Home > In the News > Is China’s Stock Market Really Circling The Drain?

Is China’s Stock Market Really Circling The Drain?

While the world may be watching what’s going in Greece this week, apparently the Chinese stock market is undergoing a hell of a crash. When I say crash, I really mean that their market is undergoing some 1929, major economic depression, people jumping out the windows to their own death style crash. Since June 12, approximately $2.7 trillion in stock value has just gone poof. Why has this happened? From what my feeble economic mind can tell. It’s like any other market crash. People invest with credit instead of real money, the bubble rises, then for whatever reason the bubble deflates, causing financial panic. The Chinese government in the mean time is trying to inflate the bubble by encouraging investors to invest everything, all the while even going so far as to go all in on their own by investing the national pension fund, all to no avail.

Meanwhile, China has a shit pot full of money invested in American markets.Will their crash affect our economy as well? I would think so. Global markets being as they are right now, I would think that the world’s second largest economic power would set off a domino effect, much different, and perhaps way more catastrophic and real than the so called Domino Effect of Communism,that supposedly was going on in South East Asia in the 50’s. Red China was really no threat, Broke China, could pose a very real threat.

Down is bad, right?

Down is bad, right?

In addition, our corporate/military machine has started to place a lot of focus on China, in order to once again try to contain them. There continues to be a large military build up in the South Pacific, as the good old US of A is leaning heavily on our “allies” to place even more troops and equipment in and around the South China Sea. As a result, China has massively improved upon, and continues to spend billions their military build up. The U.S. military is steadily encroaching on China’s holdings in the South China Sea, as well as sending a lot of money and arms to China’s nearby pain in the ass, Taiwan.

I don’t know; I can’t help but think that China’s economic distress and our military build up in the region is not a coincidence. Obviously I’m no expert, but something about this whole scenario just smells bad, not stinky bad, but scare me enough to make me shit my pants bad. Although I suppose that would qualify as stinky bad too, wouldn’t it?

Needless to say, I won’t be investing in Ali Baba stocks any time soon.

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  1. Sedate Me
    July 8, 2015 at 4:37 pm

    Actually, I think this is just China’s communist elite learning how stock markets work. Most people, even some folks in the financial industry, don’t understand how they really work. Experts like to talk about a “ratios” and a whole lot of statistical bullshit that sounds scientific and logical. It makes them look smart and it “justifies” their ridiculous salaries and influence over the economy. To be fair, some of it’s legit. But it masks the truer picture.

    If I ever get around to starting my own website, the true nature of the economy is going to be a major, ongoing, topic. But here’s the Coles Notes version of my chapter “Explaining The Stock Market”

    While it would take decades for me to realize it, I understood the stock market as a little kid. This was thanks to a game I used to play, Beat The 8 Ball. This brief video summaries the game. https://www.youtube.com/watch?v=eNXWtXXpBbI Players release their marbles and try to beat the 8 Ball’s drop. You get points for beating the 8 ball, but lose them for getting there too late. And how does Beat The 8 Ball end? Usually in complete chaos as angry competitors take apart their plastic ramps and use them to beat each other senseless. (Metaphor #1)

    Here’s where it translates. You can get a guaranteed point every time by releasing your marble immediately, sometimes more if others do the same. (This would be like buying a bond, or the stock of a safe, established, profit-earning “Blue Chip” company.) But because people are greedy, competitive, impatient, little motherfuckers, that strategy quickly goes out the window. Most players climb straight to the top of the risk-reward ladder and try to time their marble closest to the 8 Ball drop. They can win more, but they can also lose more. (It’s like buying newer, smaller, riskier, companies with “growth potential”.) However, the best players ultimately realize it’s as much about predicting what the other players are going to do than what the 8 Ball is doing.

    Similarly, success in the stock market has little to do with the underlying companies. It’s much more about “market timing” and “market psychology”. The big money is not made by picking good, money making, companies but from predicting what “The Market” (aka everyone else playing the game) will do at any given moment. Less facts. More moods.

    At the end of the day, the stock market operates almost completely opposite of the way it should. Instead of investing in and committing to a good company (“buy & hold”) and claiming your share of the profit, it’s like having One Night Stand with companies. The goal is to “hit it” before it becomes popular and “quit it” when the lineup for it is long. Because, once everybody’s in the line, that stock is a “boring old slut” with “no growth potential”. It doesn’t matter if that “old slut” makes safe, steady, profit every year. It’s about the change in price. It’s about getting that virgin stock before anyone else, pimpin’ it out, and then moving to the next one, often without even learning their names. Technology has made it even faster & easier. Increasingly, players own stocks for mere minutes.

    Business needs long term stability. But the stock market favours a casino environment ruled by immediate gratification and short term thinking. Like Beat The 8 Ball, instead of compiling smaller, safer, points…timing the booms & busts offers the biggest rewards. But only for the lucky winners. The rest crash & burn. And in those ashes, the winners pick up real “undervalued” bargains. This is why The Market tends to be bi-polar. There’s bigger, faster, profit in pushing the highs higher and the lows lower than there is in those slower, safer, profits. Unfortunately, it’s fucking crazy.

    So how does this relate to China’s stock market? Well, it could be a sign China’s economy is in trouble. But to me, it looks more like China’s elites have figured out how to make money, not off goods & services, but from stock market speculation. So, in the future, look for income inequality to rise exponentially in “Communist” China.

    (And that’s the “short” version!)

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    • July 8, 2015 at 4:43 pm

      Good stuff. What do you make of all the military jockeying for position in the South Pacific?

      Like

      • Sedate Me
        July 10, 2015 at 4:44 pm

        (Hope you watched the Beat The 8 Ball video. It makes my blather much clearer. Ironically enough, I also came across a video of Asian kids playing a ripped off version of the game.)

        I haven’t heard much about the South Pacific jiggery-pokery.
        But I expect it’s mostly just the Military Industrial Complexes of all involved nations getting together at fancy parties, eating caviar and figuring out ways to keep the campaign flowing.

        In these 1984-ish days, your greatest “enemies” are actually your greatest allies. (See: Israel Hawks & Palestinian Hawks) It’s no longer about Mutually Assured Destruction, but Mutually Assured Employment. We “need” our money wasting bullies to protect us from their money wasting bullies. They “need” their bullies to protect them from ours.

        It’s a Dragonheart kind of thing https://en.wikipedia.org/wiki/Dragonheart where the fearsome dragon & the fearless dragon-slayer are actually partners, grifters in a travelling con.

        What’s far more concerning is how China is snatching up the 3rd world
        http://www.vox.com/2014/11/20/7254883/farmland-trade-land-grab
        and Canuckistan resources
        http://www.theglobeandmail.com/news/politics/chinas-oil-sands-deal-will-have-lasting-impact/article1357620/

        This not commodity purchases, investments, or corporate deals, but DIRECT ownership of resources. That is a FAR more serious threat than ships, planes or bombs. Governments are now preparing for The Collapse and corporations are figuring out how to make a buck from it. Think of it like Payday Loans & Rent to Own stores, only with Earth’s natural resources.

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  2. July 11, 2015 at 11:18 am

    You could be right. However, I have the feeling that the U.S. has started to turn its attention away from the middle east somewhat, and has started to refocused more toward China. I am getting some serious juju about this.

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