No, not in housing, although it is way too early to make a definitive statement about loan losses tied to poor credit borrowers. This problem centers on auto loans. Yeah, just when the stock market falls into correction territory, Sebastian gives us another broken shoelace which could lead into the second shoe dropping. Hey, he's just a messenger of truth that gives you, dear reader, a heads up. It is something to keep in mind when the shills tell you to "buy the dips."
Subprime Not Dead
It almost died with the housing crisis, but gamblers knew the Fed would cover their backs. They found a new home in car loans. Subprime home loans now only account for a tiny fraction of mortgage loans at .25%, however they now make up 26% of all auto loans and rising.
As stated in a earlier piece, the car loan borrowing term has been continually extended with the continually rising price of a new car. The problem defies the lies that there is no inflation. It is so bad that average age of cars on American roads is at a record of eleven years young.
The hawkers still want to shout on late night TV, "Need a car? C'mon, down! Just $99. down and $99. per month...No credit? No problem.." They only can do that because in the 70s with a term that was 36 months. In the 80s, it went to 48 months. Now, that new car will have 200,000 miles on it when you pay the check at 84 months.
Car sales will most likely tally 17 million sales in 2015 and that is great for the economy, but you are straddled with that extra bill for the next seven years and one miss, one dental visit, one layoff and you are basically bankrupt. The gamblers realize that and that is why they moved into this market.
60 Minutes
and the US government hounded the Mafia over loan sharking, but they hold the door open for companies like Springleaf(LEAF). This jewel specializes in subprime auto loans and they charge as much as 27%. They are twice as bad as my pisans. They are the real crooks!
Things are stating to look cloudy. If they get worse, I plan to short LEAF and this is my indicator.
Nomura
released a study which showed auto loans in delinquency. It is high and approaching 7% of the $16.8 billion market backed by subprime. The loans are tied to bonds which recalls the expression, "Can you say, swaps?" These gamblers are lowering the loan standards to gain market niche, but life happens: one toothache, one car repair or new tires, new brakes or layoff and the clouds will open and rain will fall.
Critics decry us who call to mind life as we see it and they never see the crisis until it happens. I see this situation as another way to a crisis and if it develops, our economy will be stuck in second gear.
Wednesday, August 26, 2015
Wednesday, August 19, 2015
5 More Reasons To Lose Sleep
There is two sides to a story and the good side of this piece is the fact that it should not cause apnea which is life threatening. The bad news is that stress and disturbances can cause a sleep disorder. Lately, the evening news disrupted our supper, causing indigestion. It led to difficulty in sleeping due to Greece, Shanghai market, Ukraine, Syria and missing planes. Then, nothing like the center of a hurricane. We caught some good zee's. In fact, we got desert. Moody's upgraded Greece to triple C(CCC). Hey, don't laugh. US infrastructure is rated "D+."
Hey, we're all sick of it and I hate to add to the disharmony, but I become aware of five reasons that can lead to insomnia, although the song had more rhythm, "I was tossing and turning all night..."
1) US banks that were too big too fail back in 2008 are now 45% larger. The expression needs an update because the root of the baking industry problem was derivatives. Today, the so-called insurance vehicle is $100 billion bigger than during the financial crisis.
2) The above problem gets compounded(pun intended)due to the danger that the FDIC insurance fund does not have enough $ to cover any major default. In fact, the fund only has enough dough for 1.01% of bank money. Keep in mind that our government lost control of our currency and no one knows the exact amount held outside our border. We do know that it is almost 50% which is astounding and foreigners hold more $100 dollar bills than we do. Unbelievable but true!
3) The danger that a desperate Congress looking for money to spend will impose new regulations like capital controls. In fact, they already have controls on the books. Any banking transaction of $5K is reported and $10K always gets a closer look. There is also the fear that social security will be amended to allow privatization or some form of it. This could lead to apnea! By the way the government has already taken this money and pension money too when they needed it during the debt ceiling crisis.
4) According to Global Finance and their annual list of the 50 safest banks in the world, only five US companies made it and the leader of this pack came in at #39. Even I don't believe this one.
5) For the first time more US businesses went out of business than our free enterprise opened new businesses. Not only are we losing our social mobility, but we are losing free enterprise and without it, there can be no American dream as envisioned by our Founding Fathers.
I guess if you want to see something, your mind will help you find it. However, if your subconscious places you in dreams that give you a nightmare, I offer this one last suggestion. Turn the pillar over. The cool side will allow you to return to an island paradise with eye candy all about.
