You don't hear that expression much anymore. It means to be taken for a "ride." It goes back to the 1800s, when men were kidnapped to ships sailing to China by compulsory force. That image associated with the word today means a different ride. It is a rocket, straight up from the lows of 2009 on the Shanghai stock market. The index has risen over 122% or from 2025. It set a peak record on 12 June 2015 of 5178. It is up over 3,000 points in just one year. The Chinese are creating millionaires. However, dear reader the root of the word is the word. Like the song by CCR, I see a Bad Moon Rising.
Signs of Trouble
New accounts are off the charts. During the period of late 2008 to the present, there were 4,435,255 new brokerage accounts according to a report by NIA. This works out to a monthly average of 196,671 per week! It sounds and looks like 1929 all over again as the Chinese go All-In. Debt margin has increased on average by 15.24% and it is 4.22% of market cap!
Shanghai has percentage rules in stock trading. After a 10% move, a stock is halted for the day, however, it is different for IPOs. IPOs are allowed up to 44% per day and up to 110% for the week. From January to February in 2015, 18 companies went public. Every one went up the 44% limit and 17 of the 18 made the 110% gain for the week. Who wouldn't want to go all-in?
Roller Coaster
during the ride up, there have been moments of pressure. Last month the index dropped over 6% in one day, however, it steadied and hit the new peak earlier this month until this week. In just eight days the market has dropped 20% which is BEAR TERRITORY. It closed at its lows on Monday at 4053. The Chinese feel that the market will always come back like it did after falling from its all-time peak of over 6,000 in 2007. They don't understand that the market can be irrational for 20 or 30 years and much longer than you can be solvent.
Now, like I declare in my unpublished book, everything is related. Let us look at the other expression, "Greek Tragedy." A deal will be made by the EU with the Greek government because the Greeks are owned by the EU. They sold their sovereignty when they joined. The leaders know, but the people don't. Eventually, they will and this play will live up to the root of Greek plays, a tragedy.
I wrote that on Saturday and I was wrong. Greece defaulted, but the EU got control of the media to make like this was nothing more than a technicality. That, dear reader is pure BS!
It is so bad that the euro rose while the dollar declined which is the biggest lie of all! As I see it, the Greek Prime Minister is made out to be a buffoon, but I feel that he understands that fiat money is just a game. The people in power do not like to be shown up and being small in skin, they will seek to remove the Greek leader. They will get their chance as he has laid out the situation to his country which will vote on acceptance or refusal this Sunday. Already, the media is using fear to scare the vote for acceptance and to stay in the EU. They probably will succeed, but maybe, just maybe, a denial will again save democracy with this tragedy, and once again, Greece will be the cradle of democracy.
In the meantime to gather sympathy and appear like the "good guys," the EU will use one of their phony programs like the Economic Stability Fund to "help" the Greek people get by in this critical time. All they do is print on some paper, click-on their site and presto!: Money for economic stability in a time of crisis.
Nevertheless, no matter what the outcome of the outcome, all governments will stand on the side of the central bankers, so they look like the correct side and the Greek leader the fool. This will spark a world rally in markets, although only temporarily. This rally will stop the bleeding in Shanghai and the belief in this market will only make the final outcome more severe. By mid-July the joy will be over and the smart money long gone as a new low will be reached and I will do a follow up at that time to see how low it can go. At the moment, 3108 is in play. Elsewhere, the US will not be shielded from the fallout. We have a serious economic problem in Puerto Rico, and Illinois will soon make headlines under bankruptcy At present, we are also in a bubble in terms of margin debt. It surpassed the record of 2007 and it is over $507 billion. Margin calls in all markets can start a cascading fall that becomes self generating to the downside. Support for the Dow in the US is 16,500, however the transports never reached a new high which means the US is a conflicted market with over-priced stocks at over-priced evaluations.
Can you say, LIMBO?
No comments:
Post a Comment