China Services PMI Crashes As US Lags Not Decouples

Tyler Durden's picture

After hours last night, when all but the most dedicated of market savants (or late stumblers home from a night out checking the Bloomberg one more time) are sleeping, China released its Non-manufacturing PMI data and it was a howler. The series is very cyclical but we note that the November print fell dramatically to its lowest level since the middle of 2008's global economic meltdown. Dropping below the 50 (deteriorating) line for the first time since Feb2011 and combined with the dismal manufacturing PMI print from earlier in the week, we are reminded of David Rosenberg's critical insight 'Don't confuse resilience with lags' when we hear further chatter about the US apparent miracle decoupling. It seems that this 'lag' is already impacting US firms, as we noted earlier, and with EM nations increasingly starved of credit via European bank deleveraging, it seems a game-of-chicken between the Fed and the PBOC may begin on who prints/QEs first to save the world from reality once again.



China non-manufacturing PMI is evidently extremely cyclical (the orange curves) but we note the huge drop off in the November print relative to previous years. Not only is the first November print below 50 in 3 years its only been worse than this level during the crisis meltdown of the global economy.

And from David Rosenberg's Friday Breakfast with Dave, OASIS OF PROSPERITY:

On September 4, 1998, Alan Greenspan famously said, "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress".


Everybody talks about decoupling again, this time in reverse. The US economy will somehow not feel the effects of a European recession, even though GDP growth in America is 86% correlated with the pace of activity in the continent.


Don't confuse resilience with lags.


Be that as it may, it is interesting to see practically every country in the world with manufacturing diffusion indices below 50 and the US above 50.


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GeneMarchbanks's picture

China can't save you. Sheeet China can't save itself...

TheSilverJournal's picture

China will boom when it stops sending us real goods that took real resources and real labor to make in exchange for USDs from a printing press, and stops wasting its savings by stashing USDs and US Treasuries that will soon be worthless. China stashes these pieces of paper thinking that they are savings. The problems is that China is beginning to understand that it can never spend its savings or its savings will become worthless and savings that are never able to be used are not savings at all.

A ponzi is a scam which pays early investors out of the investments of later investors. In a sense, the world’s monetary system is one giant fiat ponzi scheme with the only question being when will the ponzi end, not if it will end. The problem is growth is no longer able to keep up with the malinvestments caused by cheap money (0% rates + QE). Either cheaper money is provided in order to cover up the malinvestment (more QE, or purchasing of MBS, or printing money to purchase anything) is provided at an ever increasing rate, or the malinvestments become exposed. Allowing the malinvestments to become exposed is politically unfeasible, so cheaper money will be provided in order to keep the malinvestments hidden. In a sense, the new investor is the new printed money..once the new money stops or even slows, the ponzi fails, but keep the new coming in faster and faster and hyperinflation is the end result.

Monedas's picture

I think you're a little hard on the Chicoms.....they're new to Capitalism 101 ! We've led the whole world on a merry little fiat chase for 100 years....including ourselves ! 1913-2013 FRB Centennial Celebration Collapse !

disabledvet's picture

that "worthless debt" is worth a fortune right now. not only that but if you follow the logic of the intransigence presented here it will be worth even more.

TheSilverJournal's picture

Sure, but if China begins selling its US debt, then US debt will become worthless. So what's it really worth to China if China is never able to sell it?

Paul Bogdanich's picture

That print means nothing until we see where the top is next report.  If the top on the next report is way down then that a problem. 

CitizenPete's picture

LOL  -- does sound like it could be Schiff, doesn't it?  Some emperically based valid points nonetheless.

Seize Mars's picture

SilverJournal: Right on, man.

Right. On.

Keynes, and all the the bullshit that goes with it, has gone the way of Phlogiston and the flat earth. The only people who are still worshipping this false god, are the asshats who control the government, bankers (who actually know better but in whose interest the truth isn't) and the crony media.

Truth may take a while to emerge, but it will emerge.

I relish the collapse, where we can finally find out the actual, nonmanipulated and centrally planned price levels of everything from pencils to sovreign bonds. The only part I'm not looking forward to is the emergence of all the various Hitlers, Stalins and Maos that usually accompany fiat collapse.

Sudden Debt's picture

Relax, it's just the services PMI and not the production PMI

covert's picture

contrary to popular rumor, china will be the centerpiece of the world.


