China’s Cocaine Rally Needs Another Line

Hong Kong's Hang Seng index plunges 9.5% as investors dump shares

The Party Gets Underway

JUNE 13, 2003 - There is increasing evidence that massive economic stimulus — monetary, courtesy of the Federal Reserve, and fiscal, thanks to the president and supply-side minded lawmakers — is taking hold. The magnitude of the policy turnaround, which caps a constructive, multi-year reflation process, should overwhelm the economic negatives — including the drag from expensive oil and poor finances at the state- and local-government levels.

Expensive oil and its impact on other energy costs remains a concern.

The current level of U.S. monetary stimulus is massive. Real interest rates have fallen 5.2 percent from December 2000 to March 2003, reaching -1.2 percent. A swing of this magnitude may be historical. Source

In 2008, the party was ending and the Central Banks got serious. The party was revitalized as China began contributing epic amounts of blow in the form of enormous debt accumulation, ghost cities and infrastructure. Substitute concrete for cocaine.

The coke-fueled bender was once again threatening to end in 2019:

“The global economy was facing the worst collapse since the second world war as coronavirus began to strike in March, well before the height of the crisis, according to the latest Brookings-FT tracking index. “The index comes as the IMF prepares to hold virtual spring meetings this week, when it will release forecasts showing the deepest contraction for the global economy since the 1930s great depression.   Source

A component of Operation Covid involved doling out absolutely gargantuan amounts of cocaine as Central Banks did whatever it took to keep the party rolling. However the party goers were beginning to feel the toxic effects of too much cocaine. No matter how much cocaine the Central Banks dumped onto the table, the spree lost steam.

The party people began to resemble a horse on its last legs. No matter how hard his master flails him, he cannot go on.

Desperate, the Central Banks went berserk and began delivering massive shipments of blow to the party house. Revelers hoovered up mountains of Charlie. The Fed alone is at this very moment feeding a trillion dollars of blow into the US party every 100 days. And last week the PBOC, in Operation Bazooka, dumped containers of blow into China’s party.

Hong Kong's Hang Seng index plunges 9.5% as investors dump shares

Hong Kong Market Plunges Most Since Lehman Bankruptcy (2008)

China stock skepticism gets louder amid world-beating run 

The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists.

Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc. are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money. Some are also concerned many stocks are already reaching overvalued levels.  

Now What?

I dunno… More Cow Bell?

Or maybe it’s time to pull the plug - and extinct us?

Important:

The Chinese Economy is Crumbling

Overcapacity and Price Wars - China’s deflationary spiral now entering a dangerous new stage