Chinese stocks lose trillions in value...

[Fenixgoon]

http://money.cnn.com/2015/07/07/investing/china-stocks-shanghai-crash/index.html

The house of cards begins to fall? I had read plenty of stories about ghost towns being constructed basically to inflate GDP/growth, but this seems to indicate those stories were more accurate than I originally thought

 

[PokerGuy]

If it wasn't for the impact on US companies and the US economy, I would be fine with a cratering chinese market. Unfortunately, in today's global marketplace, the impact isn't contained to just one place.

 

[sm625]

The stocks did not "lose" any value. They never had that value to begin with.

 

[sunzt]

http://money.cnn.com/2015/07/07/investing/china-stocks-shanghai-crash/index.html

The house of cards begins to fall? I had read plenty of stories about ghost towns being constructed basically to inflate GDP/growth, but this seems to indicate those stories were more accurate than I originally thought

The crash isn't really related to those "towns". It's about uncontrolled market speculation and leveraging by retail investors who make about 85% of the transactions.

Unlike Europe or US where investment is about steady fundamentals and value seeking, Chinese investors are momentum investors. Thus, when they saw all the booming IPOs and huge growth in recent years, everyone and their grandmother piled in with their savings and margin to try to get rich quick.

The crash will hurt, the government didn't help, but things will stabilize after maybe another 20%-40% drop. Some people will learn their lesson and the next time won't be as severe.

 

[Newell Steamer]

Did people seriously not see this coming?

China's "growth" is manipulation - plain and simple. They promised X% of growth, year after year, for the purposes of drawing more investors.

I remember working for a PE firm in '09, that was pitching the Asia markets as the safest way to recover losses from the '08 crash; specifically China's guaranteed rate of growth and subsequent return. This is nothing more than the greedy doing the same shit that happened in '08.

It is not cyclical. It is not the nature of the beast. It is someone setting something up that is not feasible, and other people getting hit with the consequences of it - while those who set it up make the most money initially and later on while hedging against it.

 

[Svnla]

Borrow money to buy stocks? Wow.

From another article:

Regulators announced Sunday that they would make more capital available for an entity that will allow for even more margin lending, the practice of borrowing money to buy stocks. Buying on margin is incredibly risky.

Many experts believe the Chinese stock market's surge earlier this year was partly due to average investors taking on debt to invest in stocks.
And when stocks first started to fall last month, many of those investors had to quickly sell their investments to pay back the loans. That fueled an even bigger drop in stock prices.

It could get worse as investors realize that the slowdown in China's economy should hurt corporate profits.
"Exuberance for Chinese stocks isn't backed up by fundamentals," said Michael Pento, president and founder of Pento Portfolio Strategies, in a report Monday morning. "Instead, it appears markets are being levitated by continued government borrowings and manipulations."

A move by big Chinese brokerage firms to keep buying stocks until the Shanghai Composite reaches a certain value could also be a problem.
Lei Mao, an assistant professor of finance at the Warwick Business School in the United Kingdom, worries that the government may be inflating the value of larger companies at the expense of many smaller firms.

http://money.cnn.com/2015/07/06/investing/stocks-market-china-greece/index.html?iid=EL

 

[Mai72]

The Chinese economy is not going to end. This was bound to happen. Look at what has happened to America in the past. It's probably going to get worse before it gets better.

It's not the end of the world.

 

[PokerGuy]

It's not the end of the world.

I don't think anyone's saying it's the end of the world, but a severe crash in the chinese markets is going to have significant ripple effects around the world. If it results in significant economic damage in china, it could end up dragging down other economies as well.

 

[Sonikku]

Good. Once it sends global markets into a death spiral and the stocks hit rock bottom the job creators can scoop them up for bargain basement prices before they go up again!

 

[zinfamous]

Unlike Europe or US where investment is about steady fundamentals and value seeking, Chinese investors are momentum investors. Thus, when they saw all the booming IPOs and huge growth in recent years, everyone and their grandmother piled in with their savings and margin to try to get rich quick.

I know that this statement is generally accurate, but it causes one to smirk when they actually read it.

 

[maddogchen]

You would still have a profit if you were invested long term. Chinese market doubled and now is down 30-40% so you are still up about 20-40%. Unless you are a poor fool who jumped in late.