Hey, we're all sick of it and I hate to add to the disharmony, but I become aware of five reasons that can lead to insomnia, although the song had more rhythm, "I was tossing and turning all night..."
1) US banks that were too big too fail back in 2008 are now 45% larger. The expression needs an update because the root of the baking industry problem was derivatives. Today, the so-called insurance vehicle is $100 billion bigger than during the financial crisis.
2) The above problem gets compounded(pun intended)due to the danger that the FDIC insurance fund does not have enough $ to cover any major default. In fact, the fund only has enough dough for 1.01% of bank money. Keep in mind that our government lost control of our currency and no one knows the exact amount held outside our border. We do know that it is almost 50% which is astounding and foreigners hold more $100 dollar bills than we do. Unbelievable but true!
3) The danger that a desperate Congress looking for money to spend will impose new regulations like capital controls. In fact, they already have controls on the books. Any banking transaction of $5K is reported and $10K always gets a closer look. There is also the fear that social security will be amended to allow privatization or some form of it. This could lead to apnea! By the way the government has already taken this money and pension money too when they needed it during the debt ceiling crisis.
4) According to Global Finance and their annual list of the 50 safest banks in the world, only five US companies made it and the leader of this pack came in at #39. Even I don't believe this one.
5) For the first time more US businesses went out of business than our free enterprise opened new businesses. Not only are we losing our social mobility, but we are losing free enterprise and without it, there can be no American dream as envisioned by our Founding Fathers.
I guess if you want to see something, your mind will help you find it. However, if your subconscious places you in dreams that give you a nightmare, I offer this one last suggestion. Turn the pillar over. The cool side will allow you to return to an island paradise with eye candy all about.
Tuesday, August 11, 2015
Dicotomy: GDP Facts Versus Predictions and Other Tidbits
Did you know that Canada is in recession? The US media only points out what the powers-to-be like it to broadcast. They never talk about the fact that many EU members are in recession with overall growth of only 1%. However, we do know what Trump is worth and how many candidates are seeking the presidency. When the media mentions the economy, it loudly shouts a spin on any news like the current release of GDP numbers. It came in at 2.53%, however that translates to an average of only 1.45% which is nothing to brag about.
Now, what I would like to do is go back to the last quarter of 2014 when the pundits made their predictions for 2015. They have one common denominator: They're all wrong!
Back To The Replay
In November 2014 the shills called for GDP to expand at a 3.5% to 4%-plus rate. They all had their stat sheets with leading and lagging indicators. Everyday people like Sly and the Family Stone and myself called for a downturn. We were closer to the truth, but our voice is limited to classic rock stations and some internet communication.
Leading Indicator
of the indicators is the stock market. It looks out about six months in advance. The market had hit yearly lows for 2014 in October, but rallied and in the mix of that occurrence, the pundits made their call. They looked good in their Christmas suits, but lo and behold, the January barometer fell, indicating a down year for 2015. They did not panic. They have deep pockets and the belief that the Fed will cover their backs. Again, they appeared well dressed in their Easter apparel as the market hit record highs. Not so fast, Kimosabe!
Dow Theory
says that the industrial and the transports must climb together. Transports lagged. They failed which puts the market in disharmony. The analysts were wrong as the numbers for GDP reveal that they were off by 50%!
The IMF is another shill that made its 2015 forecast back in September 2014. Not to be alone the headlines were staggered with reinforcing claims by the Fed and the US government, the EU and central banks throughout the world. Basically, they predicted GDP to grow between 3.5% to 4%-plus in 2015. Bottom line: they were all wrong and off by 50%!
In fact, for the past six years GDP has averaged a mediocre 2% and every year the pundits said 3%-plus. All wrong!
The Fed and the government like to point to the declining unemployment, but people will take any job rather than go hungry. The proof lies in the fact that wages are stagnant. Retail sales reflect this aspect which falls in the
lagging indicator category.
Economists like to point out that housing is the most important aspect in this category and in our service economy. It has risen from depressed levels to a new annual cost average for a new house with an all-time record high. They add that building permits are climbing off the charts which supports their claims that housing is back. Again, not so fast Kimosabe!
The permits are skewered toward multi-family. First time buyers of single family homes are shrinking and overall family home ownership is at 1967 lows which is almost 50 years ago with a much lower population.
