80 Billionaires Gathered in Conclave in Davos and the Market Tanks-Coincidence?

Yeah.
Probably.

From Barron's:
Risk-Off Redux 

While the elite meet in Davos, markets focus on the really big story -- the trouble in China's shadow banking system.

While the great and good of the world took in the rarefied air of Davos, fissures in global markets opened and threatened to create another seismic rumble.

Culminating with a 300 point-plus plunge in the Dow Friday, prices of so-called risk assets, ranging from emerging markets halfway around the globe to small-cap stocks with roots mainly in the good, old U.S. of A., tumbled last week. But the causes were likely less cosmic than the thoughts proffered by the elite in the Alps.

As Nouriel Roubini, who has been accorded the title of "Dr. Doom" for the 21st century, tweeted from Davos, there was much talk there of the parallels of 2014 with 1914, when Europe stumbled into World War I. "A black swan in the form of a war between China & Japan?" with the islands called Diaoyu by the former and Senkaku by the latter presumably playing the role of Sarajevo a century earlier. To continue the parallel, China is cast in the role of Germany, then the up-and-coming military and economic power, against Japan, the analog to Great Britain as the previously dominant power.

That China and Japan, the No. 2 and No. 3 economies in the world, would engage in armed conflict over what The Economist last year described as little more than "clumps of rocks" seems inconceivable, although the war of words heated up between the two nations. Yet the flap may have served mainly to obscure the actual crisis that threatens China, one financial and economic in nature.

Cracks are appearing in China's shadow banking system, which has been a major driver of the nation's credit explosion. As our colleague Jon Laing has detailed extensively in cover stories in the past two years, this credit bubble has funded a property and infrastructure bubble that is built on shaky ground. Fears that it might finally be about to burst are reverberating through the global markets.

China's credit woes are the proverbial elephant in the room, ignored amid the chattering about secondary topics, notably a slight dip in the nation's purchasing managers index, to below the 50 mark, thus denoting contraction in manufacturing. Then there were plunges in other emerging markets, notably currencies in Argentina and Venezuela, along with South Africa and Turkey. That those economies are suffering the effects of chronic mismanagement shouldn't surprise anybody. And South Africa's labor unrest hardly qualifies as news.

If there is any historical precedent, it may be 2007-08 rather than 1914. In China, so-called wealth-management products and trust loans are the analogs to U.S. subprime mortgages and the investment vehicles into which they were packaged in the past decade. In both cases, the allure was higher yields than those offered by conventional investments. And when defaults began to mount, the subprime problems were famously declared to be "contained" by American officials -- until they weren't a year later.

As Gavan Nolan, Markit's director of credit research, explains, wealth-management products and trust loans, the main parts of China's shadow banking system, provided one-third of new credit in 2013. "Shadow banking is one of the main sources of finance for investment projects in China, both privately and in local government. State-owned banks have systematically rolled over these loans, and they were regarded as quasi-government credit."

But, he continues, the prospect of a potential default in trust products distributed by Industrial and Commercial Bank of China has "created a chill in China and beyond." ICBC Chairman Jiang Jianqing said in a CNBC interview in Davos that the bank wouldn't bail out investors in the trust product, improbably dubbed the Credit Equals Gold No. 1...MORE

Also at Barron's:
Dow Slides 3.5% in a Global Retreat From Risk

Worries about slowing growth in China rippled around the world, roiling currencies and sinking stocks last week. Geopolitical fears on the rise. 

Stock-market bulls had their mettle tested last week, as the major indexes fell 3% in the biggest weekly selloff since mid-2012. After last year's rocket ride, investors who forgot that the U.S. stock market is still tethered to global markets were rudely reminded that it's a small world after all.

The retreat was sounded, before the U.S. markets opened Thursday, by surprisingly poor economic numbers from China. That snowballed into sizeable currency declines in emerging-market countries around the world, among them Argentina and Turkey. The avalanche moved to U.S. shores, where shares sold off precipitously Thursday and Friday. Unspectacular fourth-quarter earnings and domestic economic reports took a back seat to the global turmoil. Small-cap stocks fell hard, too, as investors switched to the "risk off" trade.

By the end of a holiday-shortened week, the Dow Jones Industrial Average fell 3.5% or 580 points to 15,879.11. The Standard & Poor's 500 index lost 2.6% or 48 points to 1790.29. The Nasdaq Composite index gave back 1.7%, or 69 points, to 4128.17. The Russell 2000 small cap index fell 3.3% to 1142.66 from a high of 1181.29 Wednesday.

Kate Warne, an investment strategist at Edward Jones, says the Chinese data, much weaker than expected, revived worries of a growth slowdown in the Middle Kingdom. That translated into fear about other emerging markets, many of which are important suppliers of raw materials or other inputs to China. Released before the U.S. markets opened Thursday, the HSBC January China Manufacturing Purchasing Managers' Index fell to 49.6 from 50.5 in December. A below 50 reading suggests contraction.

Warne remains bullish on U.S. equities, noting U.S. profit growth is "good but not great…If the market continues to sell down in the next few days it's an opportunity to buy." This isn't the first flare-up of China-slowdown concern since this bull has been running, she adds.

So far, the blended earnings-growth rate for S&P 500 companies in the fourth quarter—it includes actual results and estimates for companies yet to report—is 6.4%, according to FactSet Research....MUCH MORE

Here's the full list of all 2,625 attendees to the World Economic Forum from the Wall Street Journal.
The Pravda headline is "Eighty billionaires come to Davos to defend their right to become richer".
Last year there were only 70 billionaires.