China Stocks: What Could Go Wrong?
Our friend Tim Iacono is always good at keeping us informed as to what is going on in China. This latest post by him takes a look at the education of new household investors.
For other posts by Tim please click here to visit his website.
Bloomberg reports that China equity markets have become even bubblier after a wave of new irrationally exuberant “investors” that harken back to the U.S. in the 1920s when Joseph Kennedy purportedly began selling stocks after receiving a hot tip from a shoe-shine boy.
On a positive note, they now appear to have their real estate bubble under control…
Yep, the markets are getting a bit more skittish, and it appears Gold & commodities are getting a bit of safe haven bid. Oil is up and the dollar is down.
This general trend will likely continue into mid-April, but I still anticipate a big sell-off in PMs, and commodities in late April into May, that will correlate with a dollar blow-off top to 110.
The spring trading season can be rough but I agree with you Shad. PMs are showing some spunk today. (;-)
Yeah, there is a little spunk in PMs today Dan. It is likely temporary and it may wane a bit tomorrow and Friday flat-lining a bit. However, we should still see a bit more Spunk going into early-mid April. I am going to be curious to see what happens in late April though to indicate the severity of the potential drop in May.
You never really know though, because Glenfidish has made a good point that gold may buck the trend and head up for April/May/and June and not really hit a bottom until November.
At this point, it is very challenging to gain a sense of direction, as the currencies, bonds, equities, and commodities are all over the place, yet interconnected. There isn’t a great trend that is easily discernible.
I ASKED MARK……….yesterday, if, because of the rise , which continues today, if we are getting set up for OPTION EXPIRY….., The banksters have been playing this game of take it up, smash it down for the last 4 months. A lot of commission dollars are being made by these PAPER TYCOONS………….Just a thought………….OOTB
Long term , gold is going higher, just a matter of time.
Yep. I think we’ll test the 1308 level again later this year, but the jury is still out on whether Gold will be able to take out the 1347 and in particular 1382 level and prove it has put in it’s bottom and is ending the Bear, and starting a new Bull run.
If the stocks do sell off hard later in the year, it may give commodities more a bid, and get a few institutional momentum players into the space. That would help.
That is a good point J…the Long and I forget to watch out for Option Expiry and the gyrations it can cause in sudden moves.
I do come up with some good crap…once in awhile………..lol …..j…..:)
I agree Shad, equities broke support across most markets and that triggered gold buying.
Yep. People are just getting a bit edgy.
War of the machines, you mean. They are wired to fire off buys and sells under certain predefined scenarios that can be adjusted day by day and hour by hour. And you wouldn’t be tipped off by stops when none exist and where it is purely automated.
But this action was really interesting when you appreciate it offers an insight into the thinking behind the code. What we just learned is that the geniuses who do the programming have presets to load up on long bonds and precious metals if (when) the market takes a tumble.
That’s fairly valuable information and its right on our screens this morning. There are days you don’t even need to look at charts when all you really need to know is what the herd of Algo’s are programmed to buy and sell.
So think like the machines! ….or the people behind them at least.
That is an interesting correlation to see from the trading bots. War of the Machines – where they do all the thinking like the Skynet system from Terminator. Spooky times.
The majority of the action is automated these days, Shad. What I look for are the patterns that reflect the consensus opinion behind the trading algo’s. What I mean to say is that even though we all know the market is stoked by computerized trades there are still real human beings and their preconceived notions behind the activity. The trades are therefore programmed to fire based on what the human operators think is important at any given time. So some of the action is based on historical statistical data and well established trade correlations but that can all be on over-ride at the flick of a switch. We saw that today at this inflection point. The reason it is important is because there is a widespread belief we are topping (on an interim basis) in equity markets and so the response needs to be formulated somewhat on the fly as the data comes in. The Algo’s are hardly unbeatable. Just trade alongside if you can catch what they are doing.
I absolutely agree Birdman. I’d rather trade with the algo-trend, and it is interesting to see that human’s behind the machine programmed to go long the bond/gold trade if the stocks tumbled along side the dollar going down. So if we know there is a somewhat inverse relationship programmed in for a selloff in equities to gold buys, then that will be interesting to track.
Don’t forget coffee, sugar and natural gas. Ever notice what goes green when all else gores red? Kind of comedic actually.
I hate people to call Chinese stock a bubble when it is only 60% what it was EIGHT years ago. Chinese GDP went up 200% during this period. Chinese government, unlike US, are not friendly to stock market. They have been using all means to crush it so people will not gamble in stocks but concentrating on real economy. Western people don’t know about it. If any of those measures was applied here, the stock will crash immediately.
I’m with you Lawrence. I think the Shanghai has a way to run up yet. This is the time to get in and catch the wave if you have the nerve to try timing when the top eventually arrives.
The problem with Chinese stock is that it is volatile without government protection. I think this time government allowed it to rise due to capital flow worry. The trigger was Shanghai Hongkong direct trade.
I have a little bit there and made some money during the last few years. I am 30% out.
I left you a note on docs thread Lawrence. It was supposed to be here but I punched it out and hit submit before I realized I was on the wrong thread.
Oh my……………GOLD UP BIG TODAY…….1203