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The Lockstep Newsletter (http://lockstep-investing.blogspot.com/) is written to speculate on macroeconomic trends in the stock market. The newsletter seeks to recommend positions with a 12-18 month time horizon for returns. Investors should always do their own research before investing in any... More
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  • Stimulus Watch: China went overboard, do the Math  0 comments
    Sep 16, 2009 12:10 AM | about stocks: FXI, FXP, FSLR, CSUN, SDS, SPY, ZNH, BIDU, SHA, CYUNF.PK, AIG, HNP, PTR, CAAS, CABL, CAGC, HOGS, KONG, CHEUY, CHU, CHID.OB, ALBCF.PK, SGZH.OB, SHI, SHNZY.PK, SHG, SINA
    Now that the world economic situation has turned up many are looking for a sustainable environment to allocate investment. Yet is it really a meaningful recovery or just a meaningful temporary stimulus?


    The total GDP of China $4.3T USD and the amount dispersed through loose credit policies through the first seven months of this year amounted to over $1T USD. This is equivalent to 25% of GDP lent to domestically to increase consumption.


    In comparison the US GDP is close to $14T USD and the stimulus program directly related to the federal budget amounted to $1T USD (Stimulus package + Cars for Clunkers + Chrysler Bailout + GM Bailout + TARP + AIG Bailout). This is a total of only 8% of GDP.

    IMHO it is obvious that China has been too loose with credit in fear of collapse. There are already signs of liquidity causing bubbles in commodities and property values.  Considering the size of the error, it will only be a matter of time before this causes problems in their financial system.

    The author is not yet shorting China, but defintely not long.
    Stocks: FXI, FXP, FSLR, CSUN, SDS, SPY, ZNH, BIDU, SHA, CYUNF.PK, AIG, HNP, PTR, CAAS, CABL, CAGC, HOGS, KONG, CHEUY, CHU, CHID.OB, ALBCF.PK, SGZH.OB, SHI, SHNZY.PK, SHG, SINA
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