Four Big 'Troubles' In Little China

Tyler Durden's picture

While not quite as dramatic as Kim Cattrall in a cheongsam, the recent group-think of 'heads bulls win, tails bears lose" on the back of seemingly ever-rising strike prices on central bankers implied-puts is becoming crescendo-like. Nowhere is this more evident in China currently, as the world views every inflation, growth, and lending print as either positive because of more stimulation or positive because of global growth. Of course all of this ignores the 'trap' that is/has already sprung in Japan (ZIRP, deflation, and zombification), US (ZIRP, addiction, and energy prices), and Europe (print, subordinate, and alienate foreign bond purchasers) and the care with which even insane printers must tread for fear of upsetting the world economy. Tonight we hear from China's Premier Wen that, via Bloomberg, China seeks to establish social democracy and much to Chuck Schumer's chagrin we pre-suppose, that the Yuan is close to equilibrium levels. Furthermore the veiled threat that China-US cooperation is better than confrontation, which brings us to four charts we found interesting in their potential to upset the euphoria of a global race-to-the-bottom which apparently makes US stocks invincible.

1. The USD just experienced its 3rd largest 10-day Appreciation against the CNY ever and has broken above the 100DMA for the first time since SEP10. How's that going to help US trade deficits and our newly found export growth (especially with that freshly created consuming Chinese public now exporting their wage growth).



2. The magnitude of Chinese Central Planning USD Selling to offset the market's incessant CNY Selling has been dramatic from the lows of the US equity market in SEP/OCT but has been negligible since 2012 began.

This chart (based on our post here inspired by work from China Economics Seminar) attempts to distinguish between intraday and interday changes in the USDCNY exchange rate and implicitly those controlled and driven by the PBOC's fixing efforts (Interday) and the market's trading view (intraday). What is clear is that the 'market' is relatively 'flat' now (the red line is near 0 from Jan06 to now) and that almost the entire move by the CNY has now been handled by the PBOC.

The stability of that relationship (note the green ovals of massive intervention are not present) over the last few months is perhaps why Wen is so positive that we are near equilibrium? What's interesting is the timing of these massive USD selling episodes (Q4 2008/Q1 2009) and Q3 2011 to Q1 2012 are the stand outs) just happen to coincide with huge liquidity-fueled rushes in US equities.

3. Despite the largest stimulus and growth efforts, the Chinese equity market remains dramatically poorly valued seemingly reflecting considerably less confidence in the global growth story than the US and Japan appear to be.

Chart: Bloomberg's Chart Of The Day


4. The Chinese sovereign bond curve continues to flatten, diverging bearishly from the Chinese equity market's recent performance.

As we discussed here, this suggests the bond market is much more concerned about the potential for a hard landing than equities appear to be.


In summary, Wen's comments aside, we have the USD appreciating at record speeds against the world's most cash rich and consumer-growthy nation, the Chinese Central Bank potentially done intervening to juice the USD and implicitly the USD-based asset markets, a dramatically under-valued Chinese equity market suggesting significantly more hard-landing concern that other major markets, and finally the Chinese sovereign bond market flashing harder-landing signals than the recent equity strength would have us believe.

Trade accordingly.


Charts: Bloomberg

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Vic Vinegar's picture

a) I would not fight Ganhdi.  He was a good dude, despite what some of the most paranoid here may like to write.

b) your comment = the last comment I saw on

The question is: are you buying physical or not?  'Cuz if the answer is "no", then let's go back to riffing on celebrities and posting Selena Gomez Videos.

Carry on

Vic Vinegar's picture


Did you see that JPM is much > than silver and increased its dividend?  And that Amazing Race on CBS is actually a pretty good show?

I don't ask this to troll - I only ask to wonder - what are you doing to change things?

Seems like buying physical is the only option.  Why get angry when you should be coming up with solutions?

Of course, you could always toss up a junk or a "witty" comment on ZH.  LOL

AbruptlyKawaii's picture

haha godam u bastards zerohege lmao "real genius"

spiral_eyes's picture

These aren't really signs of a coming hard landing. These are signs that China is less of a bubble right now than the various other markets, particularly the S&P Hopium Index, and above all else the UST.

A property crash in China will just lead to faster decoupling, and them using their FX reserves to develop domestic consumption, instead of funding US consumption.

Peter Schiff is right.


Vic Vinegar's picture

Peter Schiff is wrong.

To be right would have meant: a) realizing his candidacy for the US Senate was a joke and b) he would have tapped baby_BLYTHE's ass.

He failed at both.  Fuk that guy.

HD's picture

Even when I agree with Schiff - I just want to punch him in the face. Simply an obnoxious man. He reminds me of those tiny little dogs that are forever barking.

