Good Morning.

We are getting a low volatility rally as expected.

Yes, it is only one day so we will see how we go, but I thought I would address the rampant bearishness about China that is around at the moment.

It has become almost a religion in terms of the belief level that China is in serious trouble…

A couple of years back, China made it very clear that it would be moving the economy toward services and consumption, as the historic economic miracle that is China, matures somewhat into a highly sophisticated, well managed capitalist system. Yes, this is what China is becoming — a little different to the picture painted by the Neanderthals of economics on Wall Street, I know. But after all, they are Neanderthals. I mean these are the people who have gotten everything wrong for at least half a decade now. The stock market was supposed to have halved again from the 2009 low, and the world in a depression, with the Euro no longer existing, and China in full scale revolution mode. I wish I was exaggerating, but that is exactly what most of even the largest institutional banks and brokers in the world were saying and aggressively forecasting.

They are just as wrong about China now as they were everything else all these years. For instance one of the big UK banks only last year forecast China GDP would be just 2% by now…

So we as investors have a choice. Believe the bearish China Armageddon nonsense, which may be appealing on some level due to the adrenalin creation in your nervous system, or take advantage and get even richer than you are as a result of having bought all the way up from the March 2009 low, as I told you to.

You will be aware that there is a small private sector bank survey about China’s manufacturing, one of the ones that gets everything it wrong, but has a huge advertising budget. That it is not the official data, and only covers less than 10% of the official China PMI survey, and does not include the biggest manufacturers in China at all It is heavily focused on exporters rather than the breadth of the economy, does not seem to deter various global and local media outlets reporting it as if it is the Real China PMI.

In reality, that survey is a nonsense. It rarely even gets the export manufacturing sector right, often saying that particular part of China is contracting while at the same time that exports are going through the roof. Yet, every month intelligent investors continue to be subjected to the stupidity of that small private survey.

So will the real China please stand up…

Here below are China’s real PMI, and China’s real GDP. You will notice the PMI is in a period of acceleration, and has been expansionary for quite a long time. Not contracting at all as some of the major banks and brokers are telling you. You will also notice that China GDP is relatively stable around 7.3% and higher for the past couple of years, which is exactly what the Beijing government was looking to achieve.

China Real PMI, monthly since the start of 2014:

Always expansionary, and even accelerating in recent months.

China Real GDP, quarterly growth since 2012

This is rather stable and strong growth from the second biggest economy in the world navigating another huge step forward in the restructuring of that economy. Very impressive and hardly anything to panic about…

The real miracle is that China’s manufacturing continues to expand even as the focus of the government has shifted to services and consumption. The China economy should be applauded, but this would upset the western sentimentality of many a major bank and economist.

When you look at this actual data, and continuing high performance of the China economy, it is clear that the current bearish sentiment is a gift. A gift to be taken advantage of…

I am still looking for a low volatility steady climb in stock prices from here — in a more sustained rally than we have seen for some time — and certainly too much higher-level activity than the consensus can appreciate.

Just keep buying, comes to mind…