Its LaoZi Vs Santa Claus – China’s 3rd Plenum vs The Yellen Hearing

For all the hype and expectations, the 3rd Chinese plenum of failed to produce a single firework. Instead we have the unveiling of a destination without a map to guide the markets.

Way of Tao – there are innumerable real and unmarked paths to reach your destination

Why bother to give milestones which you will be held ransom over ?

“development in the non-public sector will be encouraged which will in turn stimulate vitality and creativity in the whole economy…while maintaining the dominance of the public sector.”

It feels like a hollow statement to me saying – STATUS QUO !

So no overhaul. Just meander along to the Yangtze Waltz and hope no boats overturn which is wrong because Asian EM is hanging on a thread for an expansionary verdict and are going to suffer in the days ahead for China’s reticence.

Of the BRICS, all look shaky except for the C in the BRICS.

Brazil – S&P says Brazil downgrade could happen sooner if fiscal position worsens (8 Nov). Not to mention billionaire Batista’s OGX bankruptcy. Brazil has now been grouped in with Indonesia, South Africa and Turkey.
Russia – Economy grows less than estimated, missing economists forecasts for acceleration (yesterday)
India – Oct CPI worse than expected at 10.09% vs estimated 9.90%. Sep Factory Output 2% vs estimated 3.5%. (yesterday).
South Africa – Platinum strike. Palladium strike. USDZAR on its way to a new 3Y high and bonds getting dumped.

No sense in China stepping up to save the world. Another EM crisis is brewing and frothing away as I write.

Leave that job to Santa Yellen.

Funny that the markets are feeling queasy about Yellen’s Senate confirmation hearing.

I have just read some strategist reports on tomorrow’s hearing and in summary, they are all expecting the same things.

* Dovish bias favouring QE and dismissive of asset market bubbles
* Employment is her pet topic
* Not afraid of inflation
* Favour strong regulation of banks (“too big to fails”)
* Vague about tapering and will advocate ending QE as soon as the economy shows signs of sustainable growth

Markets would be on the look out for these hot issues.

1. How tapering will not amount to tightening as the markets have demonstrated in May-Jun this year.
2. Tapering timetable
3. Fed’s ballooning balance sheet which has quadrupled
4. Managing the housing recovery
5. Fed Audit – championed by Senator Rand Paul

And Santa will deliver, as usual. As the most widely read article in the financial circles yesterday puts it, “Now the only obsession seemed to be with the newest survey of financial-market expectations or the latest in-person feedback from Wall Street’s leading bankers and hedge-fund managers.”

That is a first. A whistle blower from the inside of the Fed who says “We were working feverishly to preserve the impression that the Fed knew what it was doing.”

And yes. Forward guidance means they will deliver what the market wants.

I did say a few days ago I would be looking to sell the S&P….. only after the market gets what it wants.