Burnbright's picture

I must say if that is the real baby_blythe picture it is totally tapable. Sorry young blythe, just a bit drunk.


I would however disagree with your assesment, the only failing Peter Schiff made was that Chinese politicians are out to help their people any more than US politicians are. The individuals working in the chinese government want to keep this shit proped up as much as any cleptocrat in the US.

Vic Vinegar's picture

I must say if that is the real baby_blythe picture it is totally tapable.

Greenie for that!  But I digress.

Perhaps this is my cross but if anything means anything on this site then we are working towards a common goal (i.e., buying physical).  All the other fuking comments are a pathetic joke.

Burnbright's picture

I really do think Peter's assesment is spot on if the Chinese officals were acting in the interest of their people. But they aren't, so oh well. 

And what is with the negative attitude? Comments are more than welcome, I have learned a lot from random comments of people on this site. 

Vic Vinegar's picture

Buddy I'm trying to keep it positive.  I'm a baby_BLYTHE pussy hair away from going negative.

One more time

Perhaps this is my cross but if anything means anything on this site then we are working towards a common goal (i.e., buying physical).  All the other fuking comments are a pathetic joke.

Vic Vinegar's picture

Thanks for the red, junker.  Here's to ending on a high note!

Vlad Tepid's picture

I get that you don't like a lot of people here but seriously, dude, what's up with all the Lohan and Selena Gomez-o-Rama you keep spraying us with?  Are you into them or something?  Just come out and say it.

Crab Cake's picture

Hmmmm..... You are aware that China was the original creator of the virtual or fiat currency system and all of its accompanying shenanigans like property bubbles right? Also I presume you know that China has a long history with property bubbles ending in revolution and dynasty change.... right? Of course you do. Decouple? Sure, into their own private hellhole of self repeating history. Never fight a land war in Asia... Hard not to do when your country is there and its a civil war. Ever heard of the Warring States period? Umkay then. Let us not kid ourselves, the most likely scenario involves nukes getting lobbed before this whole imbalance rights itself. Buttons get pressed.

spiral_eyes's picture

China's opposition is on a level with Occupy Wall Street. I think there is more chance of an American spring than there is a Chinese one.

Vic Vinegar's picture

To ask Jeff the Vomit Guy's rhetorical question:

am I the crazy one?

Today you either:

a) bought physical


b) came up with a witty comment on the interwebs.  Or another meaningless comment that none of us enjoyed, as is the case with you.

If you chose b) you fuked up.  End of discussion.

spiral_eyes's picture

Dude those aren't metals you're stacking. Those are Lindsay Lohan CDs.

Thomas Anderson's picture

Every year the headlines and analyst predict a 'hard landing' for China's economy, or the property bubble bursting.  Not going to happen in the foreseeable future, working in Shanghai and the growth, opportunity, and enthusiasm among foreign and chinese alike is euphoric.  Sure, I can see a Japanese style slump for China... in a decade or two.  In the near term, China is still the miracle growth story for the next few years.  The centralized policies will catch up one day if reforms aren't taken in the next few years, but we're talking about the effects being felt a decade from now for China.

It was not me's picture

I just shorted Japanese yen on my Armada Markets trading account. Gonna buy a new Ferrari with the profit? Boooyaaah!!!

Newsboy's picture


Oh, wait, you need global markets.

OK, get ready to reinvent yourself, yet again...

qqqqtrader's picture

US markets aren't invincible?

either is the housing market then...

Real Home Price Index

jonjon831983's picture

No probs Ford is in on it as well.  Putting out debt priced in CNY could be a good thing for Ford if CNY stays lower/flat?


Ford to Issue First Dim Sum Bond

Yen Cross's picture

 Tyler , don't even think about capitulating! This ponzi fiasco has just about finished the " Royal Reach Around"!

 Commodities are flat other than OIL, and the currencies are in full chop mode! I have faith in all you Durdens!

Crab Cake's picture

..... for fear of upsetting the global economy.

What a lark! So sorry the sand is already in the gearbox, and that only ends one way. Now this says nothing for the ptb's plans for once the gear box fails, inevitably. It is my firmly held belief that these criminals are in way over their head, and for that they will probably lose them. For better or worse collapse and chaos on a scale you can only find in history books is headed this way, in no more than a decade or two, but it could be as soon as tomorrow. If you still want to live in a Constitutional Republic, the time to reclaim it is now while there is still a semblance of order. To not act now risks moving in a time when only might makes right. REVOLUTION NOW!

Azwethinkweiz's picture

Now THIS is #linsanity

ACP's picture

Hey what about Kurt Russel??