Oh, by the way, builders of multi-family units have a history that points to peak building just prior to a contraction. Dear reader, you can't spend what you don't have because unlike the Fed you can't print your way to a higher standard of living. Maybe none of the presidential candidates will say it, but our standard of living is not even in the top fifteen nations of the world, thanks to the Fed lowering the value of our dollar and the military controlling our yearly national budget. The trend in retail sales is down and since we are a service economy, the outlook points that way.
Now, what I would like to do is go back to the last quarter of 2014 when the pundits made their predictions for 2015. They have one common denominator: They're all wrong!
Back To The Replay
In November 2014 the shills called for GDP to expand at a 3.5% to 4%-plus rate. They all had their stat sheets with leading and lagging indicators. Everyday people like Sly and the Family Stone and myself called for a downturn. We were closer to the truth, but our voice is limited to classic rock stations and some internet communication.
Leading Indicator
of the indicators is the stock market. It looks out about six months in advance. The market had hit yearly lows for 2014 in October, but rallied and in the mix of that occurrence, the pundits made their call. They looked good in their Christmas suits, but lo and behold, the January barometer fell, indicating a down year for 2015. They did not panic. They have deep pockets and the belief that the Fed will cover their backs. Again, they appeared well dressed in their Easter apparel as the market hit record highs. Not so fast, Kimosabe!
Dow Theory
says that the industrial and the transports must climb together. Transports lagged. They failed which puts the market in disharmony. The analysts were wrong as the numbers for GDP reveal that they were off by 50%!
The IMF is another shill that made its 2015 forecast back in September 2014. Not to be alone the headlines were staggered with reinforcing claims by the Fed and the US government, the EU and central banks throughout the world. Basically, they predicted GDP to grow between 3.5% to 4%-plus in 2015. Bottom line: they were all wrong and off by 50%!
In fact, for the past six years GDP has averaged a mediocre 2% and every year the pundits said 3%-plus. All wrong!
The Fed and the government like to point to the declining unemployment, but people will take any job rather than go hungry. The proof lies in the fact that wages are stagnant. Retail sales reflect this aspect which falls in the
lagging indicator category.
Economists like to point out that housing is the most important aspect in this category and in our service economy. It has risen from depressed levels to a new annual cost average for a new house with an all-time record high. They add that building permits are climbing off the charts which supports their claims that housing is back. Again, not so fast Kimosabe!
The permits are skewered toward multi-family. First time buyers of single family homes are shrinking and overall family home ownership is at 1967 lows which is almost 50 years ago with a much lower population.
Oh, by the way, builders of multi-family units have a history that points to peak building just prior to a contraction. Dear reader, you can't spend what you don't have because unlike the Fed you can't print your way to a higher standard of living. Maybe none of the presidential candidates will say it, but our standard of living is not even in the top fifteen nations of the world, thanks to the Fed lowering the value of our dollar and the military controlling our yearly national budget. The trend in retail sales is down and since we are a service economy, the outlook points that way.
Wednesday, August 5, 2015
Signs, Signs, Everywhere a Sign...
Do you remember that oldie? The wisdom behind it is still relevant. Greece proved that. I fear the US national deficit will second the motion. In fact, Greece has borrowed less than the US since 2007 when you relate the borrowing as a percentage to GDP. The US borrows 7.45% and Greece takes 7.3%. Both are really sad numbers.
In relation, it has been years since Pete Peterson's, Running On Empty and deficit figures have doubled which is in itself, totally insane to contemplate.
The Shanghai stock market climbed 159% in less than a year and then, lost 35% in less than 30 days.
Picture Clear?
Connecting the dots and it gives focus. If it is still not clear enough for you, here is some help and clues to provide an answer.
* The Shanghai market may bounce, but the Chinese society look around and see a slowing economy. This will cause a rush for the exit doors. The government will only compound the effect with more desperate restrictions. Then again, the Chinese see their housing market imploding and their faith in government will be shaken which could lead to a new bubble like gold, but most probably, everyone will hold their money under their mattress. In a sidebar, South Korea just had its biggest month in the purchase of the yellow metal.
* The US market is facing a summer doldrums with September and October looming.
* Oil prices! The summer driving seasonal bounce is over. Oil inventories are building and Iran only adds to the glut. Many small explorers could go belly-up which will effect the $600 billion junk bond market. Like I say in my unpublished book, all things are connected.
* Emerging markets are suffering from low commodity prices and the strong dollar effects our companies too.
* The Fed, if they finally do what they say they will do and raise interest rates,this will cause a ripple effect in Treasuries and all bonds. If too many sell, a liquidity crisis could surface. I have previously warned you that there is insufficient cash in circulation to cover all the credit debt that has exploded since 2007.
