The Looming China Crisis Is About to Hit

Hong Kong luxury car sales are plunging. The plunge in car sales in mainland China started over one year ago, but the media ignored it. Now Hong Kong is feeling the pain. Luxury car sales, like Lamborghinis, Ferraris, etc. are down 50% in just the past three months. This is a great indicator of an economy that is contracting at an accelerating pace.

The real estate bubble in Hong Kong is also bursting. It is all so similar to the U.S. in 2008, before the near-meltdown.

Why should all this matter to U.S. investors who would never buy a Chinese stock? Because a serious China recession will eventually hit the global financial markets like a tsunami. Of course, the government will hide the true economic statistics. In our newletter The China Boom-Bust Analyst, we write about the admitted efforts of the government to have companies report much better numbers in order to make statistics look better.

What does a China recession mean?

China consumes:

53% of the world's cement
48% of the world's iron ore
47% of the world's coal
the majority of just about every major commodity
nearly 500 million Chinese live on less than $2 a day
55,000 cigarettes every second

For traders, this opens great opportunities on the short side of stocks that are heavily dependent on China demand. Often you can make greater profits when stocks decline rather than waiting for the next bull market.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.