What will the effect of the China crash be on the US?

[william the wie]

The stock, bond and real estate crashes in China are building momentum and the POBC will eventually run out of gimmicks to keep GDP growth numbers positive. I have no way of predicting when that will happen.
Therefore trying to figure out which piece of straw will break the Camel's back or when strikes me as pointless. Instead I have a simpler question:

Will repatriation of Chinese capital to take advantage of bargains or increased capital flight to safety be the bigger flow at first?

We will see some of each and since upto 200 trillion will be in flux tidal waves and riptides will be common. I will therefore stick to my usual strategy of positive cash flow from low beta issues to pay for index straddles. That puts me in position to profit while not losing my ass.

 

[Moonglow]

The Chinese will need to

...

 

[Treeshepherd]

The stock, bond and real estate crashes in China are building momentum and the POBC will eventually run out of gimmicks to keep GDP growth numbers positive. I have no way of predicting when that will happen.
Therefore trying to figure out which piece of straw will break the Camel's back or when strikes me as pointless. Instead I have a simpler question:

Will repatriation of Chinese capital to take advantage of bargains or increased capital flight to safety be the bigger flow at first?

We will see some of each and since upto 200 trillion will be in flux tidal waves and riptides will be common. I will therefore stick to my usual strategy of positive cash flow from low beta issues to pay for index straddles. That puts me in position to profit while not losing my ass.

The piece of rice straw that breaks the panda's back will be the return of tankman, so to speak;

"Will repatriation of Chinese capital to take advantage of bargains or increased capital flight to safety be the bigger flow at first?"

I'm pretty sure the Chinese aren't allowed to invest in the US stock markets, so that's not an option. However, they can buy property here. The wealthy Chinese are doing just that. The poor don't have that option, and the median income in China is way less than Mexico.

China is a powder keg. I've been saying that for a while. The fuse is long, but it's already sparking.

 

[william the wie]

Quite true and it is one of those things everyone knows and forgets about. China has been on implosion watch since 2004 if I remember correctly publication date for "The Coming Crash in China" I forget if real estate was part of the title but Chang dates the entry into real estate fantasy land as sometime in the mid 1990s. I gave up on trying to keep up with that after the ghost cities hit double digits and plywood shelters under overpasses started to be counted as subsidized housing for the poor. There is or at least was a boatload of free news shows about that on hulu.

 

[Treeshepherd]

The main concern for stock investors was the precipitous 8.5 percentage point fall on the Shanghai market overnight, the biggest one-day decline since February 2007. It was the latest big drop in the Chinese stock market, which has slumped since early June.

Yahoo Finance

The obvious effect of China's woes is in the price of commodities. Gold, silver, platinum, copper, soybeans, wheat and coffee are all close to 52-week lows.

Every increase in oil prices sets up a new fall. And, China signed the long term natural gas deal with Russia. Lack of expected Chinese demand within the global fuel basket has had an effect on US markets-- energy is the worst performing sector in the S&P this year.

 

[CrusaderFrank]

Where's rdean, I thought China was committing billions to prevent this from happeneing

 

[william the wie]

Where's rdean, I thought China was committing billions to prevent this from happeneing

They are but they are still approaching their Minsky moment.

 

[B. Kidd]

Ho Lee Fuk!

 

[william the wie]

Well it looks like the US and especially the EU have been hit hard by the fallout from China.

 

[Treeshepherd]

EU has been hit hard by the fall of the EU.

One day the definition of 'bubble' will be reduced to a single word: China.

The US stands to gain, in the long run. It's all relative, baby.

 

[HaShev]

Huge 1 day drops are obviously hitting our markets but eventually all that money pulling out will find our good valued over sold stocks hitting new lows. This will eventually pour money into our markets especially into the last quarter.

 

[william the wie]

EU has been hit hard by the fall of the EU.

One day the definition of 'bubble' will be reduced to a single word: China.

The US stands to gain, in the long run. It's all relative, baby.

EU has been hit hard by the fall of the EU.

One day the definition of 'bubble' will be reduced to a single word: China.

The US stands to gain, in the long run. It's all relative, baby.

However in the short run we got problems

 

[william the wie]

Huge 1 day drops are obviously hitting our markets but eventually all that money pulling out will find our good valued over sold stocks hitting new lows. This will eventually pour money into our markets especially into the last quarter.

I think the influx of safe haven capital is probably larger than your implicit estimate. US X-M sucks because of the strong dollar. We are heading for a crash because eventually the dollar will run out of room to appreciate and all of that money will go home.

 

[HaShev]

Commodities generally rise when the dollar comes back down and those are the companies at new lows.
Canadien mutual funds and etfs and Brazil ones do well on rising commodities as well.

It's hard to picture some of these stocks lower, they are already crashed some with amazing dividends and at the best entry point of their reverse head and shoulder. You don't wait till the shoulder shows if you can spot them you buy at the head to mid head on the way back up. If the stock retests the lows and breaks then you guessed wrong and ditch it.

 

[Politico]

Where's rdean, I thought China was committing billions to prevent this from happeneing

I wondered that myself lol.

 

[william the wie]

Where's rdean, I thought China was committing billions to prevent this from happeneing

I wondered that myself lol.

Actually China is committing low trillions to prevent this from happening.

 

[Treeshepherd]

Actually China is committing low trillions to prevent this from happening.

China just freezes trading when things go bad. If you've invested in a suspended IPO, you can't sell. You just have to watch all your money go up in smoke.

The low trillions are in yuan (for the stabilization fund). Stock buy-backs are being encouraged.

"There has never been a single instance of China triggering a U.S. bear market," Thomas Lee of Fundstrat Global Advisors said in a note Tuesday. He pointed out that the Shanghai Composite spends 63 percent of months in a bear market since 1990 while the U.S. is in a bull market 81 percent of the time.

 

[william the wie]

Actually now it is in dollars @4 trillion and for extremely good reason. The official banks in China are with extremely few exceptions government owned, government operated and run by CCP members in all decision making slots. The only scapegoats available are loyal party members.

 

[Treeshepherd]

Over 40% of Brazil's exports go to China. Brazil is another tanking economy in the news.

The entire world is in quantitative easing mode, seemingly. Every other central bank is attempting to juice their respective economies, which makes me think it's unlikely that the dollar index is going to fall.

 

[william the wie]

Over 40% of Brazil's exports go to China. Brazil is another tanking economy in the news.

The entire world is in quantitative easing mode, seemingly. Every other central bank is attempting to juice their respective economies, which makes me think it's unlikely that the dollar index is going to fall.

Actually most of the world is having real problems with deflation and inflation adjusted populations. Aging populations, innovation, automation and the rest of the drivers such as overleveraged consumers being unable to buy or homeowners unable to sell their property to move to where the jobs all interact.