Morning Mumble: Stimulus (you'll need it to read it) & Commodities and the China/UK Financing Switch.

China appears to be vehement about its expansion plans at the risk of other sectors. So, it was around this time last year China introduced a Mini-Stimulus, unsurprisingly it was..."Housing for the Poor & Railways" (why don't they just be damned and open work houses & Almshouses). Now that appears to have done absolutely zip, so guess what they're doing this year? Nope, throw common-sense to the wind, they're not going to let the economy cement its foundations instead roll the risks up and continue to focus on Housing for the Poor & Railways, only 6,500 Kilometres of track...up near 1K on last year. 

One's assuming they can lay track on track? As they surely must be running out of the plausible Railway Expansion zones. Demand will, I'm categorical about this, not meet demand if this type of stimulus continues without consolidation across all sectors. One simply cannot expand and not ignore the fractured foundations of the two tier financing, with defaults here there and everywhere. 

So a thought for the China bulls. A shocking level of companies in China have sold assets to China to fund not expansion but debt repayment. What will they sell next to fund such a necessity of repaying their obligations? One assumes they can't sell the obligation? This has been common-across all the stressed Sectors save for the Solar Industry and belatedly construction. It, put simply, is a train wreck waiting to happen (sorry couldn't resist), one that will be ignored by the "old stimulus" packages they merely reword to keep the "Analysts happy." 

Do not think for a minute its a prediction of the end of the world, more a stark reality that "common-sense" is approaching. All the papers are reporting on the "stimulus" to meet Growth Targets. If one has a lobotomy you could be excused, but there's no news here folks it's a rehash of wording for what was planned in 2013, it was happening 'whatever'. You'll get the idea, as China attracts finance with the promise of riches via the Railways, one would do well to minimise their risks there...It reminds me of the American Railways, but I'll save that for another day and no doubt when I feel Wild Wild West...

In the market, I've missed something, it was disappointing, I had actually considered it thoroughly but forgot to continue the thought process through to the overall impact of the supply China and Australia. I'm more annoyed with myself for keeping my note book in such bad order. The "gap" in the Supply and Demand of commodities is the High Grade Ores, which have had a better than expected performance. This is the norm, but more importantly, is a necessity for the Mills and Producers in China whom have to reduce their pollution. So you have China pushing High Quality through the rood, and 'standard and inferior' only being propped up...this is mirrored the same for Nickel, whom since the obvious happened, has had a nice 19-21% run.

The question is, when will China adopt a realistic attitude to its economy about financing, expansion and maintaining the basic principles of Supply & Demand? From the Amateur, me (smiles), I've been watching the consolidation in China take charge and the bits that are being ignored. So everything that's in the crap now, that has defaulted and/or is, will post 2016 gain again. Solar, Coal and the stronger real estate companies (less leverage) will do well, including Carbon Emission Trading (the lovely intangible). Those expanding, based on the same principles, will (de)falter in due course as their coke fuelled frenzy of bonds dries up. This won't (oops best hedge my bets), isn't likely to be all at once, but will slowly unwind as China "over the next 5-6 years up to 2020 forces the economy to become financially independent. "

China will be akin to your 13/14 year old daughter/son spending all their allowance and then having an advance on next years as well. They're in essence betting on your income being maintained. So the 'buzz' will be no doubt called Environment Enhancement or Environmental Protection (or any such spin) post this five year plan, the Thirteenth Guideline (2016–2020) (Five year plan) will likely be consolidation. One simply cannot continue even without common-sense at the same rate. 

Albeit, as a trader I should be thankful for China additional QE stimulus on the markets. So in essence we've had a bucketload of them. PPI Claims, (I still want to know why they randomly text people are they that stupid), We've had Governmental QE, not only with rescue 'strategic elements of industry' (banks etc...) but we've also had them being able to sell a few assets at bargain basement prices, (many thanks once again).

For the UK, the consolidation in the sector is likely to have a higher impact on the banks than one realises. Bank lending, whether the Government says otherwise is most likely to deteriorate as companies such as Renovo (used to be a Pharma but acquire Ultimate Finance Group their Preliminary Results) and GLIF Plc (Link to Results) come in to their own (Psst I'm long on Both, the former more recently Inspired Capital INSC). For myself, with my cash element I have elected to start funding as well, as the returns are around 7%...much better than the last minute crap you get with ISA's.

This 'secondary' lending, albeit with conditions and pricing, is likely to force the banks to become conventional and dull. Its one reason I don't see Barclays and Barclays Investment Bank staying together. Parties will and have argued that separated they'd be weaker or one poorer, however a divestment were BARC holders get one share in each is likely to be the way forward. Barclays Retail can then ignore any issues with the IB section and just shrug in a very sort of French manner about any other misselling scandals that come to the fore.

Back to the market now, with Dunelm Mill coming in nicely with Interim Management Statement which should provide some support to the stellar performance in its shareprice over 6 years. For Rachel, selling her house and investing (shoving was her word) into Dunelm mill when she went to work in Hong Kong has proved a very savvy move (Congrats).

It looks like Kingfisher is betting on the French/European recovery now with Kingfisher entering into exclusive negotiations to acquire Mr Bricolage. One will be hoping their foray into Europe will be better than Marks & Spencer. Having not really looked at the ownership structure for some time, it would appear it's a very good expansion, with sites in France, Belgium, Argentina, Bulgaria, Madagascar, Spain, and Uruguay it 'could' be a very shrewd deal. 

So on the back of BLT (BHP Billiton's) announcement of their 4 or 5 pillars (depending how many fingers you have) Anglo American (AAL) are now inclined to wave bye bye to their Angloplats operation. Not that this has not been suggested every year since 2008, it's now very plausible. The same as BLT will no doubt do, give the shareholders 1 share in Anglo Platinum for every share they have in AAL. So for the next 12 months, IPO's will be lower, instead crap will be spun out for more people to own the crap. Would you be a holder of a stock that is being held to ransom by the workers? 

Sadly out of time to cover AMI (African Minerals Full Year Results) announcement, polyhalite (SXX implications of Verde Potash), Copper (Central Asia Metals plc Q1 2014 Production Update inline and positive), Uranium support and improvement (improving outlook), Fluorspar (take outs) and Iron Ore (default on deliveries). If life was easy, I would just paid for a narrative...sadly I cannot pay myself to write!