* Gold. It is in a quandary. The big buying season in August is here and both the Chinese and Indians could spark a needed rally. If it becomes a meme with Europe, the US will awaken against the wishes of the fiat powers. They won't be able to stop it, but this will only cause another bubble and all bubbles never end well.
Now everyone, "Signs, signs, everywhere a sign..."
In relation, it has been years since Pete Peterson's, Running On Empty and deficit figures have doubled which is in itself, totally insane to contemplate.
The Shanghai stock market climbed 159% in less than a year and then, lost 35% in less than 30 days.
Picture Clear?
Connecting the dots and it gives focus. If it is still not clear enough for you, here is some help and clues to provide an answer.
* The Shanghai market may bounce, but the Chinese society look around and see a slowing economy. This will cause a rush for the exit doors. The government will only compound the effect with more desperate restrictions. Then again, the Chinese see their housing market imploding and their faith in government will be shaken which could lead to a new bubble like gold, but most probably, everyone will hold their money under their mattress. In a sidebar, South Korea just had its biggest month in the purchase of the yellow metal.
* The US market is facing a summer doldrums with September and October looming.
* Oil prices! The summer driving seasonal bounce is over. Oil inventories are building and Iran only adds to the glut. Many small explorers could go belly-up which will effect the $600 billion junk bond market. Like I say in my unpublished book, all things are connected.
* Emerging markets are suffering from low commodity prices and the strong dollar effects our companies too.
* The Fed, if they finally do what they say they will do and raise interest rates,this will cause a ripple effect in Treasuries and all bonds. If too many sell, a liquidity crisis could surface. I have previously warned you that there is insufficient cash in circulation to cover all the credit debt that has exploded since 2007.
* Gold. It is in a quandary. The big buying season in August is here and both the Chinese and Indians could spark a needed rally. If it becomes a meme with Europe, the US will awaken against the wishes of the fiat powers. They won't be able to stop it, but this will only cause another bubble and all bubbles never end well.
Now everyone, "Signs, signs, everywhere a sign..."
Friday, July 31, 2015
Buybacks Exposed: Bottom Line Revenues
Wall Street CEOs use a lot of tricks to keep their stock price high. They do this for many reasons and most of them are not good for shareholders. In this follow the leader game, buybacks hold center court. When companies buyback their shares, they are implying that the value is too low or in the near-term future, they expect something good like a new gismo, a big sale or maybe even a merger. However, in the recent trend by CEOs, it is to cover shortfalls in bottom line revenues with declining sales. You see, dear reader, if there are less shares available, the division of earnings looks better. The quarterly earnings number can always be manipulated by changing a date of receivables to include it in the recent quarter if needed, however there is no way to hide declining sales and revenues even though many COOs have used many tricks like Pro Format accounting schemes.
Apple
the darling of Wall St. and investors has used buybacks to make their stock appear better. They have brought back 10% of their shares and still, the total bottom line is shrinking.
Many others are following their lead. Bed, Bath and Beyond could argue for the poster-child photo. Somehow, they have fooled the public, but a closer look shows that the bottom line revenues have declined quartet-after-quarter. They are not alone. Big Blue has fallen six quarters in a row as well as Proctor and Gamble, DuPont and many more.
Caterpillar in its conference call, tries to imply that things will pick up and this is only temporary, but iron ore, gold and mining in general, speak a different language. Starbucks is the latest to play this game. I guess people are tired of $3.00 per cup of coffee with no refills.
The banking industry wrote the playbook in this category. They have a major influence in the media and among analysts. They use this and other techniques to keep their share price high like putting the spin on stress tests. They pass and they claim greater capitalization, however they know that their exposure to the derivative market could collapse the global market and bankrupt their company. They smile like all is well as they buyback their shares. The CEOs can't wait to use their warrants to become not only a millionaire, but a billionaire.
Old Technique
was cost cutting which generally meant, jobs. Qualcomm is old school in this game. Recently, they announced a 15% layoff in employment. Think about that? If your business is growing, do you layoff people? This is never a good sign and it points to the saturation in cell phone market.
DuPont uses both buybacks and job cuts to perform magic for their shareholders with a dividend mention for icing on the cake. Keep in mind, dear readers that dividends are usually last to go, but they signal the crash is happening and the boat is taking in water. Not good.
