The new year is off to a wonderfulstart. China is struggling to find balance, it has devalued, andsmall and medium sized companies are often in default on theirshadow bank loans. The volatility of the stock market is much lessimportant than what it signals, which is the government is not ableto find the right tools to revive the economy without much moredifficulty. As a result of the corruption crackdown many things atbanks and at government offices are ground to a halt, as most donot know how to function without the normal graft and payoffs. Thetypical loan officer got paid 10% of the loan amount personally sohe was incented loan the maximum. Officials got 10% of the deal orcash to approve development, so approvals of even dumb deals weregiven. The government wastrying to employ the maximum number of people, and to build thecountry's industry and infrastructure, so all sorts of projectsneeding government or state bank funding got funded. The result ismuch got built and over leveraged that never should have happened,and China now is similar to the US in 2008. This is going to takeyears to sort out and probably one or two more devaluations. Result is oil stays low, commodities stay low, andmany countries that supply China remain in worse and worse trouble.To try to protect the currency, China has clamped down on capitalflight and has made it much harder to move capital out. However, ingood Chinese tradition, for a 10% payment it is possible to do.That is a lot of extra cost for investors to carry and possiblywill mean they will want higher returns from investing here. Itwill also mean less cash comes out than might have. Because theChinese economy is much more troubled now, and cash is tight, therewill be a lot fewer tourists coming from China. China will disruptthe world economy for several more years.

The Middle East is spiralingcompletely out of control now that Obama has completelydisassociated himself from our allies and is seemingly solelyfocused on the disastrous and insane nuke deal. By doing nothingabout the Iran missile tests and launches, he has told Iran and NKorea, go do whatever you want, I will not do anything. Result, theSaudis and the other Arabs and Israel know for sure they need toprotect themselves and ignore Obama, which only serves toexacerbate the risk of all out Sunni, Shia war. Assad and Russianow know Assad is not going anywhere and Egypt has partnered withRussia since it knows it will get nothing useful form Obama. Bottomline, the region is on the brink of all out war and the chance ofthat is now higher than ever since the old days of Israel vs theArabs.