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Sunday, August 1, 2010

China Slows and Hong Kong Likes It

This is never a good sign: http://www.marketwatch.com/story/hong-kong-shares-rise-as-china-manufacturing-slows-2010-08-01. The basic logic here is that bad data = lower interest rates = good markets. The reality always and uniformly is bad data = worse earnings = lower markets. I remember markets in the U.S. in 2000 rising on bad data toward the end of the year while awaiting Fed interest rate cuts and falling on signs the economy wasn't slowing. Of course, the recession came, earnings collapsed, and so did stocks. Same thing happened in late 2007 as well, though not as much.

I don't know why this sort of trade keeps getting executed, but oh well.

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