Bottom Line:
Then, when you add up all the signs and the bottom line is falling, this message means that you are trapped under water and at the mercy of the market. In addition, other factors to get your share price back to neutral. This present declining stock market is reflecting the future outlook and it isn't pretty. If you recall my 2015 forecast, I predicted this scenario at the end of the first quarter. I was a little early, which is better than late.
Apple
the darling of Wall St. and investors has used buybacks to make their stock appear better. They have brought back 10% of their shares and still, the total bottom line is shrinking.
Many others are following their lead. Bed, Bath and Beyond could argue for the poster-child photo. Somehow, they have fooled the public, but a closer look shows that the bottom line revenues have declined quartet-after-quarter. They are not alone. Big Blue has fallen six quarters in a row as well as Proctor and Gamble, DuPont and many more.
Caterpillar in its conference call, tries to imply that things will pick up and this is only temporary, but iron ore, gold and mining in general, speak a different language. Starbucks is the latest to play this game. I guess people are tired of $3.00 per cup of coffee with no refills.
The banking industry wrote the playbook in this category. They have a major influence in the media and among analysts. They use this and other techniques to keep their share price high like putting the spin on stress tests. They pass and they claim greater capitalization, however they know that their exposure to the derivative market could collapse the global market and bankrupt their company. They smile like all is well as they buyback their shares. The CEOs can't wait to use their warrants to become not only a millionaire, but a billionaire.
Old Technique
was cost cutting which generally meant, jobs. Qualcomm is old school in this game. Recently, they announced a 15% layoff in employment. Think about that? If your business is growing, do you layoff people? This is never a good sign and it points to the saturation in cell phone market.
DuPont uses both buybacks and job cuts to perform magic for their shareholders with a dividend mention for icing on the cake. Keep in mind, dear readers that dividends are usually last to go, but they signal the crash is happening and the boat is taking in water. Not good.
Bottom Line:
Then, when you add up all the signs and the bottom line is falling, this message means that you are trapped under water and at the mercy of the market. In addition, other factors to get your share price back to neutral. This present declining stock market is reflecting the future outlook and it isn't pretty. If you recall my 2015 forecast, I predicted this scenario at the end of the first quarter. I was a little early, which is better than late.
Tuesday, July 21, 2015
After The Dust Settled, The Affordable Care Act Now Will...
explode national, state, and individual budgets in 2016 and beyond. According to the National Inflation Association(NIA) in there study of New York State providers, they uncovered huge increases for 2016. They studied filings by the four largest health care providers in the state and the range of premium hikes is 13.35% to 17.18%. If you include all the care providers in the state, it averages around a 12.73% increase.
New York is not the exception. In Oregon the projected increases will be 16%. You won't believe what the health providers are asking in Minnesota? They want a 54% increase!
The Kaiser Family Foundation said plans rose an average of 2.2% in 2015 nationally, however they anticipate another 4.4% increase in 2016. No one offers any other projections further out.
Blue Cross said the cost to resign new enrollees with Obamacare made the company lose $141million in 2015. They want a 36% increase!
All these price increases were realized by investors back in 2013. The health care index(DJUSHC) was 465 in April 2013. Today, it stands at 826. A rocket, straight up!
They knew two things. One, millions of new enrollees and two, price hikes to cover any losses. They had the security to know price limits were not negotiated by the president's plan.
Doesn't End There...
enrollment in Medicare is also busting budgets because of the unexpected surge in new enrollees. In Kentucky the government estimated that it would get a 150,000 new patients, but they were half wrong. It was double that! They added over 311,000. Their budget allocated $34 million, but they will need $74 million. This math progression will cause the state to go bankrupt as the new estimate for 2021 calls for $363 million. That is over 10x the present budget in six years.
I have been against Obamacare since it came out. The president ran with the concept of First Payer. I endorsed that idea, but what we got is a sellout to Big Pharma. There are no price limits. For example, you check tire prices, you know the cost. Get a broken leg, and you are slaughter of the lamb. You are subject to unnecessary tests, padded bills, etc. Obamacare did not make hospitals and doctors set a fee for service which was the root of the inflationary prices in health care. In addition, the bill forces young people to purchase health insurance under plenty of law. They will become criminals for not buying something that they don't need. I could go on and on... from the concept of doctors working 36 hour straight shifts which no person could perform, to limiting student enrollments in medical colleges to keep wages high and limit costs.
Bottom Line: the Affordable Care Act is unaffordable!
New York is not the exception. In Oregon the projected increases will be 16%. You won't believe what the health providers are asking in Minnesota? They want a 54% increase!
