China's Death by a Thousand Cuts Policy

Published January 7

As I watched events unfold overnight, with China’s CSI 300 Index tripping its first trading curb in 13 minutes and its second after a half-hour of trading and two minutes after restarting, it became clear what the problem was. China is allowing the devaluing of the yuan, but unlike it managed it in August with one fell swoop, this time it is via several smaller devaluations. This death by a thousand cuts appears to be just as painful as the quick slice in August, but it should end soon, possibly even this week. That means that equities can start to recover starting next week, or importantly, when the yuan has reached the point where China will defend it again. Where is that? I’m hearing somewhere between 5.6 and 5.7 Yuan per U.S. dollar onshore; it’s currently at 5.5921. In other words, this is not a forever problem, so there will soon be an important point to buy stocks. However, I do not believe that point is today. As for China, I’ll have some proposals for its best steps to long-term prosperity, along with a purely communist solution in two follow-up reports. See the full report on China's death by a thousand cuts.

Sector Security	01-07-16 11 AM ET
SPDR S&P 500 (NYSE: SPY)	-1.0%
SPDR Dow Jones (NYSE: DIA)	-0.7%
PowerShares QQQ (Nasdaq: QQQ)	-1.0%
iShares Russell 2000 (NYSE: IWM)	-1.1%
Vanguard Total Stock Market (NYSE: VTI)	-0.9%
iShares China Large-Cap (NYSE: FXI)	-1.5%
Vanguard FTSE Europe (NYSE: VGK)	-1.0%

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