The Shanghai Composite And The Communist Manifesto
So, we hear the Shanghai stock market has stabilized thanks to government intervention. I can't believe my ears. There are people on TV and in print actually saying the Chinese government is not going to allow a stock market crash and neither are other governments around the world going to allow their exchanges to experience a similar fate. I've even read where the correction in China was engineered by the government. That the Chinese government has more than $1 trillion at its disposal to stop a possible crash. This is preposterous. You mean like the crash in China less than a decade ago? Or like 2000 in the U.S.? Or maybe the Middle East in 2006? Or Russia in 2006? Or the FTSE in 2000? Or the Nikkei in 1990? The list is endless and so are the asset class corrections and eventual crashes throughout history, be Tulipmania or the South Sea Bubble hundreds of years past or more recent manias.
The communists have decreed a reduction in speculation? Of course, my dear comrade Lenin. Does this chart of the Shanghai Stock Exchange look like a chart of stability? The air pocket on this chart is very disconcerting. To assume any entity can determine the fate of any stock exchange is ridiculous. To say this drop was engineered is equally ridiculous. The global equity markets have been working their way towards some type of dump for months. Dumps are never without warning. Ever. Just because you don't know it's coming doesn't mean someone else doesn't. I say this not because of my opinion but because of what I see. Let me give you an example. I've developed a very creative method of modeling large investor volume. I've never seen it implemented anywhere else. I doubt it's an original thought. In fact, I'm quite sure many have similar capabilities but they aren't going to share it and neither am I. The only question on this dump was when the trigger would be pulled and where it ends. This "correction" has nothing to do with the Chinese politburo's "corrective" policies. Or as Mark Twain said, "A lie can travel half way around the world while the truth is putting on its shoes.".
Let me be blunt. Free market and democratic investors participating in a communist market is unprecedented and yet the world of fools is not. (Yes, I know the restrictions on buying Chinese stocks on the Shanghai exchange.) Do you want your money invested in a police state with no transparency, little regulatory control, terribly weak financial markets, massive corruption and central planning? If so, good luck. There's enough risk (and return) for me investing in transparent societies with strong regulatory control, deep financial markets, strong liquidity and market driven investments. For me, that is basically Japan, Europe, Canada, Australia and the U.S. If someone wants an outsized return, it isn't necessary to invest in poorly regulated shallow markets. Energy, metals, gold, home builders, industrials and many consumer discretionary stocks far outperformed this cycle in stable Japanese, European, Canadian, Australian and U.S markets without many risks associated with emerging markets or communist regimes.
The only stability I see in the Shanghai Composite is after a 50-70% drop. Let's see the Chinese government prop up the stupidity of hack investors leveraging their homes to buy government controlled companies. Maybe we've achieved a Brave New World. In the U.S., the bulls have held support so far. Let's see what happens in the coming weeks. Will they be able to drive us higher or will we break down from here?
The communists have decreed a reduction in speculation? Of course, my dear comrade Lenin. Does this chart of the Shanghai Stock Exchange look like a chart of stability? The air pocket on this chart is very disconcerting. To assume any entity can determine the fate of any stock exchange is ridiculous. To say this drop was engineered is equally ridiculous. The global equity markets have been working their way towards some type of dump for months. Dumps are never without warning. Ever. Just because you don't know it's coming doesn't mean someone else doesn't. I say this not because of my opinion but because of what I see. Let me give you an example. I've developed a very creative method of modeling large investor volume. I've never seen it implemented anywhere else. I doubt it's an original thought. In fact, I'm quite sure many have similar capabilities but they aren't going to share it and neither am I. The only question on this dump was when the trigger would be pulled and where it ends. This "correction" has nothing to do with the Chinese politburo's "corrective" policies. Or as Mark Twain said, "A lie can travel half way around the world while the truth is putting on its shoes.".
Let me be blunt. Free market and democratic investors participating in a communist market is unprecedented and yet the world of fools is not. (Yes, I know the restrictions on buying Chinese stocks on the Shanghai exchange.) Do you want your money invested in a police state with no transparency, little regulatory control, terribly weak financial markets, massive corruption and central planning? If so, good luck. There's enough risk (and return) for me investing in transparent societies with strong regulatory control, deep financial markets, strong liquidity and market driven investments. For me, that is basically Japan, Europe, Canada, Australia and the U.S. If someone wants an outsized return, it isn't necessary to invest in poorly regulated shallow markets. Energy, metals, gold, home builders, industrials and many consumer discretionary stocks far outperformed this cycle in stable Japanese, European, Canadian, Australian and U.S markets without many risks associated with emerging markets or communist regimes.
The only stability I see in the Shanghai Composite is after a 50-70% drop. Let's see the Chinese government prop up the stupidity of hack investors leveraging their homes to buy government controlled companies. Maybe we've achieved a Brave New World. In the U.S., the bulls have held support so far. Let's see what happens in the coming weeks. Will they be able to drive us higher or will we break down from here?
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