China

Muddy Waters Research founder Carson Block believes that China’s overleveraged economy will eventually face a “day of reckoning.” He just can’t say when.

In the first unofficial challenge to Beijing over China's domination of disputed waters in the South China Sea since President Trump took office, a US navy warship sailed within 12 nautical miles of an artificial island built up by China in the South China Sea according to the WSJ.  The navy vessel, the USS Dewey, traveled close to the Mischief Reef in the Spratly Islands, among a string of islets, reefs and shoals over which China has territorial disputes with its neighbors.

The USS Dewey

It has been a seesion of violent, volatile gaps, starting with sharp gap up in S&P futures on Wednesday night, just around 10pm, which saw ES spike and rally to new all time highs on no news...

Something strange is taking place in China, and we are not talking about the largely optical, mostly irrelevant first downgrade of China by Moody's since 1989 (which still managed to unleash diplomatic hell in Beijing), and in which the rating agency simply admitted what everyone else already knew about the 300% debt/GDP economy.

The bigger issue, as we noted previously, is that both the short-term...

and conventional Chinese funding market appears to be breaking...

The market may have long since moved on from Moody's downgrade of China to A1 from Aa3 (by now even long-only funds have learned that in a world with $18 trillion in excess liquidity, the opinion of Moodys is even more irrelevant), but for Beijing the vendetta is only just starting, and in response to Tuesday's downgrade, China's finance ministry accused the rating agency of applying "inappropriate methodology" in downgrading China's credit rating, saying the firm had overestimated the difficulties faced by the Chinese economy and underestimated the country's abilit