The Chinese economy is collapsing.
That, of course (in this insane QE World) is being taken as good news by equity traders who anticipate another wave of free money to come gushing out of Beijing ON TOP OF the $194Bn that was announced on Monday. That's right, China's economy is so big that they need $194Bn PER WEEK to keep it afloat. How long do you really think they are going to be able to keep that up?
We're short on China with some FXI puts, but not too many yet as we don't know WHEN this madness will end – only that it will end and that it will end very badly when it does. China's PMI is once again contracting at an accelerating rate DESPITE all the stimulus but last year Chinese market rallied while the economy was clearly contracting as well – popping FXI from 32 in March to 42 in September (up 35%) before collapsing back to 36 in October.
The Sept/Oct drop happened when Manufacturing numbers were improving, which indicates that the Chinese market, like Japan's and, to some extent, the US and Europe, have nothing to do with how well the economy is doing and everything to do with how much free money the Central Banksters will be able to transfer to their Top 1% buddies.
The reason the markets don't seem to make sense to you is because you are not in the top 0.01%, where all the free money is going. From their perspective, they don't give a crap about the economy or the companies they own and invest in, they only care about how much money they can funnel out of the Government, through the banks, that can end up in their pockets.
How else do you explain the madness of CAT, who haven't had good sales numbers since the beginning of 2013 (another indication of the World-wide slump) yet have kept their stock net flat over that time period? The stock even surged to $108 (up 30%) last year before coming back to the $80s but even the $80s seem high based on the clear contraction in sales, don't they?
Well, it only seems wrong to poor people, who fail to understand how the wealthy shareholders of CAT benefit from maintaining a $27Bn debt load while paying out $1.6Bn in dividends and buying back $4Bn of their own stock in 2014 alone. Meanwhile, CapEx is down 66% from 2013 because this company, like most American companies, are not planning for the Future – they are only enriching themselves in the present – and sticking the US taxpayers (not them!) with the bill.
This is what is called "Financial Engineering" and it's being practiced by most of the S&P and it's being practiced in China and Japan and Europe because the Recession didn't end and it's not getting better and the top 0.01% know that so they are getting their Bankster Buddies and their Paid Politicians to put their host countries deeply into debt while they transfer as much wealth as they can, as quickly as they can, to themselves.
Since the crash in 2009, World Governments have taken on roughly $40Tn in debts and the top 1% have gotten $41Tn richer while the bottom 99% have barely held flat. Maybe you think flat is OK but it won't be when you get the bill from your Government (like the Greeks are) asking you to pay back the $40Tn you borrowed to bail out your Betters.
And where will your Betters be when it's time to pay the bill? Well, like the Greek Billionaires who fled before it all hit the fan – they will be off in tax havens, sticking you with the bill or, where possible, they will be exempting themselves from "excessive taxes" in the countries they control. Why else do you think the Koch Brothers are investing $1Bn in the 2016 election? They want their tax breaks. For guys who make $10Bn a year, knocking their taxes down just 10% over an 8-year presidency is worth $8Bn to them – that's a good return on their investment!
Meanwhile, we see clear signs that the Top 1% have been pulling their cash out of the markets (why do you think bond prices are so ridiculously low?) and we have pulled our cash out of our Member Portfolios, which are up a ridiculous 60%+ in 16 months as we, too, benefit from the Fed's wealth transfer program (thank you poor people).
At the moment, we're positioned short and expecting a correction. As noted yesterday, we're short /ES (S&P Futures) at 2,100 and /TF (Russell Futures) at 1,260 with very tight stops above. This morning, the Dollar was smacked down to 98 (down 0.6%) to give the impression that the Futures were stronger than they actually are (as they re-price with the Dollar) and we took quick advantage of that in our Member Chat Room.