 

[realibrad]

China should just borrow more money to loan out to people to spend more money. Is this not how stimulus works? So a few stocks went down, all that means is that you have to borrow more money to get the value back. Prime the pumps!

 

[SMOGZINN]

You would still have a profit if you were invested long term. Chinese market doubled and now is down 30-40% so you are still up about 20-40%. Unless you are a poor fool who jumped in late.

You can only tell when late is after the fall.

 

[Subyman]

So, will this delay the iPhone 6S?

 

[Pipeline 1010]

It is not cyclical. It is not the nature of the beast. It is someone setting something up that is not feasible, and other people getting hit with the consequences of it - while those who set it up make the most money initially and later on while hedging against it.

Nailed it. You've just described every bubble over the last 100 years.

 

[Newell Steamer]

Investors can check in, but they can't check out; http://www.bloomberg.com/news/artic...ck-sales-by-major-shareholders-for-six-months

 

[Exterous]

Borrow money to buy stocks? Wow.

Not only that but using your house as collateral:

The regulatory tweaks aimed at supporting equities included this shocker: Homes are now acceptable collateral for borrowing to buy more stocks.

http://www.bloombergview.com/articles/2015-07-06/china-steers-toward-a-subprime-economy

 

[stlc8tr]

I know that this statement is generally accurate, but it causes one to smirk when they actually read it.

Yeah, the US markets can never have bubbles because all those fundamentally sound investors prop up the market.

 

[sportage]

Trump mentioned his tie's are made in China so maybe China is afraid Trump will pull his tie factories?
And who knows how deeply China was invested in Greece?
Americas's Wall Street fudged the figures and bloated housing prices, then it all came crashing down in 2008.
Who's to say China didn't learn the same old tricks from the master, the US market, believing they could experience all the gains while bypassing all the hurt?
Or, maybe its the rice?
Maybe the modern day Chinese prefer a big mac over a bowl of rice?
But I think there is reason to worry....
If Greece is in such financial trouble and China follows suit, no doubt it will be just a matter of time until we suffer much the same within the US.
After all, this is a world economy where all the dominoes are stacked.
How much are we, the USA, in debt to China?
And what does any bank do when facing failure?
Call in the outstanding loans.

 

[Gonad the Barbarian]

Not only that but using your house as collateral:



http://www.bloombergview.com/articles/2015-07-06/china-steers-toward-a-subprime-economy

Everyone who has a mortgage and owns stock is effectively doing the same.

 

[MongGrel]

Fuck China, Fuck all the companies that have invested there moving the manufacturing there.

Maybe that was a bit strong, but hey wtf.

 

[Genx87]

It is rather amusing to watch the central planners in China scramble to centrally manage their disaster. Cant sell stock for 6 months, can use house to borrow to buy into a crashing market. As if they can out regulate a self correcting market.

 

[Tombstone1881]

Trump mentioned his tie's are made in China so maybe China is afraid Trump will pull his tie factories?
And who knows how deeply China was invested in Greece?
Americas's Wall Street fudged the figures and bloated housing prices, then it all came crashing down in 2008.
Who's to say China didn't learn the same old tricks from the master, the US market, believing they could experience all the gains while bypassing all the hurt?

Trump Ties .. Jackets, shirts, you name it! He hates the Chinese but loves the quality of their garment industry. Who knows? Trump might try to be more PC now and move his clothing line out of China and into a more suitable place... like Indonesia.

They learned from the US alright. Create fake value in something. Then the creators eviscerate every dime they can from it and run away, leaving a giant pile of dung behind to collapse around everybody else. Then they get the government, aka the tax payer, aka YOU, to bail them out. Too big to fail you know.

Privatize the gains and socialize the losses. The American Way!

 

[Kwatt]

It is rather amusing to watch the central planners in China scramble to centrally manage their disaster. Cant sell stock for 6 months, can use house to borrow to buy into a crashing market. As if they can out regulate a self correcting market.

They should let the Fed do it for them! Ben might come out of retirement for the right price..

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The price fell. The value is the same as last week.

 

[MongGrel]

They should let the Fed do it for them! Ben might come out of retirement for the right price..

.

The price fell. The value is the same as last week.

Nice signature btw.

Creative, I hadn't noticed that one before.