Yesterday supposedly the U.S. start market bounced on the news the China economy was getting a stimulus.
But is it a hollow hurrah?
Buried in the WSJ is a blurb mentioning investors fears of insolvencies in China and how due to Chinese bankruptcy laws, they will not be able to recover a thin dime.
Here is what Roubini had to say on the Chinese stimulus:
Chinese fiscal stimulus will also provide much less bang for the headline buck ($480 billion). For one thing, you have an economy radically dependent on trade: a trade surplus of 12% of GDP, exports above 40% of GDP, and most investment (that is almost 50% of GDP) going to the production of more capacity/machinery to produce more exportable goods. The rest of investment is in residential construction (now falling sharply following the bursting of the Chinese housing bubble) and infrastructure investment (the only component of investment that is rising).
Roubini goes further describing the dramatic drop in global trade, with other Asian nations experiencing 40% drops, but notes China's exports have not dropped.....yet. What has happened with China is a the dramatic slide in imports, which are the raw materials China uses in it's manufacturing base.
Jim Rogers immediately responded to the rally China cannot pull the world out of a hole.
So one must wonder where China is getting this 8% growth with their Stimulus now being reported?