China Pumps the Brakes, Time for a Little Honesty With Ourselves

Courtesy of Joshua M Brown, The Reformed Broker

So China sees a potential bubble in stocks and real estate. That’s funny, I remember saying there was a property bubble in China just a couple of days ago…

Today is one of those days where investors reassess their sector exposure. The news that China’s economic commanders have just told the banks to cut back on loans may have more of an effect on a US portfolio than many may think.

Hold off on patting yourself on the back for avoiding all those China ADRs that have invaded the IBD Top 100 – plenty of US stocks have doubled over the last year and they certainly didn’t do that because of the make believe recovery here in the States.

China’s decision to slow the train down in terms of stock and property values will have an impact on the velocity of oil companies, infrastructure companies, miners, steel companies, copper companies and even agricultural plays.

Panic is not the name of the game, analysis is. You may be surprised to look over your portfolio and notice that a great deal of it is geared toward the growth in emerging markets. We hit new highs yesterday on the S&P and the last fund flow data I heard showed the first positive net money flow into equities in a long time.

Translation: everybody’s long.

Whether you believe that this is a hiccup or that China is truly concerned about engineering a soft landing, today may be a good time to get real about what you own and why. Let’s be honest with ourselves about where our exposure really is, whether our stocks are headquartered in China or not.