About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Tuesday, October 21, 2014

Staying Away From China Now

I traded China stocks aggressively this year and particularly over the June - Sep. period. The
case for China was a course reversal on monetary policy back to easing over the past year or
so. Now China is tightening up on the broad measure of monetary easing and instead is using
targeted liquidity injections into its major banks. I have argued this year that China's profligacy
on monetary policy in the new century and particularly since 2009 - 2010 would eventually
necessitate a regimen of monetary stop / go to try manage growth plus control a dramatic
proliferation of real estate debt that is taxing the country's internal cash flow capabilities.
A vast shadow banking system has sprung up featuring the marketing of credit instruments
backed ultimately by real estate and managed by property trusts and companies which are
at debt servicing risk as property prices fall and land sales slow.

the recent tightening in growth of broad liquidity measures has prompted me to take to the
sidelines where it may well be appropriate to stay until there is clarification on policy and
this irrespective of the targeted liquidity injections.

Here is the chart for the Shanghai. $SSEC It may still be proper to argue that the Shanghai
deserves to trade at 2400 - 2500 as I have for several  years, but since it nearly reached that
area recently while at the same the PBOC was shifting policy gears, I took what I could get.

the post on June 3, 2014 started the idea and is attached. Big Red Dragon....


Rich said...

A long read and source that may be of interest-


Unknown said...

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