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we ll include some pertinent quotes along with our thoughts china is growing by about 8 a year which is amazing on the surface of it as their exports are down about 20 more in some sectors how can that be i continually read about how china is going to lead the world out of its global funk and 8 growth in gdp does seem pretty strong but we need to look a little deeper if i told you that the next us stimulus package would be 4 5 trillion dollars mostly given to banks that would be forced to loan out the money quickly do you think that might jump spending and gdp in the short term would you start looking for a few bubbles to be created what about the dollar that is the equivalent of what china is now doing the volume of credit that is flowing into china is equivalent to one third of their gdp banks that already have large problem loan portfolios are now lending even more in a very short time frame china has severe capacity utilization problems as trade has sharply fallen and the us consumer is unlikely to return to anywhere near the level of consumption that was the case in 2006 the chinese stock market is up 85 this year and commodity and real estate prices are rising and no wonder the money supply shot up 28 5 in june alone that money is looking for a home my friend vitaliy katsenelson has written a very perceptive essay for foreign policy magazine talking about the nature of the current growth in china but don t confuse fast growth with sustainable growth much of china s growth over the past decade has come from lending to the united states the country suffers from real overcapacity and now growth comes from borrowing and hundreds of billion dollar decisions made on the fly don t inspire a lot of confidence for example a nearly completed 13 story building in shanghai collapsed in june due to the poor quality of its construction this growth will result in a huge pile of bad debt as forced lending is bad lending the list of negative consequences is very long but the bottom line is simple there is no miracle in the chinese miracle growth and china will pay a price the only question is when and how much this is very much in line with our theme of the recent china bubble john has done a much better job in attaching specific numbers and analogies to the situation but the fundamental picture aligns with many of our posts going back to april the larger view has not changed and the question becomes if china can complete this transition before the legs give out the us can not be expected to provide the bubble year levels of aggregate demand that has created and supported the existing chinese manufacturing and employment infrastructure i am going to quote at some length from simon hunt s latest note he travels very frequently to china and is one of the world s true experts on the copper market if you want to know something about copper ask simon copper we are told is the metal with a phd in economics if copper prices are rising then the economy is booming and historically that has more or less been the case but there may be reason to believe that phd may be no more useful this time around than a regular ivy league degree there is no better example of this speculative activity than what is being seen in the copper market it is easy for global merchants hedge funds etc to ship cathode into china and warehouse it outside the reporting system so fuelling investors sentiments that copper demand in china is soaring and at the same time draining copper from the rest of the market it is not so much industry which is doing this buying in china but individuals financial institutions and even small companies divorced from the copper industry who are buying and holding the metal because copper is a store of value and prices will go up is the common response we updated our numbers for the first half of this year they are truly staggering over 1 million tonnes of cathode is sitting in china mostly outside the reporting system as a punt on rising prices emphasis mine if it is happening in copper it is likely to be happening in other commodity markets as well if you are trading the metals you should be aware that a quick drop could happen if demand falls off due to there being a glut of supply coming back onto the market this is another long term theme that we have been exploring again john does a much better job of providing specifics to back up our original assertions we don t know who simon hunt is but if john asserts that he is a true expert we ll take his word for it this piece we put up covers most of our thoughts on the subject so we won t rehash but it is an ongoing story with the potential to have some serious impacts across global markets this is a very big deal and from the chinese point of view quite smart right now they are stuck with 2 trillion in us treasuries agency paper etc they can t sell their dollars without really hurting the dollar thereby forcing the renminbi to rise and hurting their own exports but they and much of the world feel that the us is pursuing policies that are going to be harmful to the value of the dollar and therefore to china s largest reserve exposure what to do take those dollars and buy physical assets companies natural resources maybe a few small countries to my chinese readers that s a joke although some in the west worry about that in the card game called old maid we played as kids the loser was the one who ended up with the old maid at the end of the game for the past decade the chinese sent us stuff and we sent them dollars in the form of electrons they in turn invested those dollars in our debt so we could buy more stuff it was a form of vendor financing and now the chinese have apparently decided to pass the old maid of the dollar on to other parties who will sell them their assets for dollars seriously did anyone not think they would do this massively selling the dollar which so many conspiracy theory types keep saying they will was never really a rational option but using those dollars to acquire productive assets very smart very rational if you figure out what they want to buy and get there first there are profits to be had attention should be paid this is an interesting point many have picked up on this point previously but most have assumed those asset flows are going to be into commodities we disagree mostly because of the numbers involved 2 2t is a hell of a lot of commodities but john explicitly defines the agenda of overseas acquisition including commodities equities and any other real assets china can get its hands on on a quick tangent the implications for inflation protected or hedged assets are huge specific equity sectors are likely to see flows go through the roof we ll leave it to our readers to discuss in the comments notice in the chart below that unemployment continued to rise until the first quarter of 2003 and that is also when the stock market took off those who see green shoots need to think about that meanwhile the market is clearly telling us that it sees nothing but blue skies in the future i truly marvel at this rally but i continue to think it is a bear market rally the weakest high beta names are rallying the most this rally does not seem to be the basis for a sustained bull market that being said richard russell has removed the bear from his letter and put in a bull i may be the last bear standing nothing new here for regular zh readers but it s almost comical in the simplicity of