MobBarley's picture

On September 4, 1998, Alan Greenspan famously said, "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress" when we Communist anti Nationlist Anti republic treasonous Outsourcing Greedy Who? bastards have every intention of destroying this economy as part of our greater Yersatz Shitsreal agenda.


tbone654's picture

Dec 17th..  it's all done... divest now... BLACK SWAN DAY...

tbone654's picture

EU is Go, or NO Go...  reality is they must (all of EU) restructure their debt first or die...  BYE BYE Greece...  Japan to follow...

Nate H's picture

why dec 17? (i am traveling that day)

tbone654's picture

Germany must decide to bailout everyone in EU by Dec 17th, or let them all fail... Odds are for letting them all fail, as they must restructure their own debt first, or they themselves will eventually fail...

This has all been "feeding the sharks, in the hope they then eat you last"... 

I'm long markets now, but I will be short by the 17th... The last 100 S&P points up will reverse and then some in the coming weeks...  sorry... Feels like the "can" stops bouncing this month...  The 17th is the logical last day, as they will not tell the world they are NOT stepping up before then...


Note: I've been re-reading "reminiscences of a stock operator" lately...  same kinds of movements before the big crash then too...  Secondaries getting the bigger push than the blue chips before the bottom falls out...  erily similar...

TheSilverJournal's picture

The "last day" is when a large country (Italy) defaults. If Germany lets a large country default, its game over for all fiat because the banking system won't be able to handle writing off all of that debt. Germany won't allow a large country to default because Germany would then go bust and become much poorer. German bankers and politicians do not want to take the blame for Germany getting crushed and they are not ready to give up control over the printing presses, which they would lose. Plus, world will be pressuring Germany to allow Eurobonds to be printed because if Eurobonds aren't printed, all fiat goes down. Germany will allow Eurobonds. When German yields rise just a bit more, Germany will be begging for Eurobonds.

ultimate warrior's picture

Doesn't the market have to end up so bonuses can get paid out on Wall St?  I think collapse holds off until next year.

GiantVampireSquid vs OWS UFC 2012's picture

Dec 19 Greece has to rollover bonds trading at 30% of par.  Is the Troika going to bailout the hedgefunds holding this worthless paper?

johnu78's picture

The Occupy Movement is going to bring the system down come Spring, count on it!



Dr. No's picture

best wait till summer; school is out then....

jonjon831983's picture

Neither, cyanide pill please.

UP Forester's picture

Make sure it's colored red, white and blue, so you can give them to all your unenlightened friends.

They'll take it if you say it's to fight al-Qaeda....

Long-John-Silver's picture

When do we barrow money from the Chinese so we can give money to China in an effort to save them? /sarc

Matt's picture

Hey China, if you lend us another $1 Trillion, thru the miracle of fractional reserve, we will lend you $10 Trillion, ok? Heck, lend us $2 trillion more, so we can use the other $10 Trilion to bailout Europe. Inflationary? Bah, we can crush inflation in 15 minutes if we want to.

Caviar Emptor's picture

No no no... we just buy $10 Trillion worth of Xmas decorations financed through 100 year Treasury Bonds at 3%. 

jeff montanye's picture

i think long john had it with barrow (as in wheelbarrow) money.

disabledvet's picture

will someone please explain why the phuck we have this huge illegal immigration problem while at the same time we have a massive outsourcing mania? i mean i'm totally convinced we've been living in looney toon labor land for so long that it really paraphrase Hillary..."take a total collapse of your friggin' village." the one area i am still an uber bear is housing--and my sights are set on Washington DC itself. As this war winds down--prices are gonna fall.

bahaar's picture

Maybe because someone is ready to employ those illegal immigrants?

Atomizer's picture

This is how you build propaganda and/or new government mystery novel chapters.


National Security and Homeland Security Presidential Directive


The 2010 United States National Security Strategy and the Obama Doctrine of ‘Necessary Force’


Gen. Jim Jones, Former National Security Advisor


We have another crisis!!! Ahhhhhhhhhhhh, run for the hills. LOL

CitizenPete's picture

Looks like your screwed. No hope for ya (if you stay around).  Forget the red pill -- take the cyanide pill beatch. 

chump666's picture

 china already has neg real interest rates.  china prints,  the outflows will be eye bleeding.  if the FED goes insane and prints oil will hit 140+ and the US/world will explode.

Atomizer's picture

We survived 143+. Let's raise the bar to 200+ this month. It will send every thinly margined multinational corporation (who doesn't pay US taxes) into the shitter. I pray we hit $5-$7/gallon and $10 for premium gasoline. It won't effect my lifestyle.