The Kaiser Family Foundation said plans rose an average of 2.2% in 2015 nationally, however they anticipate another 4.4% increase in 2016. No one offers any other projections further out.
Blue Cross said the cost to resign new enrollees with Obamacare made the company lose $141million in 2015. They want a 36% increase!
All these price increases were realized by investors back in 2013. The health care index(DJUSHC) was 465 in April 2013. Today, it stands at 826. A rocket, straight up!
They knew two things. One, millions of new enrollees and two, price hikes to cover any losses. They had the security to know price limits were not negotiated by the president's plan.
Doesn't End There...
enrollment in Medicare is also busting budgets because of the unexpected surge in new enrollees. In Kentucky the government estimated that it would get a 150,000 new patients, but they were half wrong. It was double that! They added over 311,000. Their budget allocated $34 million, but they will need $74 million. This math progression will cause the state to go bankrupt as the new estimate for 2021 calls for $363 million. That is over 10x the present budget in six years.
I have been against Obamacare since it came out. The president ran with the concept of First Payer. I endorsed that idea, but what we got is a sellout to Big Pharma. There are no price limits. For example, you check tire prices, you know the cost. Get a broken leg, and you are slaughter of the lamb. You are subject to unnecessary tests, padded bills, etc. Obamacare did not make hospitals and doctors set a fee for service which was the root of the inflationary prices in health care. In addition, the bill forces young people to purchase health insurance under plenty of law. They will become criminals for not buying something that they don't need. I could go on and on... from the concept of doctors working 36 hour straight shifts which no person could perform, to limiting student enrollments in medical colleges to keep wages high and limit costs.
Bottom Line: the Affordable Care Act is unaffordable!
Tuesday, July 14, 2015
Did You Get Shanghaied?
A few weeks ago, I predicted a major downturn for the Shanghai Index. It fell over 28%. If it weren't for draconian measures, it is possible that it could hit my target 3100. There are many reasons and if you go, dear reader to the archive, you can reread the article.
As you can see, the parabolic move is over. These type of stock movement generally returns to the
starting point. This is how I determined 3100. When you consider that 255 million people opened
accounts in the last nine months with little market experience, the Shanghai market is just one, big
casino. "Everyone is a genius when the market goes straight up," is an old saying with more than one
meaning. One of the implied meanings is markets usually turn when "dumb" money enters. The Chinese market is 85% retail because it is mostly closed to foreign investors.
Last Year...............................................................................................................................
the Shanghai market got connected to the older, more established Hong Kong market. Next year the smaller, Shenzhen will be added to form a triangle connection. The Shenzhen is composed of newly, private enterprises. This exchange does not have government backing and as you will see in a moment, could be the reason why the three indexes collapse. When you put the above picture into dollar values, the Chinese lost economic wealth to the tune of over $3 trillion in one month. To put that figure into perspective, China's losses are double the size of Australia's entire stock market.
Stop the Bleeding!................................................................................................................
Chinese regulators have come up with a new regulation everyday of the past week to stop the bleeding. The market has rallied up to the 4,000 range, but the fear behind the recent movement is alive and well. China has instituted many old tricks and they even are writing new chapters.
* They've banned short selling.
* They will not allow any investor or any officer in any company or any fund that holds 5% of any company to sell their stock for the next six months regardless of price action.
* They've halted trading on 51% of all Mainland Chinese companies.
* They've lowered their banking interest rate for the fourth time this year.
* They've told all brokers not to liquidate client accounts due margin calls, basically suspending margin requirements.
* They've told "special authorities" to investigate anyone who sold short or is seeking to sell short.
Even with all of the above and who knows what will be added in the coming weeks, debt margin is still over 4% of market cap! In addition, the Chinese government is buying up vacant homes to sell as affordable housing. This sounds like a nice idea except it only spurs more speculation in an already overheated housing market whose bubble is popping.
Adding it up: the Chinese economy is slowing, housing is tethering, oil is already busted and now, questions about investing in the Chinese market will cause many to get out after any rally fearing further restrictions to trading. Eventually, this BEAR MARKET will spread to the region and to the global community. Don't get taken for a ride!
This piece was written before the two completed deals: The nuclear agreement with Iran will eventually add a lot of oil to an already gloated market. Not good. The Greece deal is only kicking the can down the road and each time it gets harder and harder because the can is pretty beat up. This will not end well. Bottom line: Don't Get Shanghaied.
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