NEW YORK (TheStreet) -- If you read my article in late April on China, you know that I am bearish on China contrary to the majority of analysts. I have one advantage: no conflict of interest. I don't manage money, I am not a broker, and don't work for Wall Street. Thus, I can say "sell" or "sell short."The next 12 months may be the most important for investors and traders in several years. Most money managers are not prepared for it, just as they were totally unprepared during the last global crisis. This opens up great opportunities for the small segment of investors who are prepared.
For China now we hear that "the government will cut bank reserve requirement, allowing banks to make substantially more loans." These analysts don't realize that the government is far behind the power curve, meaning that the economy and financial condition of most firms is so bad that they can't get bank loans at any price. The bulls say that there are 1.4 billion consumers who will support the economy. Well, China had that many in 2008 but it didn't prevent the crash of the Shanghai market of 71%. Most of those 1.4 billion people are so poor they have trouble feeding themselves. The bulls say that China has $5 trillion of reserves which it can throw into the economy. They don't realize that most of that money is already spent in infrastructure, and $800 million is in U.S. Treasuries, which it really can't sell quickly. By the way, in 2008, China had about $3 trillion of reserves but it didn't prevent the China crisis that year. Bloomberg reports that China's largest real estate developer, Vanke, said April sales fell a huge 35% from the prior month. That's incredible because March was already down 30% to 50% depending on the city. A Hong Kong-based property analyst at Credit Suisse was quoted: "It (China real estate) may pick up in the coming months, because developers are cutting prices to boost sales volume." You see, they really think that lower prices lead to higher sales. The U.S. experience in the past four years shows otherwise. Demand leads prices. And demand has disappeared. I suggest you don't let the Facebook ( FB) hoopla lure you in.