In a phenomenal demonstration of frankness and true economic assessment, the head of the China Investment Council, Lou Jiwei, who controls China's $298 billion sovereign wealth fund, admits the ponzi nature of today's markets:
Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose.
Indeed, they can't lose thanks to the criminal silence on behalf of Mr. Jiwei's US financial counterparties. It doesn't get any simpler than that folks. Keep in mind Madoff was thrown in jail for a few hundred years for much less: what's $55 billion when you are dealing with a $20 trillion+ global equity market Ponzi scheme. And yet both China and the US continue their struggle to perpetuate a Ponzi, with the full implicit backing of all financial, regulatory and legal authorities. The system is now officially broken, even ignoring the conspiratorial ramblings of fringe bloggers.
And as for who, aside from TradeBot and HAL9000 are speculating in equity markets, look no further than China, which is dead set on exporting its tulip mania to US stock markets:
Asked whether CIC would be a keen buyer in the United States, Lou said CIC can buy anywhere in the world, but it cannot avoid buying U.S. assets because the American economy and capital markets are so large.
Lou said CIC was building a broad investment portfolio that includes products designed to generate both alpha and beta; to hedge against both inflation and deflation; and to provide guaranteed returns in the event of a new crisis.
He said the risk of a decline in the dollar risks was more of a national issue for China than for CIC because its capital is in dollars.
So, dear investors, now you know that you are officially playing in the world greatest Ponzi scheme. One wonders at what point the US authorities will have the guts to at least admit what China is now openly saying is one big pyramid scheme. And as for the Fed's prudent approach to fighting bubbles - well, that is now completely discredited, as the only goal for the US Federal Reserve is to make sure that Wall Street's "VIP club" manages to cash out before all the stupid money and other retail investors, presumably before all hell breaks loose, and the latest bubble pops once more. Good luck to all.
h/t Michael Pettis and Dave