"To Stop Falling Chopsticks, you need a Tamagotchi"

Did China finally get a Tamagotchi?

“Falling Chopsticks need a Tamagotchi to arrest the fall”

- Shrubfucius

The Chinese have still much to learn from America about “free markets”.

The most important thing they have yet to grasp is that “free markets” are still kinda rigged (so it should suit the CCP!), and they need a lot of “hand holding”, given that the main players are monkeys with ADHD. This is a Universal truth, regardless of race and religion.

Look at what Janet & Jay did: the SPX dropped a whole 2% from its all-time-high in January and they came out to roll back QT! Et voila, new all-time-high. The falling knives were arrested by the motherly affection of Tamagotchi Yellen and her reaction function being:

“ SPOO down >2% regardless of absolute level —> ACT”

Compare that with China. What a mess. HSI down 10% for the year and it’s only January. Falling Chopsticks every day!

A Twitter friend suggested that what China needs is a Central Banker Transfer as we do with sports. If Mbappe is worth $200m, then what’s Yellen worth to China? Probably add a zero. It could be the biggest transfer in “sports” history! I can arrange for a commission!

Anyway. I’ve been struggling to figure out the Reaction Function of Chinese policy makers but I think I got it now. Their reaction function is:

“HSI <15,000 —> ACT”

Which may explain why we got this headline today:

China Eyes Stock Rescue Package Backed by $278 Billion

• China considers offshore money for stabilization fund: sources

• Some policy measures could come as soon as this week

Basically, Chinese Premier Li Qiang is calling for “forceful” steps to stabilize the collapsing stock market aka the falling chop sticks.

Which makes me wonder if China finally got themselves a “Tamagotchi”, in the face of Premier Li (“Tamagotchi Li”?). Tamagotchis are “Made in China” after all, so about time I say.

The point is, SOMEONE finally panicked and is doing something about it (maybe!).

I see a lot of comments that "$278bn is not enough!”. And those comments are obviously coming from Western Investors who are used to NVDA adding $300bn of value a week. But in China, $300bn buys you all of BABA, BIDU and BYD and you are left with $25bn in change to buy anything else you want with it!

But the point I think I want to make is that they panicked and they showed they cared. A bit like Zero Covid. Remember how stubborn they were there? Well, they eventually panicked there too.

As someone smarter than me once said: “Markets stop panicking when policy makers start panicking”.

On the negative side, I’m not sure what China will do is enough to create a big RALLY because I think what they are looking to achieve is a BOTTOM aka stability.

This may be the difference between Tamagotchi Yellen ( = rip the market to new highs to create Wealthflation!) vs Tamagotchi Li (= keep the HSI above 15,000).

Ultimately, the market monkeys trust Yellen so they buy every little dip in the US. Whereas the market monkeys don’t trust Li just yet so he needs to keep his eyes on the ball and prove he can DELIVER on his Reaction Function.

Disclaimer:

This isn’t financial advice. This is the equivalent of reading MAD magazine but for finance but worse: This is the trading blog of a shrub.

Don’t be Stupid. Seriously. How many times do I have to repeat this ….