About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Sunday, March 22, 2015

China -- Beware The Shanghai

I posted bullish on China on Jun. 3, 2014. There were easy, low risk trades. I even raised my
fair value level on the Shanghai for 2015 to 2750 subsequently. The market is now parabolic
and we are witnessing the same sort of folly we saw over 2006 - 07 and in 2009. Shanghai

China has the PBOC abandoning its monetary discipline again to grow the money supply
vigorously in view of continuing tepid economic performance. Because the Xi government is
also trying to implement reforms, it remains unclear how unabashedly aggressive the central
bank will continue to be in wielding policy. China Money M-2

The Shanghai market is now hugely overbought on the indicators and is trading a whopping
36% above its 40 wk. m/a. Whatever upside is left on the current parabolic run higher, figure
there is a 1,000 points of downside if Xi and his guys put the leash on the PBOC at some
point out ahead.

For those who want to stay long China equities, it is essential to watch central bank monetary
operations from week to week. The S&P China Spyder GXC is in the bottom panel of the
Shanghai chart. It is a version of an index fund and does not exhibit the craziness of the SSEC.

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