Chinese Fire Drill

Asian markets were walloped overnight and are starting to look more and more like the culprit for recent weakness in US equities. China GDP Growth rate expectations are being slashed by The Street while the Chinese equity market continues its slow-motion crash.

Some important reads on the topic:

Big investment banks rush to cut China growth forecasts  (MarketWatch)

China Bond Risk Exceeds Ireland as Defaults Unavoidable (Bloomberg)

China Is Prepared for Rough Economy Ahead, Li Says (BusinessWeek)

China is shaking, sending ripples from Perth to Peru (George Magnus)

China’s Big Four Banks See $70 Billion Vanish From Stocks (Bloomberg)

Today on television you will hear many imbeciles say that China doesn’t matter because S&P 500 revenues are only 14% from emerging markets or weakening Chinese growth is “already priced in”. They have no idea what they’re talking about. We don’t know what’s priced in after PE multiples have expanded 25% over the course of a year. We also have absolutely no idea what the PBOC’s policy response will be, no one does.

There’s plenty of room between dismissiveness and panic. No need to be at either of those polarities right now.

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