Has seen their stock market make explosive gains in the past 4 months. They have reasons for the growth, but are running out of near-term upside and increasingly are positioned for a correction. I mentioned in a quick note to clients a week ago that roughly 20% of the value of loans being made to Chinese individuals is going into the stock market. The last time this happened we saw a spectacular stock market boom, followed by the central government putting in place measures to curb the speculation. I took this as a sell signal. Within days we saw the beginning of a spectacular collapse (70%). What’s different now? The Chinese government is highly motivated to:

-       continue to make sure everyone is happy until the 60th anniversary of the People’s Republic of China (October 1st).

-       continue to make sure they are not lynched by the increasing unhappiness of the large rural poor population.