Death and Destruction when it happens. People's Republic of...

Death and Destruction when it happens.

People's Republic of China pulled two rabbits in as many quarters. I suppose theoretically they have unlimited rabbits. Banking reserves cut from 20% to 19.5% enough to spur a 400 point rally in Hang Seng futures suggests the market is very short. Especially leading up to Chinese New Year where people look to cash up for spending money (read gambling and ang pows).

Interestingly enough, the rate cut late last year happened on Friday over the weekend, while today's surprise announcement on reduction of banking reserves proves one thing - China only has fiscal policy as a weapon. So theoretically, being as bearish as I am (those that know/remember me will testify), don't discount China supporting the world by cutting rates to near zero and manipulating fiscal policy to an almighty inflationary bubble.

If you're short, like me, draw a line in the sand. My line is about to be breached (again). The Chinese are mad. Nothing will stop them from saving face, even if it means a loaf of bread will cost a bar of gold. And what everyone forgets, is they have a reset button. It's called Communism. With one directive from up top, the whole country could shut off from the world and spend the next 50 years rebuilding its reserves by internal production and consumption.

Martis, your conviction is admirable. The market is overheated and when it turns it's gonna be a disaster. But with Central Banks pulling out their big guns - you cannot fight increased liquidity with no where to turn to.