[FXP] update

Per the backlink model, I'm short China via FXP as of today.  It's a 1/3 position right now and I will add on the dips.  If my model is correct then this is a C wave rising and so it should begin to get sporty soon.  It was up 4% today.  Every indication is that Chinese growth has ground to a virtual halt.  Electricity consumption, steel consumption, you name it have all flat lined.  China is probably the most indebted nation in the world right now on a per per GDP basis.  The difficult thing about China is that everything is essentially off the books; the debt is at the province level where it is hard to track or control.  Any numbers you hear at the national level are hardly even worth reviewing because its not what you see but what you don't see that will kill you.  China has pursued growth for growth's sake for a long time now and I think that its banking system is about at its capacity to take on further debt because much of what they have already taken on will default.

Anyway, today's snapshot is below.

I personally know a fair number of Chinese people and they are all good hard working people.  They know that things are not right but they lack the economic background to be able to really understand it.  But I know that their government has been stealing from them in many ways, most notably via expansionary credit games and by holding the Yuan down during those times.  This stopped the people from receiving the buying power of their trade; instead it went into government pockets. 

Consider this: if you are in China you cannot spend dollars.  So when someone pays for the product of your labor in dollars or euros, the payment essentially goes to the government, not the worker.  The government then decides how much of that buying power trickles down to the worker via the exchange rate.  You would think that the most powerful producing nation in the world would have strong currency.  Since it does not, you have to wonder where the difference is going.  I don't wonder at all.   It's going to corrupt bureaucrats and insiders.  That's why in China there are billionaires and there is everyone else.

Living within a fake money system is guaranteed to be a pump and dump, boom and bust situation.  While this thrash is a crappy deal for the average person, it's really not all that bad over time if you get the advantage of the pump which makes it easier to survive the dump.  But during the pump phase the Chinese people have received a small fraction of the value they should have received for their labor because the corrupt Chinese government manipulated the Yuan down during the pump phase.  But now that the dump phase is neigh, they are opening up the Yuan to float more.  In other words, the leadership has already extracted much of the value of the pump phase and now it wants to socialize the pain during the dump phase.  You will know China has bottomed when the currency is in the toilet and then the powers that be reverse their decision to let the Yuan float.  They will do it in the name of the people but it is only economic ignorance by a disarmed people that allows this kind of scam to go on and on.

I think US markets are vulnerable to a Chinese market collapse.  In fact, they are intertwined.  Americans are spending less and that means Chinese have nobody to sell to.  Americans better hope that the Chinese people never wake up and realize that they are fools to sell to anyone.  If the the people had any clue, they should produce for their own consumption and not for the pursuit of worthless paper money printed up by some other nation.  If Chinese people would figure this out then they would receive the value of their labor instead of exporting it to America and Europe.

In any case, pay attention to the red arrow above.  The Chinese markets appeared to be sliding right off a cliff and that is when US markets spiked down like crazy before recovering as the pressure on Chinese markets eased.  But if my model is correct FXP will soon hit higher highs and the fear will return to American Ponzi markets when it does.

There is no such thing as decoupling in a global debt Ponzi.