CLICK CHART TO ENLARGE Talk Digital Network AUDIO INTERVIEW of BOB HOYE
Stock Market Crashes Stoppable? Never have so many owed so much to so few.
Stock Market Crashes Stoppable? Never have so many owed so much to so few.
Signs of The Times
Snippet from July 8, 2015 Pivotal Events
China's transition from exuberance to gloom has been rapid.
"At a stock trading hall for investors in Shanghai, the mood is glum. The zest for market speculation goes hand-in-hand with the socialist conviction that the government can and should protect them from risk." – Financial Times, July 1.
Formerly the bastion of capitalism, Wall Street has also become overly dependent upon socialist central bankers.
"Regulators [believe] that margin debt in China's stock market remains managable." – Reuters, June 30.
"China's financial industry joined the nation's securities regulator in moving to shore up the nation's $7.7 trillion stock market." – Bloomberg, June 30.
"China Hunts 'Manipulators' as Stocks Tumble"
"A flurry of policy moves over the past week, including an interest rate cut and a relaxation of lending rules had failed to arrest the sell-off." – Yahoo! News, July 3.
"Fund in China Fails To Stabilize Stock Markets" – The New York Times, July 4.
PERSPECTIVE
The above list chronicles the sudden discovery of a highly speculative blow-off gone suddenly bad. Such headlines could have been recorded in New York in early October 1929 or in 1873. Instead it was recorded in China at the conclusion of a truly magnificent financial mania.
On the way up, the action generated many quotations about the wonders of run-a-way speculation that peaked on June 12th. In a couple of steps the SSEC has plunged more than 30 percent. An index of new issues has crashed.
Although quick, there seems enough pattern to conclude that China's great bubble has blown out. As with historically great bubbles outside of New York it climaxed in the May-June window.
In the completing frenzy of the Nikkei Bubble at the end of 1989, there were official attempts to talk the speculation down. After some weeks of serious decline, policymakers talked about easing margin requirements. China's current easing of "lending rules" could be as effective as those offered in Tokyo in early 1990.
The plunge is much faster and steeper than the initial break in 2007. Another case of the "margin calls going out with the confirmations". Using the pattern that got us this far, once the SSEC stabilizes it could churn around into August. This could lead to heavy liquidation in the fall.
Considering the Greek problem, it seems like another test of policymakers and their peculiar theories. At speculative extremes they never have had any control over credit spreads and the action since May has been a warning. Also at such extremes they have been many months behind the changes in market rates of interest.
Ironically, the chronic application of desperate measures created a bubble which consequent 2 contraction will not be prevented by more of the same desperate measures.
This test of policymakers will likely mark their theories and practices as a massive failure.
Even worse, the public will eventually understand the failure as well. More alert politicians will pillory interventionist central bankers upon a cross of gold.
InstitutionalAdvisors.com FREE TRIAL HERE
Snippet from July 8, 2015 Pivotal Events
China's transition from exuberance to gloom has been rapid.
"At a stock trading hall for investors in Shanghai, the mood is glum. The zest for market speculation goes hand-in-hand with the socialist conviction that the government can and should protect them from risk." – Financial Times, July 1.
Formerly the bastion of capitalism, Wall Street has also become overly dependent upon socialist central bankers.
"Regulators [believe] that margin debt in China's stock market remains managable." – Reuters, June 30.
"China's financial industry joined the nation's securities regulator in moving to shore up the nation's $7.7 trillion stock market." – Bloomberg, June 30.
"China Hunts 'Manipulators' as Stocks Tumble"
"A flurry of policy moves over the past week, including an interest rate cut and a relaxation of lending rules had failed to arrest the sell-off." – Yahoo! News, July 3.
"Fund in China Fails To Stabilize Stock Markets" – The New York Times, July 4.
PERSPECTIVE
The above list chronicles the sudden discovery of a highly speculative blow-off gone suddenly bad. Such headlines could have been recorded in New York in early October 1929 or in 1873. Instead it was recorded in China at the conclusion of a truly magnificent financial mania.
On the way up, the action generated many quotations about the wonders of run-a-way speculation that peaked on June 12th. In a couple of steps the SSEC has plunged more than 30 percent. An index of new issues has crashed.
Although quick, there seems enough pattern to conclude that China's great bubble has blown out. As with historically great bubbles outside of New York it climaxed in the May-June window.
In the completing frenzy of the Nikkei Bubble at the end of 1989, there were official attempts to talk the speculation down. After some weeks of serious decline, policymakers talked about easing margin requirements. China's current easing of "lending rules" could be as effective as those offered in Tokyo in early 1990.
The plunge is much faster and steeper than the initial break in 2007. Another case of the "margin calls going out with the confirmations". Using the pattern that got us this far, once the SSEC stabilizes it could churn around into August. This could lead to heavy liquidation in the fall.
Considering the Greek problem, it seems like another test of policymakers and their peculiar theories. At speculative extremes they never have had any control over credit spreads and the action since May has been a warning. Also at such extremes they have been many months behind the changes in market rates of interest.
Ironically, the chronic application of desperate measures created a bubble which consequent 2 contraction will not be prevented by more of the same desperate measures.
This test of policymakers will likely mark their theories and practices as a massive failure.
Even worse, the public will eventually understand the failure as well. More alert politicians will pillory interventionist central bankers upon a cross of gold.
InstitutionalAdvisors.com FREE TRIAL HERE
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