China Will Nuke Foreign Investors From Orbit

I believe Evergrande presents a barbell risk. One tail is contagion risk that spills into the currency markets. That's the nightmare scenario for the global economy. At the other end is highly concentrated risk for everyone directly involved. They risk more than 100 percent loss in the event of claw backs and possibly jail time for corruption.

A couple years ago, I would have expected a somewhat normal bailout. In the past year though, the government arrested its wealthiest and most successful entrepreneur Jack Ma. It scrubbed one of the most popular actresses from the Internet, with the only obvious connection being she was a friend of Jack. The CCP has been wrecking the share prices of industry after industry as part of a regulatory crackdown. For profit education? Toast.

Liquor. Technology. Video games. Casinos. Entertainment.

The CCP doesn't care about investors first. It doesn't care about profits. State-owned industries don't need profits. The CCP cares about power and social harmony. Whenever there is a choice between the people and the wealthy, a really big and public choice, they will choose the people. There will not be a 2008-style bailout for wealthy Chinese, banks or foreign investors. There will be bailouts to the extent they are necessary, but there won't be a USA 2008 situation where the entire bailout is handed over to bankers. Most of the bailout funds to AIG were passed through to Goldman Sachs and other speculators. Goldman was allowed to become a bank to get money directly from the government. Goldman is not a bank and was not a systemic risk should it have failed. It is a corrupt, thieving organization profiting from the looting and immiseration of the American people. In China, perhaps Goldman's executives and their entire board would have been jailed, or at least had to pay back all their money as part of compensation to the victims of the bubble.

If you're wondering how China is going to pay for a bailout, I suggest you look in the mirror if you're a wealthy investor or a foreign investor in China. If things get out of control, or maybe if the problem is much larger than understood, it'll spill into the foreign exchange market. Otherwise, risk will be contained for the system and the people. But not for investors who made stupid bets on the assumption the CCP will bail them out. No one is too big for the firing squad in China.