Got an email from Lin at 0300 (around 11 hours difference). "David, I highly recommend you buy important things soon. China is having difficuties (sic) and many factories in Guangdong are closing. Workers are not being paid."
BELOW IS A CUT AND PASTE FROM TODAY. I placed a huge (for me) order on eBay this morning for electronic parts. I have noted over the last six months many eBay items I had found for years and years have vanished. Scary stuff this news...
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Latest Update: Market lost SEVEN PERCENT TODAY
THIS WILL BE THE LAST UPDATE
1625 hours
Chinese stock markets continue to plunge
8 July 2015 Last updated at 09:54 BST
The dramatic sell-off in China's main stock market has continued despite efforts by regulators to try to stem the losses.
The Shanghai Composite index plunged 8% on opening, taking the drop in share values to 30% since their June peak.
On Wednesday, another 500 listed firms said they would stop trading their shares in an effort to insulate themselves from the meltdown.
Around 1,300 firms have halted trading, almost half of China's main shares. ALL, STOCK SALES HALTED.
While 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, itโs already being called Chinaโs 1929 โ the year of the most infamous stock market crash in history and the start of the economic catastrophe of the Great Depression.
In any normal summer, a 30pc fall in the Chinese stock market โ a loss of value roughly equivalent to the UKโs entire economic output last year โ after an ascent which had seen share prices more than double within the space of a year would have been front page news across the globe.
The dramatic series of government interventions to stem the panic โ hitherto unsuccessful, it should be added โ would similarly have been up there at the top of the news agenda. Yet the pantomime of the Greek debt talks, together with the tragi-comedy of will they, wonโt they leave the euro, has relegated the story to little more than a footnote - even though 940 companies, more than a third, have now suspended trading on Chinaโs two main indices.
"America in 1929 and China today โ are at roughly similar stages of economic development"
The parallels with 1929 are, on the face of it, uncanny. After more than a decade of frantic growth, extraordinary wealth creation and excess, both economies โ America in 1929 and China today โ are at roughly similar stages of economic development. Both these booms, moreover, are in part explained by extremely rapid credit growth. Indeed, Chinaโs credit boom dwarfs that of even the โroaring Twentiesโ. Borrowed money, or margin investing, played a major role in both these outbreaks of speculative excess.
True, the Chinese stock market bubble is only a one-year wonder, whereas the build-up to the Wall Street Crash of 1929 was more sustained. Even so, the comparison still holds. As noted by JK Galbraith in his classic account, The Great Crash 1929, even as late as 1927 it was possible to argue that American stocks represented fair value.
It was only in the final year that the โescape into make-believeโ happened in earnest, when the stock market rose by nearly 50pc. This applies to the Shanghai Composite, too. Stripping out the lowly-rated banking sector, valuations for just about everything else have rocketed, making those that ruled on Wall Street in the run-up to October 24, 1929, look relatively modest. Nor do the similarities end there. As in 1920s America, Chinaโs stock market boom has ridden in tandem with an equally speculative real estate bubble.
The macro-economic backdrop is also surprisingly similar. Then, as now in China, rural workers had emigrated to the cities in vast numbers in the hope of finding a more prosperous life in fast-growing industrial sectors. In 1920s America, virtually all these sectors โ from steel to automobiles and the new technologies of radio and consumer durables โ grew like Topsy, inspiring households to invest in them and chase the apparently bountiful profits they were generating.
A similar explosion in industrial activity has taken place in China, only more so. China has packed more development into a few short decades than any country in recorded history before, creating a worldwide glut in industrial capacity that even global demand, let alone domestic Chinese demand, is struggling to accommodate.
Already, there are warning signs of a slowdown, similar to those that front-ran the 1929 crash โ depressed commodity prices and a virtual hiatus in global trade growth. The Chinese economy is like one of those cartoon characters who manages to keep running long after leaving the edge of the cliff, only belatedly to look down and plunge into the abyss.
Naturally, there are many dissimilarities too, not least that China is still essentially a planned and centrally-controlled economy which has so far managed to defy the usual rules of economics. The consensus is that this time will be no different, that even if the stock market does continue to crash, the impact will be no worse than 2007-08, when the Shanghai Composite fell by two-thirds. Yet after a massive fiscal and monetary stimulus, the wider economy barely lost a beat. Have no fear, the Chinese authorities have it all under control. Believe it if you will.
