We do live in a bizarre investing climate. China is slowing. The establishment spinners thought (or at least said) that today’s Chinese economic numbers would improve over last quarter. They did not. But interestingly the markets are reasonably happy.
Because the markets know that a nice injection of cheap money is on the way from China’s central bank if things continue to get bad. Everyone will ride the high into the end of this year until right after bonus season.
The markets no longer reflect fundamental growth in the economies of the world, at least not nearly as much as they once did. The game now is when will central banks move in and juice the system? It looks like the Chinese will probably move in sometime this fall, maybe even this summer.
For many the thought of China slowing is just not fathomable. China is the economic frontier. 1.3 billion consumers and factory workers humming along. How could the Chinese economy do anything but expand?
And according to official numbers China is still expanding, though at half the rate it was recently.
I seriously question these numbers however. The economic data coming from the United States are highly suspect. My bet is that the validity of the economic figures coming from Beijing are far less accurate than even the heavily massaged numbers which come from Washington and New York.
The market senses this too. But one thing Mr. Market feels like he can count on is that the politicians will administer another infusion. That is a reasonable bet. So he places some chips.
How long can the central banks keep this up? I don’t know. But my guess, and it is a guess-perhaps a hunch, is that the main indicator over the long term of a big time (the big) move down will be the degree to which these central bank infusions get closer to one another. Once we get to the point where it’s just constant injection. Then things get really weird.
But we’re not there yet.