Interestingly during Fridays Live Training Room session one of the things we were discussing was the current market bubble which I personally feel is sentiment driven based on hope.

There are currently a lot of bullish commentators our there right now telling us that the worst is over the recession is near its end. Even the red top papers are starting to “ramp up” people’s hope about how good the economy is right now. When the red tops stop talking about what celeb is looking fat in a bikini and talking about local and global economics alarm bells should be striking.

Every day we are seeing new news items stating increasing employment, lower incomes, rising taxes, ultimately lots of bad news. Will it ever end? Of course it will but will a recover be in line with previous recoveries in past economic cycles.

At some point the worse will be over, economic measures will stabilise and most likely start to increase. This will most likely push the statistical measures for recession back positive but economies will be still weak a lot weaker than they once were. On paper we could see the end at least statistically speaking.

Before we see anything real and tangible there needs to be change. Fundamental and economic changes before any statistical growth can actually be called a bullish cycle.

Who is going to lead the way globally, the US? The UK? The Euro zone? What about further east, China? China is growing by about 8% a year (pretty impressive) but there exports are down about 20%. The Chinese stock market is up 85% this year.

Fast growth is not to be confused with sustainable growth… My god we know that one all too well don’t we. Growth coming from borrowing and debt.  This all sounds to familiar, doesn’t it?

The important news out of China this week was that China was getting ready to use its $2.2 trillion reserves.

“Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday. ‘We should hasten the implementation of our “going out” strategy and combine the utilization of foreign exchange reserves with the “going out” of our enterprises,’ he told Chinese diplomats late on Monday. Mr. Wen said Beijing also wanted Chinese companies to increase its share of global exports. The ‘going out’ strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.”

From the  Financial Times

 

This could create an interesting situation for the USD could get devalued quite a lot and cause a rise in the Renminbi hurting their exports.

So is it likely that China right now will start the turn on the global slump? Not just yet but it could be an interesting ride along the way and it could be a long time before China’s economy is as big as the US economy.

I still come right back to the question of what needs to change right now for things to “help us” in the short term and what will that economic trigger be to push us from a hopeful and statistical recovery into an actually economic recovery?

Answers on a postcard please