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Dramatic Stock Market Selloff

EU in Recession, US Entering Recession and China is Lying About Its Growth

Economics / Recession 2012 Jul 12, 2012 - 06:11 AM GMT

By: Graham_Summers

Economics

Best Financial Markets Analysis ArticleThe emerging markets, especially China, are showing signs of a major slowdown. Indeed, recent revelations have made it clear that China’s slowdown is in fact much worse than expected:


Chinese Data Mask Depth of Slowdown, Executives Say

Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.

Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.

Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.

The executives and economists roughly estimated that the effect of the inaccurate statistics was to falsely inflate a variety of economic indicators by 1 or 2 percentage points. That may be enough to make very bad economic news look merely bad. The executives and economists requested anonymity for fear of jeopardizing their relationship with the Chinese authorities, on whom they depend for data and business deals.

http://www.nytimes.com/2012/06/2...

 For those of us who have been skeptical of the China “miracle,” these revelations are nothing new. After all, China’s infrastructure projects include ghost towns…

http://www.time.com/time/photogallery/0,29307,1975397,00.html

http://www.youtube.com/watch?v=rPILhiTJv7E

…as well as blowing up buildings just to build new ones in order to record “growth”

As one of the most architectural productive country, China aggregates 2 billion m2 of new building area every year, consuming about 40% of the world’s concrete and steel. However, on the flip side of the new building fever, there lie the rubbles and remains of other “older” buildings: people tear down four-star hotels to build five-star ones and bulldoze newly developed construction sites before they are even finished. Lots of young strong buildings are down, fulfilling their unnatural destiny in the roaring noise of blasting. (Source from ifeng.com and people.com.cn)

http://www.chinahush.com/2010/09/24/china’s-bizarre-phenomena-buildings-die-unnaturally/

Some analysis I’ve read puts China’s actual Debt to GDP north of 200% (the dodgy debt is hidden in State Owned Entities and remains off the “official” books.

The problem is… by now everyone knows that China’s data is “suspect” but no one seems to know just how suspect it is. And given that Europe is in a recession (confirmed) while the US economy is entering a recession again (not “officially” confirmed yet, but it is) in its weakest state in the post-WWII era, much of the world economic growth story is tied to China.

So if China’s growth is slowing and potentially even recessionary… where is the global growth engine going to come from?

The easy answer… nowhere.

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

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