We can no longer trust Chinese financial information because some corrupt leaders apparently are getting payoffs from criminals.

We can no longer trust Chinese financial information because some corrupt leaders apparently are getting payoffs from criminals like China's "protected" versions of Bernie Maddoff and Mikhail Khodorkovsky.

Fed-Induced Speculative Blowoff
By John P. Hussman, Ph.D.
President, Hussman Investment Trust
Despite my extreme criticism of Fed actions in recent years, I would argue that QE2 has in fact been "successful" over the short-term, but not through any monetary mechanism. Rather, QE2 has been successful a) by creating a burst of enthusiasm that released some pent-up demand in the same way that Cash for Clunkers and the new homebuyer tax credit did, and b) by encouraging investors to believe that the Fed has provided a "backstop" for stocks and other risky assets, creating a speculative blowoff in these securities, to the detriment of what investors perceive as "safe" assets, which ironically includes Treasury securities. In short, the main effect of QE2 has not been monetary but has instead been rhetorical - and that rhetoric may very well be nearly empty.
http://www.hussman.net/weeklyMarketComment.html


Companies aren't hiring in America, they're doing it overseas. American companies are getting back on their feet, but American workers are not. Companies like DuPont, and Caterpillar are increasingly moving jobs to China, India, and Brazil countries with a rising work ethic, skilled workers, and growing consumer demand. Big companies take on fewer American employees and more entrepreneurs are launching businesses with only global hires. Today they are getting top talent in emerging economies. Still, the trends are working out well for U.S. companies with the recent blow-off going on. But how long can that last? Think November 2012 when the Obama socialists and their reparations for the lazy, the corrupt, and the incompetent get swept out of office and the American work ethic comes back.

World Markets:
China is raising its interest rates for the second time in two months, in efforts to slow its economy and ward off inflation. It was another .25% increase, raising the one-year yuan rate to 5.8%.

The economic policies of China are now ant-inflationary while American policies are anti-deflationary. That will cause investments to continue to move to China the same as the American Economy enjoyed from 1800 until the Clinton bubble burst.

There is no way to know truth about China's corporation's anymore. China is about to face scandals that will make Maddoff look like a petty criminal due to corrupt Chinese leaders who imprison Americans who have the audacity to check the corrupt company books. No doubt corrupt Chinese leaders will be executed before they get the message that economic success depends on honest leaders not corrupt leaders that protect corporate criminals. Good leaders do not lock up people who check corporate income statements and balance sheets. Only corrupt leaders criminalize and arrest careful investors.

China imprisoned an American geologist and gave him an eight-year sentence because he was in China doing investment research to see if the balance sheets and income statements were truth or a fraud. Seeking truth is now apparently a criminal offense among corrupt leaders in China. That means that we can no longer trust Chinese financial information because fraud in China cannot be exposed. As long as China supports N. Korea (a pathological new dynasty) shows no respect for the rights of investors seeking the truth, and arrests Americans seeking the truth, China will become an increasing risk of total economic collapse and anti-western nationalization/confiscation of property.

Economic reports:

Yesterday
Case-Shiller 20-city Index Oct dropped 0.8% after increasing 0.6%last month. It would have been a 1% drop if they did not drop last months number by 0.2% to make this month look less disastrous. Obama and the socialists are destroying the economy by not liquidating the Mortgage crisis.
Consumer Confidence Dec dropped again to 52.5 from 54.3% last month.

This Week
Dec 29 7:00 AM MBA Mortgage Applications 12/24
Dec 29 10:30 AM Crude Inventories 12/25
Dec 30 8:30 AM Initial Claims 12/25
Dec 30 8:30 AM Continuing Claims 12/18
Dec 30 9:45 AM Chicago PMI Dec
Dec 30 10:00 AM Pending Home Sales Nov

Market Outlook Dec 29, 2010
In 2004 the market sunk the first week and then began to recover at mid year. That was after the 2003 rally that the hedge funds held high to the end of 2003. That situation is we believe the closest to what we have today. We expect high volatility in early 2011.

The market is still near its high for the year just where the funds want it to be. However on a cash flow basis it is not. At this point volume is down 50% since last May. Volume of late is the lowest we have seen since the Obama recession.

For your taxes this year, Obama is requiring securities firms to report not just client purchases and sales but also profit and loss. The securities firms, in doing that, have decided to tell their clients in advance so the clients know that they can take some losses to decrease capital gains taxes to as close to zero as possible. Obama will take it otherwise. It will minimize the amount that investors pay in capital gains this year. In demanding more information to harass some investors, all the investors are getting the information needed to drive their taxes as close to zero as possible. In the past investors did not often sell fractions of their under performing investments as much as they will going forward under socialism.

World Markets
Asian markets were up last night. China's market was up 1.7%, Hong Kong up 0.9%, India up 1.2%, and Japan up 0.5%.

European markets are flat this morning in a range of about -0.2% to 1% half way through their day.

US pre-market futures are up about 0.25 % at 7:00 AM EST.