Sequitur's picture

Atomizer, this is EXACTLY how I feel. Let gasoline hit $10 per gallon, I don't give a fuck, won't bother me in the least.

But it will wake the people up. It will shock them away from the Kardashians and into action on Fed printing and America's insane, idiotic energy "policy," which really is spending trillions on planes and bombing countries with oil.

It's at times like these I am so very disappointed in the U.S.A., fast becoming Idiocracy (if we're not already there).

RockyRacoon's picture
Chris Martenson’s presentation at the Gold & Silver Meeting in Madrid

In this video Chris Martenson, economic analyst at and author of ‘The Crash Course’, explains why he thinks that the coming 20 years are going to look completely unlike the last 20 years. In his presentation he focuses on the so-called three “Es”: Economy, Energy and Environment. He argues that at this point in time it is no longer possible to view either one of those topics separately from one another.

Since all our money is loaned onto existence, our economy has to grow exponentially. Martenson proves this point empirically by showing a 99.9% fit of the actual growth curve of the last 40 years to an exponential curve. If we wanted to continue on this path, our debt load would have to double again over the next 10 years. By continually increasing our debt relative to GDP we are making the assumption that our future will always be wealthier than our past. He believes that this assumption is flawed and that the debt loads are already unmanageable.

Martenson explains how exponential growth works and why it is so scary that our economy is based on it. In an example he illustrates how unimaginably fast things speed up towards the end of an exponential curve. He shows that an exponential chart can be found in every one of the three “E’s” for instance in GDP growth, oil production, water use or species extinction. Due to the natural limitations on resources, Martenson comes to the conclusion that we are facing a serious energy crisis.

This energy predicament is namely that the quantity of oil as well as the quality of oil are in decline. He shows that oil discoveries peaked in 1964 and oil production peaked 40 years later. Martenson also shows how our return on invested energy is rapidly declining – the “cheap and easy” oil fields have already been exploited. In 1930 the energy return for oil was 100:1 or greater. Today it is already down to 3:1 and newer technologies such as corn-based ethanol only provide a 1.5:1 return. Martenson predicts that the time in between oil shocks will get shorter and shorter and that oil prices will go much higher.

Not only oil but also other natural resources are being rapidly used up as well. At the current projected pace of use, known reserves for many metals and minerals will be gone within the next 10 to 20 years. The energy needed to get these non-renewable resources out of the ground is growing exponentially. So we live in a world that must grow, but can’t grow and is subject to depletion. The conclusion out of all this is that our money system is poorly designed and that we need to rethink how we do things as quickly as possible.

After finishing his presentation Chris Martenson answers questions regarding a rise in efficiency, alternative technologies and oil prices. He also responds to questions regarding electricity, shale gas, gold, silver, platinum, palladium, and uranium and the race for global resources.

This video was recorded on November 16 at the Gold & Silver Meeting 2011 in Madrid.

Long-John-Silver's picture

Gasoline is $9 a gallon in Briton. What have they done about it? Nothing except continue to pay it as they pump it into their vehicles.

jeff montanye's picture

well they use less than half the gasoline (or something) per capita vs. the u.s. (we're number one, we're ...,) if this is right:

trav7777's picture

nah, people will just start blaming "oil companies" and demanding that they GIVE them the gasoline they're "entitled to" at a "fair price."

Mary Wilbur's picture

Don't forget the "speculators."

jeff montanye's picture

all true but blaming and demanding will get you only so far and no farther, as many children learn to their dismay.

Long-John-Silver's picture

Are you a Robot powered by Dilithium Crystals? If not then you must eat food from farms dependent on Diesel Fuel and/or Gasoline.

Matt's picture

Or grow your own food. Or buy your food from Mennonites. That's really all we need is more Mennonites, that'll keep food prices down as we move away from gasoline. If they let me have Internet access, I'd consider it.

tbone654's picture

And then it's like Bass says...  The US will have a good seat for what happens to the EU in the next 1-3 years, and maybe will do something to avoid it in US...  I love his line Thursday... paraphrasing

If the Dems and Repubs each had a 100 foot put with a 40 foot break and 20 mph winds...  One of them will just say "Good, Good?" and they move on to the next election. No one raises taxes or cuts spending, and everything stays the same...


so having that good view of the EU may scare them into finishing the game... for all of our sake...