Shanghai Index Has Another Murderous Decline Overnight And Makes New One Year Price Low. Next Stop A Retest And Break Of The 2008 Bear Market Lows?
China's equity markets have been in a bear market since 2007. It's underlying economy has been collapsing for over a year. If you really understand economics, you know why I have been confident stating this many times on here. In fact, last year we wrote why soaring auto sales were a sign of impending doom. This while the mainstream media and Wall Street bullishly. and very incorrectly, focuses on the massive auto sales and real estate boom in China. We were probably the only voice known to mankind who accurately called the implosion of Chinese equities and the coming collapse in its economy. Well, except for long time reader, commiserator and European economist Frank.
We have written numerous times that technical analysis is simply a self-fulfilling manifestation of fundamentals. There is absolutely no replacement for accurate fundamental analysis. Back in October of 2008 people were citing RSI readings, percentage of stocks below their moving averages or whatnot as a reason to buy kept getting their asses kicked as the stock market kept imploding for another six months into March of 2009. Why? Because they didn't understand fundamentals. It was not an oversold reading of technicals that started this rally in March of 2009. It was a change in fundamentals. Period. If fundamentals had not changed, the market would have kept imploding. People who do not understand the limitations of any type of analysis all worship false gods. And worst of all are the people on Wall Street who generally worship no god. In other words, they don't understand anything. Which is why 99% of money managers, private equity managers, bank CEOs, traders and hedge fund managers would be living under a bridge panhandling for money right now were it not for the people who work in Wal-mart stores who had to bail out these generally megalomaniacal, arrogant and ungrateful bastards who killed our economy.
Back in the first few days in May, a very prominent financial blogger remarked that sentiment was possibly becoming too bearish on China with a handful of people now calling for an implosion in China over the past four or five months. Below in italics is what I said to him at the time. It's a variation of what I have written on here many times about sentiment eventually failing.
Getting the specifics right about the future are not easy but they are predictable on a macro level. That is, China is finished.
Trying to apply sentiment to this situation is preposterous. You must apply reason. Did the Russians believe the end of World War II was just around the corner when ten million of its citizens had been killed? Could it get any worse? Why yes it did. Another ten million lost their lives.
You simply cannot apply sentiment to a macro situation like this. It's ridiculous. You cannot stop a collapse from happening after printing money at a pell-mell rate for a decade. It would be like applying sentiment to whether the volcanoes in Iceland are going to stop erupting.
Countless people saw the collapse in the United States in 1929 and in Japan in 1989. If you know what is happening in China and actually follow the statistics, the collapse has already begun.
Remember, on here we always listen to what gold is telling us. But in this environment we do not like gold. A very, very, VERY lonely position. If you bought the shiny metal at $200 or $400 or somewhere when it was despised, there is no imminent danger. But, there are maybe 1% of gold holders who bought at those prices. If you did, consider yourself lucky or smart or both. The vast majority of gold purchases have been made at very elevated levels. With China under pressure, you might consider buying some antiperspirant. ie, I would be sweating my positions just about now.
Shanghai link in the post title.
We have written numerous times that technical analysis is simply a self-fulfilling manifestation of fundamentals. There is absolutely no replacement for accurate fundamental analysis. Back in October of 2008 people were citing RSI readings, percentage of stocks below their moving averages or whatnot as a reason to buy kept getting their asses kicked as the stock market kept imploding for another six months into March of 2009. Why? Because they didn't understand fundamentals. It was not an oversold reading of technicals that started this rally in March of 2009. It was a change in fundamentals. Period. If fundamentals had not changed, the market would have kept imploding. People who do not understand the limitations of any type of analysis all worship false gods. And worst of all are the people on Wall Street who generally worship no god. In other words, they don't understand anything. Which is why 99% of money managers, private equity managers, bank CEOs, traders and hedge fund managers would be living under a bridge panhandling for money right now were it not for the people who work in Wal-mart stores who had to bail out these generally megalomaniacal, arrogant and ungrateful bastards who killed our economy.
Back in the first few days in May, a very prominent financial blogger remarked that sentiment was possibly becoming too bearish on China with a handful of people now calling for an implosion in China over the past four or five months. Below in italics is what I said to him at the time. It's a variation of what I have written on here many times about sentiment eventually failing.
Getting the specifics right about the future are not easy but they are predictable on a macro level. That is, China is finished.
Trying to apply sentiment to this situation is preposterous. You must apply reason. Did the Russians believe the end of World War II was just around the corner when ten million of its citizens had been killed? Could it get any worse? Why yes it did. Another ten million lost their lives.
You simply cannot apply sentiment to a macro situation like this. It's ridiculous. You cannot stop a collapse from happening after printing money at a pell-mell rate for a decade. It would be like applying sentiment to whether the volcanoes in Iceland are going to stop erupting.
Countless people saw the collapse in the United States in 1929 and in Japan in 1989. If you know what is happening in China and actually follow the statistics, the collapse has already begun.
Remember, on here we always listen to what gold is telling us. But in this environment we do not like gold. A very, very, VERY lonely position. If you bought the shiny metal at $200 or $400 or somewhere when it was despised, there is no imminent danger. But, there are maybe 1% of gold holders who bought at those prices. If you did, consider yourself lucky or smart or both. The vast majority of gold purchases have been made at very elevated levels. With China under pressure, you might consider buying some antiperspirant. ie, I would be sweating my positions just about now.
Shanghai link in the post title.
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