the argument people aren t employed unemployed people don t spend money not spending money means no green shoots forget second derivatives revised seasonally adjusted housing numbers or dennis kneale s belief in the power of the smiley face this is going to be a long jobless recovery hours worked per week are at an all time low as noted above part time work is very high employers when things actually start to turn around and they will will first give current employees more hours and then expand the hours of part time workers there will be few new jobs for a long time because our population is growing between 130 150 000 new jobs are required each month to keep unemployment from rising initial and continuing claims suggest we are currently losing at least 300 000 a month as an aside the media talks about initial unemployment claims falling that is actually not true unemployment claims are in fact quite high and rising but the seasonal adjustments make them look smaller normally this would not be a big deal but the summer seasonal adjustment assumes a normal automobile manufacturing market with layoffs in july the layoffs came much earlier this year distorting seasonal adjustments higher and persistent unemployment lower incomes and wages higher savings rates capacity utilization at 50 year lows and still falling rising home foreclosures a deleveraging financial system etc are not the stuff of v shaped recoveries throw in that moody s estimates that us banks will have to write off 400 billion in 2010 and it s a very weak recovery indeed that shapes up for next year not to rehash but john again does a great job of tacking on numbers to a scenario we have been covering for a while investors hoping to recoup their losses from the bubble burst in short order are in for a surprise overall a good reading piece to ruminate on over the weekend sphere related content bookmark this post with view comments guest post 30 year review ahead of short term auctions q2 adv gdp and aug 7 nfp posted by tyler durden at 1 37 pm submitted by john bougearel of structural logic sphere related content bookmark this post with view comments labels structural logic weekend reading posted by tyler durden at 1 22 pm must read fast on the draw trades need spot of marshalling ft h t joe roubini op ed on bernanke the great preventer nyt lennar signals fleeting buildling rally as buyers flee bloomberg jp morgan to raise banker salaries ft the man spreading false rumors about harman and textron takeovers that fooled fast money s najarian found dead in suicide bloomberg chinese steel executive beaten to death ft alan abelson it could be worse barron s real homes of genius the california housing collapse deconstructed dr housing bubble rally may cool on earnings reality check reuters california officials worried about new budget woes businessweek us probe targets ubs banker visits reuters phibro trader andrew hall is holding citi hostage over 100 million pay package wsj who caused the economic crisis an email debate between simon johnson and goldman s john tablott salon part 1 part 2 and part 3 sphere related content bookmark this post with view comments jpm s carl carrie on algorithmic trading posted by tyler durden at 12 59 am when the former head of product development in the electronic client solutions group at none other than jp morgan carl carrie was last quoted on zero hedge he had some very nasty words for high frequency trading today in a podcast transcript by algotradingpodcast carl shares much more light in just why any reform movement against hft and pt in general will be met by a huge pushback by exchanges brokers infrastructure providers telcos and all derivative market players clearly algorithmic trading is a huge factor high frequency trading for arbitrage s indexes adrs pairs etfs interlisted trading as well as automation around auto working have all been factors contributing to the growth of algorithmic trading and trading on exchanges the exchanges themselves have also been contributing factors they ve invested heavily in capacity and throughput and the allocations of assets to european equities has also been a minor factor carl also touches on another so far undiscussed issue the industrial oligopoly and the economies of scale advantages to the select few in the electronic trading space you re seeing the beginnings of a fallout and you re seeing larger scale players some of them become clear winners not that they can permanently sustain their competitive advantage but for a period of time there is an economic advantage in being the preeminent top scale player and probably the next two rungs below hey christine varney if you can look away from google for longer than 10 seconds maybe you can focus on where the next real fight for monopoly is ocurring with materially greater consequences than firefox being bundled in with windows 7 most notably carl discusses the emerging risk types with this new technology not surprisingly as joe saluzzi would attest and much to the chagrin of program trading specialist irene aldridge the key risk is liquidity and much more so to the downside i e when it disappears there are new risk types i think it used to be about timing cost and market impact those were two twin pillars that most algorithmic trading has been based on and i think if you look at what s happened recently in the credit markets it hasn t opened our eyes to liquidity risk but liquidity cost and liquidity risk is perhaps a different animal it s not just about price volatility it s about volume volatility it s about timing of that volume volatility it may be there today and when you want to get out of your position it may not be there tomorrow and how do you reflect that into your own trading and into not just your alpha generation but on the risk side of the alpha generation most risk models don t really take into consideration the kinds of anomalies that we may see on a yearly basis it s not a six sigma event typically that happens when we have a liquidity crisis and a liquidity crisis very easily moves across from one market as a class to another so you ve got this contagion correlation effect that s massive so i think it s important for all of us to develop new science and new tactics to really deal with that and particularly as you talk about emerging markets there s no sphere that is as liquidity sensitive as emerging markets is curiously when carl left jpm his parting letter had this to say yes i love equities but i think the biggest transformation in the market over the next couple of years will be in the otc fixed income credit and commodity markets that are both begging for more liquidity and transparency and are ripe for a major transformation i want to be there at the genesis of that transformation we at zero hedge completely agree with this statement and will be presenting some of our extended ideas on this matter over the next several weeks sphere related content bookmark this post with view comments saturday july 25 2009 the flash trading org chart posted by tyler durden at 5 41 pm zero hedge will attempt to categorize all the relevant players in flashtradinggate this is the initial focus of senator charles schumer s recent campaign for market equality and transparency as we will undoubtedly miss critical connections between these and other pertinent industry players we solicit readers insight as we develop this org chart we invite readers to send emails to flashtrading zerohedge com with any...