The Chinese real estate bubble has been imploding for the last year. The Chinese economy is barely growing at 1.6% after decades of 10% growth. There are millions of unoccupied condos. There are dozens of ghost cities and empty office towers. It’s the most corrupt nation on earth. We are in the midst of a global recession.It’s pure madness that the Chinese stock market would soar when its leading economic indicators crash to 2008 lows.
Its stock market has gone up 115% in the last 9 months. It has gone up 80% in the last 5 months. It has gone up 35% in the last month. Housewives and other uneducated gamblers have opened a record 10.8 million new stock accounts this year, more than the total number for all of 2012 and 2013 combined.
The Hong Kong stock market has gone up 14% in three weeks.
Since real estate investing is failing miserably, the Chinese middle class have piled into stocks on margin. Where have I seen that before? Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. When has buying overvalued stocks on margin when the economy is tanking ever gone wrong before? Have we already forgotten 2000 and 2008? Humans truly act like irrational herds of cattle stampeding in whatever direction they are pushed by their keepers.
After the markets closed for the weekend today in China regulators announced they were clamping down on the use of shadow financing for equity purchases and increased the supply of shares available for short sellers. Bloomberg explained what happened a few hours ago:
Investors have used umbrella trusts, which allow for more leverage than brokerage financing, to ramp up wagers on Chinese stocks after monetary stimulus sparked a world-beating rally in the nation’s benchmark equity gauge. Permitting mutual funds to lend their holdings to short sellers would make it easier for bearish traders to bet on a retreat after the Shanghai Composite Index closed at a seven-year high on Friday.
The announcement immediately caused Chinese stock market futures to crash by 6%. A similar move in U.S. markets would be a 1,000 point crash in the Dow. Monday should be interesting. The Chinese Plunge Protection Team is probably conferring with Yellen and her minions to avoid a worldwide contagion of people coming to their senses.
Bloomberg stumbles upon the truth of all the stock markets in the world hitting record highs:
Chinese investors have been piling into the equity market after the central bank cut interest rates twice since November and authorities from the China Securities Regulatory Commission to central bank Governor Zhou Xiaochuan endorsed the flow of funds into equities.
Central bankers in the U.S., Europe and Asia have created another massive bubble. This time it is a bubble in stocks, bonds and real estate simultaneously. There is no place to hide. We are now in the blow-off stage. Markets are totally disconnected from reality, amateurs and muppets have been lured into the fray, margin debt is off the charts around the globe, and confidence in the infallibility of Yellen, Draghi, and the Asian central bankers couldn’t be higher. These bankers have been tasked by their .1% masters to elevate markets across the globe so they can extract the remaining wealth of the clueless plebs. We are now in the death throes of this latest tulip mania. It may go on for many more months or today may be the peak, but one thing is for sure – it will crash and burn. What happens next is anyone’s guess. But I’d put my money on war, chaos, and revolution. There will be no impunity for our gambling.
“Nations, like individuals, cannot become desperate gamblers with impunity. Punishment is sure to overtake them sooner or later.” ― Charles Mackay
“Insanity in individuals is something rare – but in groups, parties, nations, and epochs it is the rule.”
Friedrich Nietzsche
“The mass never comes up to the standard of its best member, but on the contrary degrades itself to a level with the lowest.”
Henry David Thoreau
“It is because the public are a mass—inert, obtuse, and passive—that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are—and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against intelligence.”
Alfred Jarry
COMING TO A STOCK MARKET NEAR YOU
Chinese Stocks Are Still Crashing
Submitted by Tyler Durden on 04/17/2015 09:27 -0400
While the Chinese are long to bed, futures continue to trade on their exuberant stock market… and it’s going south in a hurry. As we noted earlier, the catalyst appears to be a regulatory decision to increase the number of ‘shortable’ securities (and follow-through from PBOC’s day prior demands of brokers to monitor margin trading). Both of these actions were taken as ‘signals’ that policymakers may be getting nervous about the ebullient wealth creation… Chinese stock futures are now down almost 7% – the 2nd biggest drop in 7 years.
Throughout time people have had an absolute love of studying history.
Which is why they have become so good at repeating it.
2015-04-17 06:15 by Karl Denninger
Bubbles, Bubbles Everywhere….
