Never underestimate Chinese paranoia. The degree to which the Chinese government can shoot itself in the foot has no bounds. Give them a reason to be paranoid and they’ll take it to the umpteenth degree to suffocate themselves in a furor. Imagine preparing for a moderate hurricane by not only putting up shutters, but by erecting an adamantium fortress with lookouts armed with tactical nuclear missiles instructed to unload all munitions if they see an ant carrying a piece of sawdust that looks suspiciously large when viewed under an electron microscope.

Donald Trump is certainly enough reason for the Chinese government to exhibit some form of healthy paranoia. I would too if I were in charge of the People’s Republic. But the more bellicose Trump gets, the more China will lock itself down and suffocate its own economy.

A piece from Bloomberg came out last week warning of danger in Macau stocks. This is true, there is danger, and much of the analysis is spot on. It focuses on the possibility of oversupply – and in a country full of real estate ghost towns this is actually quite likely – to copious bets on call options, to price to earnings ratios being 10% higher than they were at the 2014 peak. This is all true, but it misses the central point of why Macau is so dangerous particularly now.

The Bloomberg piece starts out with this paragraph (emphasis mine):