All things China continue to go berserk.The new listing in Shanghai for Bank of Communications surged 71% on its IPO.
The Chinese stocks I follow are mostly up a lot over the last few weeks, not as much as the Shanghai market but they do seem to be capturing a lot of the effect.
The Shanghai exchange has about tripled in the last year and a half. It has been a wild ride for a relatively new stock market.
If the market cracks, crashes or does anything else nasty it makes sense to expect other markets to react. I don't really get the wave of commentary that says otherwise, it seems that other markets would in fact feel a China meltdown.
However that does not have to mean that there is a fundamental reason for all other markets to go down with China. I would suspect that a reaction in sympathy could retrace rather quickly. Here though you need to think in terms of weeks not days.
It seems that most of the big, short term, "Vs" in the US market over the last ten years or so have needed six weeks or so to retrace.
You should be less afraid of a V shaped move than a U shaped move.
8 comments:
I suspect that the Chinese authorities did not really want to see such an extreme level of speculation. Now that they're stuck with it, however, it will be interesting to see how they react. Will they let it fall under its own weight or will they begin to emulate the US PPT in order to forestall a "crisis"?
It will be such an event as Shanghai buckling that will set off the geometric chain reaction collapse in the 300 trillion dollar deritives house of cards. The world will have never seen anything like it because the condition has never existed before.
Vuja De:
"To wit, when comparing the late-1990s, pre-bubble mindset to the modern day perception, it seems as if the names have changed to misdirect the innocent.
Back then, globalization was the justification for growth. Today, it is the root of isolationism and a path toward nationalization.
Back then, there was margin. Today, there is credit.
Back then, folks flocked to day-trading firms. These days, condo-flipping is in vogue.
Back then, politicians were targeting corporate America. Today, they've taken aim at lending practices.
Back then, we had the Greenspan put. Today, we've got the Bernanke helicopter.
Back then, Dan Dorfman moved markets with his opinions. Today, Jim Cramer is a self-proclaimed equity evangelist.
Back then, corporate malfeasance was being fingered by the misdirected masses. Today, insider trading is in the wake of the blame.
Back then, we had venture capitalists. Today, we have private equity.
Back then, we rationalized dot.com valuations. Today, we're collectively cool with debt levels.
Back then, Nobel Prize winners could do no wrong. Today, Goldman Sachs pedigrees are viewed in the same vein.
Back then, there was a scramble into index funds. Today, there is a race to chase the hedgies.
Back then, the FOMC walked the tightrope. Today, they're fitting a noose.
Back then, Julian Robertson capitulated. Today, Richard Russell is seemingly doing the same.
Back then, we had a financed based economy. Today, we have a finance-dependent economy.
Back then, Gordon Gekko was a financial icon. Today, or at least in production, he returns as a hedge fund manager.
Back then, we saw a fear of missing. Today, we have exactly the same thing.
There are plenty of threads between the decades, but perhaps the truest extension is the consistency of entitlement. In an age when the middle class is in the process of being eradicated, nobody seems to be where they want to be."
http://www.marketwatch.com/news/story/more-things-change-more-they/story.aspx?guid=%7BD43CA863%2D1A2E%2D415B%2DAD6B%2D62158F29113E%7D
"derivatives". Never could type well.
wow dave, you miss the run up pal.
buster
Another great post by Mebane Faber:
http://worldbeta.blogspot.com/2007/05/hulbert-trendfollowing-article.html
He really gets it. Market timing is about risk reduction, not enhancing returns. Note his comments on leverage.
If you follow Dave B's postings on Big Picture, you know that he is expecting the world to end soon.
Actually, it is amazing the number of people sitting this one out for fear of global armageddon.
Actually what is really amazing is the number of people who imagine a bearish stance is the same as sitting anything out; can't speak for anyone else but in my case it is the exact opposite, particularly WRT analysis.
Here's a quick quiz (with apologies to Jack @ http://tinyurl.com/2g4crv): Which portfolio would you be more comfortable holding?
* One in which you have an 80% chance of a 12% gain combined with a 20% chance of 10% loss.
* One in which you have a 70% chance of a 20% gain combined with a 30% chance of 20% loss.
* One in which you have a 100% chance of a 6% gain and no chance for loss.
* One in which you have a 60% chance of a 10% gain combined with a 40% chance of 30% loss.
If you are currently 100% long or close to that then your portfolio is the last one IMO.
We are living through a one-time global event, the metamorphosis of very large emerging markets into the economic mainstream, and a financial/currency system designed for the 20th century is barely keeping up. Imagined as a semi-closed thermal system with the Bank of Japan and Europe pouring fuel in while the USA serves as the main heat sink (assisted by other central banks) there is growing friction and the possibility of a breakdown must be taken into account; failure to do so in some manner is frankly foolish, particularly since an array of risk management techniques are feasible and available to the small investor.
Roger, you should compare the H-Chip index in Hong Kong to the Shanghai index. From what I see, a correction will be a great buying opportunity because traders will send the discounted shares down as much as the mainland shares.
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