Things that make me when it comes to the market…
ETSY..
A rank double on the IPO. We haven’t seen that before, have we? Oh wait….
Netflix up $78 on “earnings” when its free cash flow is the most-negative in its history, which of course is what’s actually in the bank at the end of the day (or more-accurately in this case how much of it is flying out of the bank!)
The CNBS people are running around talking about nonsense like Bitcon (er, “coin”), which has lost somewhere around 75% of its alleged value (or, if you prefer my view, it has reverted 75% of the way to its actual value — that is, bupkis!) in the last little while — but it’s a “breakthrough” they say…. (sure is — it’s breaking through the bottom of your wallet headed for the toilet!)
I had an interesting conversation with one of the folks who hold a number of these tech stocks; he was the typical early 30s young and full-of-cum dudes when it came to the markets and technology, and of course was a huge believer in them in the public marketplace. It’s hard not to be when you’ve seen your Apple stock price nearly double in a reasonably short period of time.
My caution to him was the same as it is to everyone else in this space: Know where the door is and be prepared to use it; these prices are being driven by uneconomic acts that are being “validated” and even driven by central bank policy along with pie-in-the-sky unicorn beliefs.
The problem with uneconomic actions is that they’re uneconomic. I know that sounds circular and to some extent it is; the most-important part is that it cannot and thus won’t continue forever. When it stops the avalanche of people trying to get out before their “gains” are gone will make 2000 and even 2008 look like a cakewalk.
It is always said “this time it’s different” when a mania takes hold; the parade of people claiming so is never-ending and they get lots of ink because excitement sells — especially in the financial media. But the fact of the matter is that debt accumulation never has and never can drive sustainable growth — in asset prices or anything else.
Were I to have obtained an allocation in ETSY I’d have done exactly what I did back in 1999 with a couple of allocations I did get — I flipped them immediately. While this looked dumb a week or a month later with the benefit of hindsight a year later it was in fact extremely smart.
Yep, doubling down on every problem that created the worldwide disaster in 2008 to fix the problems.
Who, with the exception of you Admin, Karl, and about 1000 other voices trying to wake people from their slumber, that is who.
So, it dawns on me because it just too obviously “insane” to build Ghost Cities in the name of temporary profits, especially coming from an Empire that takes the long view, the very, very, long views, that they may not have “wasted” it.
I am not the only one that is smelling major, major, war in our immediate future. China has been busy using OUR fiat (from buying their produced “American” products) and forging, now, long-standing arrangements and relationships with nearly all, if not all, of our “enemies.”
I don’t think it was accidental that they used our money to buy our enemies alliance.
And when this dance starts in earnest, and China is forced to lay all cards on the table, and the decision comes down to either keep supplying our war effort, or not, either of those decisions may lead to a nuclear power leveling some of their current infrastructure.
Bombs are not free, nor quickly made, and no one would bomb the brand spanking new infrastructure with NO residents.
Whom is going to look crazy when we are living in tents – if lucky – and their survivors are being moved into modern high rises with faster internet than we are even allowed to have?
That is the way my mind works. In the end, my guess is as good as yours.
European stocks mauled by China, Greek worries; DAX logs worst week in 3 years
By Carla Mozee
Published: Apr 17, 2015 12:24 p.m. ET
European stocks dropped sharply Friday, pulling lower along with other global markets, with traders attributing the moves to changes in Chinese trading rules.
Heightened worries about a default by Greece also contributed to the dark mood on the financial markets. Friday’s hefty losses drove European indexes deeper into the red for the week. Germany’s DAX 30 DAX, -2.58% logged its worst week since November 2011, with 5.5% decline.
The Stoxx Europe 600 SXXP, -1.76% on Friday fell 1.8% to 403.69, led by nearly 2% fall for the basic materials group. The Stoxx 600 ended the week down 2.2%, the biggest such fall since December.
European equities began tumbling in late-morning trade, along with U.S. stock futures, after heavy selling in futures tied to Chinese stocks. The drops came after the Securities Association of China said fund managers may lend shares for short selling, and will also expand the number of stocks investors can short sell.
At the same time on Friday, the China Securities Regulatory Commission “banned the margin trading business of brokerages from taking part in umbrella trusts,” Bloomberg News reported.
