Still pitchdark - forget about China coming to the rescue.

* It must come as no surprise that I dont expect the Baltic bank story to end well.

Ive been nagging about this for too long now. The Swedish banks are THE Centralbank in the Baltics. Unfortunately it would seem they might shortly be incapacitated to provide more funds. Since no Government and other organisations in their right state of mind would lend capital to these countries (the market certainly would´t), "they" would then have no other choice than to devalue.



*The premier Wen yesterday spoke about Chinese growth next year of 8% and that China would be boosting the economy via fiscal injections.

For a country still leaning on central planning command style, I have a hard time believing they will be able to navigate through these rough waters in a better way than a fully fledged democratic market economy. Admittedly, the Chinese PMI data looks very promising and seems about to turn higher. But what is the validity of this? How much is it really worth?

Purchasing managers in China are more or less ordered as to what their expectations for the future should be. GDP numbers etc are more often than not bang on in line with expectations. In a world where currently hardly any number comes in as expected, how come that happens in the case of China? I am very wary of the real economic situation there and will definitely NOT pin my hopes for a world recovery on it. The western world will have to sort this out themselves. China might actually turn out to be a HUGE drag for the worldeconomy as it is forced to downsize its giant production capacity suit.

For now, it seems to me the Equity market is very much driven by expectations of upcoming Chinese stimulus packages to save the world. It seems the US stimulus packages are not expected to get much traction anytime soon. Geithner is fast moving into the domestic freezer and Obama seems to have lost his ways with Washington DC and Capitol Hill already, which is concerning. risk is that Geithner continues full throttle down the "protectionist -pressuring - China - to strengthen -their currency track" that would be a disastrous mistake. In line with opening pandoras box.

Since I am not a believer of the "China sorting out the world version", I will second guess the equity market on the subject. There will be some stimulus measures coming from China, and the equity market wants to believe it will work. From that angle, I can see a bearmarket rally coming. To be monitored.


* Chinese stimulus measures - handle with care

For a country designed to produce everything to the world it might sound quite difficult, investing in more production capacity. "When in trouble,double?" - I think NOT.

Chinese authorities had better be very careful with any coming stimulus measures. Investing further production capacity in order to keep unemployment down could be a very risky proposition. The global economy might not even turn next year, meaning any investments now will make for an even bigger collapse later on.

With negative real interest rates the obvious risk is that stimulus money will find its way into the Shanghai stockmarket instead, creating yet another bubble. Nah, I am issuing a warning sign on China, it might very well be the next "bubble in trouble."



*US Banks
The US banks have led the way to the basement in terms of stock collapses. Dont expect less hardship with the Swedish bank stocks. It will be tough,very tough. Although the downward path might have some bright spots, it is still going - down.
I am still long bank puts.




*Re Equities and my expectations for a bear rally before long;

Well it sure didnt happen yesterday. Tomorrow will be an interesting day. Dont get me wrong though. To me it seems clear that the banks with Baltic exposure will drive shareholder values to zilch. Trying to time it. Question is; Is it about to happen right here, right now, or will there be a bear rally in between? TA seems to indicate at least a temporary basing out. As always, trying to trade it.



As usual, good luck




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