to heal the nation.
It has taken me a while, but the light bulb finally flickered with regards to this refugee crisis in Europe and here. The large number of young males and their behavior on New Years Eve finally made me realize we may be the victims of another Mariel Boatlift. Castro emptied Cuba of its criminals and malcontents Into Florida for us to deal with. Could the Middle East authorities be thinking the same way? They have already figured out a way to get rid of their stupid people. Convince the dummies to be suicide bombers. Jim
once a smart man said this DONT ASK WHAT YOUR COUNTRY CAN DO FOR YOU…………………………….. BUT ASK WHAT CAN YOU DO FOR YOUR COUNTRY just think if we all took that to heart…………. what we could accomplish in a very short time…. but instead nowadays the democrats are on a race to give out as many freebies as possible until they spend us into oblivion
Liberty is a system of law and economics that protects the individuals’ rights to his or her life, freedom, and property regardless of what the majority thinks about it. The “charming madmen” that espouse democracy are killing us. You can bet the winner this November will be the one who most convincingly tells the lie that if you vote for me I will give you everything you want and make someone else pay for it. Jim
So, Jim, you think Bernie will win? He is certainly the “Take and give” candidate.
J Ryan ah yes the national debt. Kind of reminds me of that movie where the guy escapes prison with a ball and chain attached to his leg. You mention Obama do you seriously think a Republican president would do things differently? You talk of destabilizing things well they would do it internally cutting off welfare to the poor no abortions or Planned Parenthood more money spent on wars and more young American casualties. Look at the George Bush fiasco do you want a repeat? When you vote the fix is in. Tweedle dum or tweedle dee.
Appreciate the comments, Boris.
“Wall Street’s soothing noises”??
WHAT soothing noises??
All I hear is a bunch of indecipherable double-talk by finance Yodas which inspires anything but confidence in where the DOW is headed this year.
Clifford
WOW
If China is so worried about their economy… Why are they spending billions on expanding and upgrading an offensive military? Those issues seem to be ignored! How could it be in America’s best interest to prop up China, when they are developing an aggressive war machine? A peaceful country needs hundreds of offensive electric attack submarines? Maybe they poured too much cement. But they have no problem channeling billions into developing a deadly war machine that will rival any Asian country and threaten world stability.
Well said, Ivano!!
China has to be the least offensive nation in the history of the planet. I can’t remember the last invasion they launched. Are there Chinese troops in any foreign country? Dumping sand on a reef in their own South China Sea is hardly an attack on a foreign nation. They have submarines because they perceive the U.S. Navy presence off their coast as a serious threat. They don’t need to start a shooting war, an economic one will do just fine. They are smart enough and patient enough to know they can have everything they desire without ever firing a shot. Jim
Aircraft carriers aren’t potentially offensive? ICBM subs, likewise? The world’s largest army? And their claim to the South China Sea certainly conflicts with the 200 mi. limits of several other nations, and goes far beyond 200 miles from any part of China. The U.S. would have nearly as good a claim to those waters. True, the Chinese are a patient people… up to a point, at least, but they are building for the future, when they might not need so much patience.
Why have Congressmen and Presidents voted to increase the Natonal Debt to the present level and pay down only the interest and nothing on Principal?I do not think they will ever
Mortgage it to pay both Interest AND principal liike we do.
They have always used their politcal “magical “words “We need to Balance the Budget”.
The President of a leading political organization when Iasked the above question wrote to me me “that is not our focus”.
Will somebody explain in economic terms what is going on if the plan is to “never to pay down the debt”.
surely the building boom in china is over for good. what about all those unused commodities that were stockpiled in anticipation of even more construction? china is now sitting on a zillion of tons of copper, iron, steel, etc., that they’ll never use. whew! what does that say for the future of commodities prices? cheap, cheap, cheap for years and years to come. eventually, china’s pain will become our gain – just like saudi oil. can you see it coming?
That’s a good question. How many commodities does china have to affect the markets? How soon will it be before they develop fracking.?
Tranquillity has two l’s.
This is a nicely written article by Boris, but playing a forex game is not my cup of tea. I remember when working in Peru in 1982 interest on CD deposits being over 100% per annum; the only problem being that devaluation and inflation were higher. Took a visa run to La Pas Bolivia; the hotel would only accept USD and would only change money at the official rate. Went out the hotel and asked around, and was told to look for someone standing on the street corner holding a paper bag. The rate the bag lady offered was what I had heard it should be; so I handed her a hundred dollar bill. She just handed me the bag of money. A friend of mine working in Bolivia several years later told me that it got so bad that on paydays their office hired a pickup truck to rush to the bank in the morning. The office counted out the money for wages and the staff then rushed to buy food for the week, until they got paid again. Seen similar in other countries and seen local currencies get strong without any logical reason that I could fathom. Over the last four months here where I live, the Vietnam Dong has strengthened against the USD by about 2%. Go figure.
One problem with all of the very good comments and suggestions is that a very large number of people in the country truly believe that the government is the only solution. Whether you vote Republican or Democrat seems to makes no difference, they both have different ways to spend more than we can afford. Romney made a very good point, unfortunately for him in a “politically incorrect way”, that 47% of the population depend too much on the government to ever vote for him and change the system. Still true today and unfortunately people like Larry Edelson and Doug Casey are probably correct, the present financial system needs to crash and burn before any real change occurs.
David in Williamsburg, Va
Government is the problem, not the solution. Who caused it to be such a problem? Your friendly neighborhood politician/liar, looking to buy your vote with promises, that’s who. I’ll give Obama this: he has delivered on some of his promises. Do we like the result?
Chuck, I agere and that’s my point, unfortunately not enough people believe it.
Sorry typo agree
Could it be that the Chinese government is actually driving investment money out of the country? After all, if Chinese investors buy up assets in other countries. and their government finds reasons to prosecute them and seize those assets, then the government ends up owning a sizeable chunk of the world, even without firing a shot. Ah, well – another weird idea shot to hell.
China may be the world’s worst form of government since it is a communistic dictatorship, however, for a capitalist country where at one time we were considered the “home of the brave and land of the free”, the USA has become a nightmare. Term limits for all politicians, cutbacks on government employees through attrition, establishing a “flat tax” program, and cutting frivolous expenditures just begin to speak of reforms. Big brother needs a serious haircut.
Home of the chickens and land of the serfs is what we are becoming. Remember, WE have let all the excesses happen that you mention, Al.
If I read my charts correctly, the markets should trend up for maybe two or three days before resuming their fall. Will they fall lower than recently, or not? If yes, they could drop more than expected, maybe signaling a big recession. It is certainly time for one. We shall see.
Wall street wisdom. Stock market has predicted 9 of the last 4 recessions.
Fear sells, even at Weiss, or particulaly at Weiss. Fear is being ramped up again. Two more new “grinning hyinas” have been brought on broad!