http://www.telegraph.co.uk/finance/chin ... reece.htmlWhile all Western eyes remain firmly focused on Greece, a potentially much more significant financial crisis is developing on the other side of world. In some quarters, it’s already being called China’s 1929 – the year of the most infamous stock market crash in history and the start of the economic catastrophe of the Great Depression.
China Watch
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biffvernon
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I would compare it more to the Russian stock market collapse of the 1990s. or the collapse of the 'Tiger economies'. Similar cause - a relatively new stock market with huge investment from smaller, naive local investors, who are being sent to the cleaners by the usual sharks who know how to profit from these situations.
The Chinese stock market bubble is large, but it grew and popped quickly.
This is largely an internal Chinese issue in financial terms, it will impact Chinese GDP and growth, oil demand etc., as China has been trying to internalise demand for its consumer products. It might tip global GDP back into recession, but it won't cause much direct financial impact in the West.
The Greek issue is largely political. It is a power struggle between north and South Europe, with the new eastern provinces backing Germany in the hope that they won't be next in the firing line.
The Chinese stock market bubble is large, but it grew and popped quickly.
This is largely an internal Chinese issue in financial terms, it will impact Chinese GDP and growth, oil demand etc., as China has been trying to internalise demand for its consumer products. It might tip global GDP back into recession, but it won't cause much direct financial impact in the West.
The Greek issue is largely political. It is a power struggle between north and South Europe, with the new eastern provinces backing Germany in the hope that they won't be next in the firing line.
Are you following the latest? There is so much news that Zerohedge servers can't take the hits eg Chinese have banned selling for large shareholders:
http://www.zerohedge.com/news/2015-07-0 ... rs-illegal
Lots of financial stuff falling over today..
http://www.zerohedge.com/news/2015-07-0 ... rs-illegal
Lots of financial stuff falling over today..
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adam2
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This even merited a mention on the evening TV news.
Many investors have lost money and seem keen to blame the government for this, rather than accepting that prices can fall as well as rise.
It would appear that shares can be purchased by persons who only have a fraction of the money required, the rest being lent to the customer with the shares purchased being security for the loan. Known as "buying on margin" which was prohibited in most countries after the crash of 1929.
A relatively small fall in share prices can result in the loss of ALL the customers money and a debt left over.
Consider someone who has $1000 and uses this to buy "on margin" shares valued at $10,000. All is well if the shares increase in value and a substantial profit may be made in a rising market. For example if in a few months the shares double in price to $20,000, they may be sold at that price, the borrowed $9000 can be returned, it might be say $10,000 now with interest.
That leaves $10,000, not a bad return in only a few months for someone who only started with $1000 ! "its raining soup, grab yourself a bucket"
Now consider what happens if the shares fall in value to $5000 and are sold at that price. The investor has lost the entire $1000 AND still owes $4000 plus interest to whoever lent the money.
If the investor owns other shares that have done better, these will have to be sold to repay the debt. If enough shares are sold thus, the value of ALL shares may suddenly crash.
If enough investors are unable to repay the bank that loaned the money, then banks fail.
This could well be the Chinese 1929.
Many investors have lost money and seem keen to blame the government for this, rather than accepting that prices can fall as well as rise.
It would appear that shares can be purchased by persons who only have a fraction of the money required, the rest being lent to the customer with the shares purchased being security for the loan. Known as "buying on margin" which was prohibited in most countries after the crash of 1929.
A relatively small fall in share prices can result in the loss of ALL the customers money and a debt left over.
Consider someone who has $1000 and uses this to buy "on margin" shares valued at $10,000. All is well if the shares increase in value and a substantial profit may be made in a rising market. For example if in a few months the shares double in price to $20,000, they may be sold at that price, the borrowed $9000 can be returned, it might be say $10,000 now with interest.
That leaves $10,000, not a bad return in only a few months for someone who only started with $1000 ! "its raining soup, grab yourself a bucket"
Now consider what happens if the shares fall in value to $5000 and are sold at that price. The investor has lost the entire $1000 AND still owes $4000 plus interest to whoever lent the money.
If the investor owns other shares that have done better, these will have to be sold to repay the debt. If enough shares are sold thus, the value of ALL shares may suddenly crash.
If enough investors are unable to repay the bank that loaned the money, then banks fail.
This could well be the Chinese 1929.
"Installers and owners of emergency diesels must assume that they will have to run for a week or more"
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3rdRock
http://www.theguardian.com/business/201 ... c-selling-
China stocks bounce back after days of panic selling among investors
Market crisis eases, though it remains unclear whether apparent recovery is a temporary reprieve or beginning of stabilisation.
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peaceful_life
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3rdRock
http://www.theguardian.com/world/2015/j ... in-lending
China's biggest banks lend 1.3tn yuan in attempt to halt stock market meltdown
Reports suggest more than dozen banks have lent cash to state-backed Chinese Securities Finances, which provides so-called margin lending to investors.
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biffvernon
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http://www.theguardian.com/business/201 ... -fall-2007
Chinese shares has tumbled more than 8% after an unprecedented state rescue effort to prop up valuations abruptly stopped, raising doubts about the viability of Beijing’s plan to stave off a deeper crash.
Major indexes had their largest one-day drop since 2007, shattering three weeks of relative calm in China’s volatile stock markets since Beijing moved to arrest a slump that started in mid-June.
“The lesson from China’s last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect,” said Capital Economics analysts.
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raspberry-blower
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A must read article that takes a warts and all view on China and what is likely to happen worldwide as a consequence
Nicole Foss: China and the new world disorder
Nicole Foss: China and the new world disorder
Nicole Foss wrote: Our long global boom stands on the brink of a major reversal, the consequences of which will ricochet around the world as the credit pyramid pancakes. The endgame of a monetary supernova is credit implosion, and it does not play out as a slow squeeze. We are going to see some dramatic movements in the financial world, followed by a cascade of similarly dramatic events in the real economy, in the not too distant future. The process begins with the deflation that is already underway, with monetary contraction that leads to falling prices across the board, crushing companies and countries along the way and leading straight into economic depression.
Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. We have been warning about this dynamic since 2008, and have already seen the liquidity crunch start to play out in many parts of the world. Once it hits critical mass, and it can do so very quickly, momentum will increase greatly. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
I think there is a lot of truth in this unfortunately.raspberry-blower wrote:A must read article that takes a warts and all view on China and what is likely to happen worldwide as a consequence
Nicole Foss: China and the new world disorder
Nicole Foss wrote: Our long global boom stands on the brink of a major reversal, the consequences of which will ricochet around the world as the credit pyramid pancakes. The endgame of a monetary supernova is credit implosion, and it does not play out as a slow squeeze. We are going to see some dramatic movements in the financial world, followed by a cascade of similarly dramatic events in the real economy, in the not too distant future. The process begins with the deflation that is already underway, with monetary contraction that leads to falling prices across the board, crushing companies and countries along the way and leading straight into economic depression.
Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. We have been warning about this dynamic since 2008, and have already seen the liquidity crunch start to play out in many parts of the world. Once it hits critical mass, and it can do so very quickly, momentum will increase greatly. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder
I don't know how to mitigate deflation and depression in terms of my pension which (like all pensions) is in the stock market in one way or another. The above will cause a major crash in stock markets all around the world. A 50% drop is likely if things aren't as bad as these predictions indicate.
Does anybody have suggestions as to how to best mitigate the above? I am planning to take my pension in approx. 5 years and need to find a way to circumvent what I think is coming.....
Real money is gold and silver