Is he like the old economic indicator that everyone forgot about but eventually returns in a big way?

UP Forester's picture

Damn.  I was expecting the guy with a big bamboo hat shooting lightning bolts, a sword guy, a guy with a couple pigstickers, and an old dude with electric eyes that can disappear....

Yen Cross's picture

And Kurt Russell driving a tanker full of Crude, to save the Night!

BlackholeDivestment's picture 

                ...may the wings of Liberty never lose a feather. 

chump666's picture

I love it Asia/China/Europe sinks and America floats on.  A debtor nation that is swimming in debt and it's paymasters are in trouble, big trouble.

Marketwatch this ones for you.  You got quarter melt-up, calling a full yr bull market is pure insanity you f*cking ass-wipes.  See your charts when China hit a trade deficit? Huh?  Wall street is going for broke again.  Yeah like 2008 but x1000 on the shock meter.  

Ah sh*t time for tequila shots.  Right now.

UP Forester's picture

Too many Big Macs and Freedom Fries, of course the turd is going to float.

Vic Vinegar's picture

Sorry, soul brother.  Your comments have always = the point of uselessness.

Remind me again why what you have to say is > than what a commenter has to say?

Vic Vinegar's picture

Just in case you need to do some bad UP weed to brainstorm on this question:

Vic Vinegar's picture

How about I green myself in: a) the name of the Yoopers and b) in the name of buying physical.

I made good money today on JPM, fading the commenters here.  

Yet if you would just buy physical, you might change things.

Somehow I doubt that's going to happen and I'm going to keep on enjoying Jamie Dimon's scepter*.

* - taken from Bloomberg today.  It's rather homo-erotic yet still true until your actions > your comments.

Alpha Monkey's picture

Oh my god, you mean 2,008,000!?!?

Assetman's picture

So... when is it again we are going to see liquidity exit the US market?

Put another way, who in the world is going to be the next (indirect) incremental buyer of USD denominated assets?

C'mon, now... it's a really big world.

Perhaps the Fed will start buying yen, since I'm sure doe-larrs are so scarce there.

Ponzi is as Ponzi does.


chump666's picture

US (stocks) may  decouple some more, but I doubt it.  What happened with the mad USD buying by Asia/China is very similar to the USD bids before the market liquidated last yr (copper/ commodities/equities collapsed).  Everyone blamed Greece and the S&P (US) downgrade.  But it's all China.  They freaked out again on the CNY fix/bond spread.  To think that the DOW/S&P trades off Apple and JPM/FED/Obama credit boom is frightening. 

Something big is about to kick in.

Assetman's picture

Maybe I'm getting my years (and market liquidations) mixed up... but I thought that the US markets rallied last year on USD weakness, not appreciation.  Not necessarily against the yuan, but against the developed country currencies.

I don't even remember when QE2 started/ended.

I need a drink.


chump666's picture

me too.

We had USD buying prior to the liquidation (aug 2011 sell off), outta Asia, that too me is a risk aversion sign.  When the sell off did come, it was copper that was slaughtered amongst other indust commodities. So Greece had nothing to do with it.  When the liquidation trade hit took out everything cept USTs. 

But i am watching Asian moves, they buy up big on USD's again means something is cooking over there, namley inflation/slowdown/stagflation/problems.

What is mixed up now is oil bid, USD bid, EUR selling and now CNY selling.  So indust commoditoes will sell on Europe open.  What that does to equities?  Who knows.  Should sell.  JPM and Apple holding the market up doesn't feel me with much confidence.


TradingJoe's picture

Keen observation chump, markets poped yesterday on JPM fumes, in tandem with the USD...never a good sign! PHYZZ is about to get a lot cheaper!

disabledvet's picture

"Nothing succeeds like excess." It's been said "only the good die young" but from where i'm sitting and from every angle Ben Bernanke is simply walking on water.

MsCreant's picture

Walking on water don't make you a miracle man.

oldman's picture


Just being a man makes one a 'miracle man' these days.

How is it for a woman?

Thanks     om

Vic Vinegar's picture

I've rubbed my face in so many BPA-laden receipts I want to suck you off right now.

How's that for a witty response?  Means nothing, no?

Awakened Sheeple's picture

I've been trying to figure something in my head, and maybe you can help me out, yeah? When a person is insane, as you clearly are, do you know that you're insane? Maybe you're just sitting around, reading Guns and Ammo, masturbating in your own feces. Do you just stop and go, "Wow! It is amazing how fucking crazy I really am!"? Yeah, do you guys do that?

LFMayor's picture

The real lunatics of my fringe read shotgun news.  Guns and ammo is like mainstream media.