Monday Market Movement – China’s New Stimulus Falls Flat, Trade War Continues

When at first you don't succeed…

China has been attempting to boost their own small companies with promises of financial support for local businesses and Chinese investors are hoping and praying that their Government will perform another market bail-out, like the one they did in 2015 when it put $483Bn into a bullish, state-run margin trading firm to stop the bleeding.  $483Bn is 5% of China's real economy – that would be like the US putting $1 Trillion into the markets – of course it's going to have an effect but of course the effect is simply an unsustainable illusion that will fade over time and, eventually, you either do it again or end up having the same correction you put off the last time by spending hundreds of Billions of Dollars.  

Unlike the US, China doesn't bail out Capitalists at any cost.  The last time China was crashing, too many farmers had put their life savings into the market and the repercussions of a major crash would have been too painful.  Now they have all been warned and all had their chance to pull back their cash and a lot more foreign money (thanks to "reform") is now at risk in Chinese markets so the state would rather spend 10% of the GDP AFTER the crash – to buy up those companies when they are cheap.  In China, the Government plays the markets as well!  

As you can see from the chart above, a massive effort was made just a month ago to rescue the market and, since then, we've drifted along but still haven't filled the gap that occured in October that took the market down 15% and even that is just 1/2 of the overall 30% decline since January.  

We tend to think of China as "them" but THEY have people, just like us and THEY have a Government, just like us and that Government is full of good and bad, competent and incompetent people – just like ours and THEY do what they can to fix the markets and please their constituencies but, just like us, THEY have a country to run and budgets to manage and, ultimately, THEY live in a World with the rest of us and…
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