18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,617 Blog Posts

Stocks Collapse on Literally Same China FUD — LOAD ZE DIP

Good thing I don’t give a shit, otherwise I’d be inclined to take exception to this rout. This headline seems to have cut the dicks off stocks.

You’ve got to be kidding me. This is the same news for the past two years. How many times do we have to endure the trade war pump and dump? So now we’re setting up for a Mnuchin or Kudlow jawbone next week, followed up by a progress update on Trump’s fucking Twitter account. You’re all brainwashed into believing nothing can break stocks. That’s where you’re wrong.

I’m shorting more into the close.

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  1. numbersgame

    So here’e something that got me thinking: VIEs, “variable interest entities (VIEs).

    Foreign ownership of Chinese companies is illegal. Of course, Chinese companies need foreign capital, so they worked around this with VIEs. It’s kind of like this:

    American: “I want to buy 51% of your company”
    Chinese busineesman: “That is illegal. However, you can buy a piece of this foreign company based in the Cayman Islands, and this foreign company has an agreement with my company so that they get the profits from my comapny.”

    The thing about this is: VIEs are STILL illegal.

    So if you *think* you own a piece of LK’s profits – or Alibaba’s for that matter – you are sadly mistaken. How sad is TBD.

    Obviosuly , this has to be a piece of the trade talks, because China desperately wants foreign investemetn and foreigners want someplace to invest their central-bank-generated cash. So why haven’t we heard anything about this critical issue in the media?

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    • ferd

      A fine question.

      But, longer term, as the dollar suffers the impact of our behavior, the country with a personal savings rate of 37% may be better able to self-finance than the country with a 7% savings rate.

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  2. awanka

    I’m beginning to think the game is rigged, Mr. Fly.

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  3. numbersgame

    Off for the weekend, but one last thought. Politic beliefs are closer to a religion than a science, and the defintion of “facts” often depends on who is stating them. It is well-understood that Trump has taken this to a new level in the US. However, Xi has this ***same kind of effect in China,*** perhpas even more so, becuase disagreemnt can lead to imprisonemnt as opposed to a disparaging tweeted nickname.

    Given this, perhaps the US has misunderstood China’s *ability* to negotiatiate. By propping China up (particularly vs the US) through propaganda, the Chinese gov’t has made it difficult for them to give in to US demands without concessions of their own. On the other hand, the US position is to bring China in line with other open markets, so US negotiators have little to offer in the way of concessions.

    Imagine if you hired your neighbor’s son to mow your grass (at a really low price), but your neighbor kept stealing your newspaper. You get sick of it, and finally threathen to pay some other kid to mow your lawn. So the two of you meet to “negotiate”. You want the neighbor to stop stealing your newspaper; he wants to know what you’ll offer in return. See the problem?

    Now when you add in two very large populations that have been told that they are 100% in the right, that the other country is unfair, and that they will easily win the trade war, waht happens next?

    Read some articles from the Chineses perspective:

    While my original position was that the US would have a weak trade deal (the same opinio of China’s gov’t apparently), it seems as if Trumps pride plus bipartisan support on the issue will make this harder. Any weak trade deal will be attacked both by Democrats as well as Trump’s far-right base, and it seems China is incapable (due to doemstic politcs of their own) of accepting any deal where they will give more than they receive (which is waht the US is seeking given the unbalanced starting point).

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    • tradingnymph

      Xi is President for life and China plans in 5 year plus strategies. Only 19% of their export trade is with the USA, so a lot more lawns out there. Also in response to your other comments…you wrote…”China is an Exporting economy. A weaker yaun will help exporters, so if anything that will accelerate, not slow down the Chinese economy. Also, the US is a consumption economy, so a stronger dollar has a more balanced effect on its economy (it increaes purcahsing poer of consumers).

      “They get to pay off debt with cheap Yuan”
      I think that most of China’s debt is internal: SOE and local/regional gov’t debt owed to the federal governemetn. The value of the Yuan doesn’t affect this.

      Also, when it comes to the essentials: energy and food, China is a net importer while the US is a net exporter. In other words, China NEEDS trade, the US doesn’t.”…In response
      1.It may help the exporters a bit, but foreign capital will flee China and slow economy. You saw this when Fed started to raise rates awhile ago. PBoC normally steps in to defend currency…but not this time I bet.
      2. Stronger USD has a more balanced effect….LMAO. Yep, all those Buy Back Loans will truly benefit from a stronger USD. Oh and Housing is saying Yipe. Sadly this Grand Experiment the Global Central Banks have conducted can’t support a rise in rates.
      3. If you borrowed in Stronger CNY and get to pay off the loan in weaker CNY then that is good thing. But, China has a vast amount of debt including shadow that has been funded with foreign money and wants payment in USD, Euro etc and not CNY..which is going to cut the shadow market which makes China slow again and they are happy with that.
      4. Nope, China doesn’t need us. China is pairing up with Russia for Oil. They pick up cheap Iran Oil when sanctions around (which they aren’t stopping). For Cars, Planes..they are slowing their economy so a decrease need..and Europe can provide that. Agriculture..China slowing means less need for Pork. China’s greatest import…US Debt…now if they don’t keep that…then ouch for us, The USA is really not in the lead position at all. China press is already pushing boycotts on USA made products btw.

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