Chinese stocks have been performing the most astonishing miracles on a daily basis. On Monday, the Shanghai stock index soared another 4.7%, now up 77% over the last six months and 140% over the last 12 months, interrupted only the occasional air pocket and deep and nerve-wracking but temporary plunge.

And this, just when China’s economy is slowing sharply, when overcapacity has become a nationally recognized problem, when growth in car sales, another miracle, is grinding down, and when everyone, from the National government on down, is working furiously to sweep non-performing loans under the rug and out of sight. No one wants to see them. They’re too big and too ugly to behold.

But nothing is going to stop this daily stream of stock-market miracles. Even in the US, not a day goes by when we aren’t exhorted by one of the gurus to finally jump on the bandwagon and buy Chinese stocks. The whole world is caught up in the miracle.

Suddenly, amidst all the hype, there is an unruly voice whose pronouncements on Chinese companies had epic impacts in the past: short-seller Muddy Waters Research, as always talking its book, but dude, it’s about time.

This is how Muddy Waters explains its name:

The Chinese have an old proverb, “浑水摸鱼” (muddy waters make it easy to catch fish). In other words, opacity creates opportunities to make money. This way of thinking has unfortunately become endemic in global capital markets.

So Carson Block of Muddy Waters told CNBC that Chinese stocks are soaring in part because liquidity is “being crammed into the system,” and in part because the Government of Mainland China has been pushing the meme that “buying stocks is patriotic.” So losing money is impossible, it seems. This has led to the “largest pump-and-dump in history,” as Block put it, with the share prices being manipulated up by insiders – in many cases by 500% in the past year.

Here are the mechanics of the greatest pump-and-dump in history with a strong warning to keep clear:

Hard-landing gurus have been predicting an imminent end of the China bubble for years. A “hard landing” would be the optimistic scenario. But to their greatest frustration, there was no hard landing, or a soft landing, or any landing for that matter. China just kept on flying. But now it’s running out of air. Read… China Momentum Indicator Plunges to “Hard Landing” Level

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