Joe “Lil Weezy” Weisenthal hit me up this morning for crowd-sourced post on what might be the most worrisome thing for markets in the near future. I said China at the beginning of this year and I still think that’s the biggest unknown. Here’s what I told Business Insider:
Recent signals out of Europe confirm what world-wise people have expected all along – the aristocratic nexus of government officials, wealthy landholding “rentiers” and other bankers and credit market participants would find a way to preserve the status quo as best they could. In this case, they will do so through a combination of leniency, debt restructurings and printing. This became obvious to all over the last three months.
China is a very different animal, a lie wrapped in a deception cloaked in a propaganda program dragged by an idle cement mixer. There is no roadmap, there is no precedence and there are no rules. Every ongoing datapoint has the government’s fingerprints all over it before we get to see it. Economic targets issued by Beijing are treated as though they are actually orders by the millions of government officials in charge carrying them out. The central planners are well aware that a majority of the time China has lost control of her people historically, it has been as a result of food cost inflation – and so they remain optimistic they can stoke internal consumer appetites without overstimulating and driving inflation higher.
Provincial governments, on the other hand, have been funded almost entirely with the taxes from land and real estate development – and so they yearn for a return to building despite the fact that there simply isn’t any demand yet. It would be too easy to expect that simple resumption of growth-oriented policies and stimulus will turn things around so quickly – instead, it is more likely that 7.5% GDP becomes a best-case scenario for the coming year. This will not have a salutary effect on the developed markets and corporations that are counting on a fast-growing China for the years ahead.
There’s more at the original post from some other folks like David Kotok, Doug Kass etc…