As for the ban, “any sort of regulation for the market, particularly one that so buoyant like that in China, is never seen as a good thing as it’s literally a physical impact on the kind of trading that can be done. The actual trading itself is getting limited, potentially,” said Jasper Lawler, market analyst at CMC Markets.
The moves in China come as Chinese stocks have rallied this year. The Shanghai Composite SHCOMP, +2.20% is up 32%, and Hong Kong’s Hang Seng Index HSI, -0.31% has gained 17%.
Mining companies are sensitive to moves made in China, a key buyer of metals and other commodities. The U.K.’s FTSE 100 UKX, -0.93% was pushed 1% lower to 6,990.26, with mining giants Rio Tinto PLC RIO, -1.44%RIO, -1.44%RIO, -1.40% and BHP Billiton PLC BLT, -1.60% down 1.4% and 1.6%, respectively.
France’s CAC 40 PX1, -1.55% fell 1.6% to 5,143.26 on Friday, closing the week down 1.9%.
DAX and Athens: Germany’s DAX DAX, -2.58% on Friday was shoved down 2.6% to 11,688.70. Before the Chinese-stocks news, the DAX had already been moving toward its first weekly loss in four weeks.
Concerns about Greece’s debt troubles has hurt risk sentiment, and in turn has pressured the DAX, said Fawad Razaqzada, technical analyst at Forex.com. As well, gains this week for the euro EURUSD, +0.17%“has weighed on German exporters and that has eroded their attractiveness. That’s given investors a reason to take profit from these repeated record levels we’ve seen in the past few months.”
The DAX on April 10 hit a record closing high of 12,374.73. The euro has moved back above $1.07 against the dollar following a round of weak U.S. economic data.
Krugman to the rescue
http://www.zerohedge.com/news/2015-04-17/greece-about-be-fixed-good
In most of the world the mantra is follow the money; in China, its follow the Party. The Party wanted to inflate the Shanghai Stock Exchange so it talked it up and the money followed. Now they realized they created a monster and they seek to quietly put the monster back in his cage. Good luck with that. Stocks are crashing around the globe and the bears will be gorging come Monday. I don’t think that monster is going back in his cage without a fight.
Quinn has yet to understand any of the truth behind 9/11.
He is just full of shit and still writing meaningless economic tripe.
Just another satisfied MORON !
Again he FAILS the…
9/11Litmus Test
“It’s [China] the most corrupt nation on earth.”???
I suggest you look into your mirror:
Your beloved Great Land of GMO Milk and Fake Money is THE Greatest Corrupt and Most Evil nation on earth . . . throughout all of history, bar none!
“Your beloved Great Land of GMO Milk and Fake Money is THE Greatest Corrupt and Most Evil nation on earth . . . throughout all of history, bar none!” ———– David Chu
People here have said that Chinks have really high IQs. There goes that theory down the toilet!
China: so corrupt even the police are protesting … hardy fucking har har
David Chu – I wouldn’t be talking about milk. Remember the little “tainted milk” scandal in China?
China was U.S.-made. The U.S. came into China back in the 70’s, talked up the elite, told them they could make a ton of money, and the Chinese elite allowed the American multinationals in.
“The figures in 2010 showed that three-quarters of China’s top two hundred exporting companies – and these are Chinese statistics – are foreign-owned. There is a great deal of foreign investment in China, often from neighbouring countries like Taiwan. Foxconn, which produces computers for Apple in China, is a Taiwanese company.”
I’m not saying that China is not smart enough to have become a leading economic force, but not in the time they’ve had. The U.S. took their technological know-how into China, allowing China to get “up to speed” way faster than they could ever have done on their own, a process that would have taken China hundreds of years on their own.
The Chinese elite, in order to get rich (and, no, it was not done for the benefit of the peasants), allowed their country to be polluted, mined, rivers and soil destroyed, and all for a chance at billions of dollars to line their own pockets with.
You were sucked in for riches, and now your country is destroyed. The corrupt Chinese (the ones who are fleeing China with their new-found bribe money) are no more than parasites who ate up their country and then fled to greener pastures (pushing up prices all over the world with their monopoly money). No one should accept their money.