I donโt buy it. Indeed, I can see very little evidence for Chinaโs technocratic elite having things under control. The firebreaks that China put in place over the weekend to mitigate the panic are, in practice, not much different from those applied during the Great Crash of 1929, only this time itโs public rather than private money that promises to quell the fire. They failed spectacularly in 1929. This time around, theyโve thrown the kitchen sink at the problem, but so far it has produced only a mild, and wholly unconvincing, rebound. The fire still smoulders, threatening to break out anew.
"China cannot forever, Greenspan-like, keep answering each successive bubble by creating another"
BELOW IS A CUT AND PASTE FROM TODAY. I placed a huge (for me) order on eBay this morning for electronic parts. I have noted over the last six months many eBay items I had found for years and years have vanished. Scary stuff this news...
----------------------------------------------------------------------
-
Latest Update: Market lost SEVEN PERCENT TODAY
THIS WILL BE THE LAST UPDATE
1625 hours
Chinese stock markets continue to plunge
8 July 2015 Last updated at 09:54 BST
The dramatic sell-off in China's main stock market has continued despite efforts by regulators to try to stem the losses.
The Shanghai Composite index plunged 8% on opening, taking the drop in share values to 30% since their June peak.
On Wednesday, another 500 listed firms said they would stop trading their shares in an effort to insulate themselves from the meltdown.
Around 1,300 firms have halted trading, almost half of China's main shares. ALL, STOCK SALES HALTED.
While 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, itโs already being called Chinaโs 1929 โ the year of the most infamous stock market crash in history and the start of the economic catastrophe of the Great Depression.
In any normal summer, a 30pc fall in the Chinese stock market โ a loss of value roughly equivalent to the UKโs entire economic output last year โ after an ascent which had seen share prices more than double within the space of a year would have been front page news across the globe.
The dramatic series of government interventions to stem the panic โ hitherto unsuccessful, it should be added โ would similarly have been up there at the top of the news agenda. Yet the pantomime of the Greek debt talks, together with the tragi-comedy of will they, wonโt they leave the euro, has relegated the story to little more than a footnote - even though 940 companies, more than a third, have now suspended trading on Chinaโs two main indices.
"America in 1929 and China today โ are at roughly similar stages of economic development"
The parallels with 1929 are, on the face of it, uncanny. After more than a decade of frantic growth, extraordinary wealth creation and excess, both economies โ America in 1929 and China today โ are at roughly similar stages of economic development. Both these booms, moreover, are in part explained by extremely rapid credit growth. Indeed, Chinaโs credit boom dwarfs that of even the โroaring Twentiesโ. Borrowed money, or margin investing, played a major role in both these outbreaks of speculative excess.
True, the Chinese stock market bubble is only a one-year wonder, whereas the build-up to the Wall Street Crash of 1929 was more sustained. Even so, the comparison still holds. As noted by JK Galbraith in his classic account, The Great Crash 1929, even as late as 1927 it was possible to argue that American stocks represented fair value.
It was only in the final year that the โescape into make-believeโ happened in earnest, when the stock market rose by nearly 50pc. This applies to the Shanghai Composite, too. Stripping out the lowly-rated banking sector, valuations for just about everything else have rocketed, making those that ruled on Wall Street in the run-up to October 24, 1929, look relatively modest. Nor do the similarities end there. As in 1920s America, Chinaโs stock market boom has ridden in tandem with an equally speculative real estate bubble.
The macro-economic backdrop is also surprisingly similar. Then, as now in China, rural workers had emigrated to the cities in vast numbers in the hope of finding a more prosperous life in fast-growing industrial sectors. In 1920s America, virtually all these sectors โ from steel to automobiles and the new technologies of radio and consumer durables โ grew like Topsy, inspiring households to invest in them and chase the apparently bountiful profits they were generating.
A similar explosion in industrial activity has taken place in China, only more so. China has packed more development into a few short decades than any country in recorded history before, creating a worldwide glut in industrial capacity that even global demand, let alone domestic Chinese demand, is struggling to accommodate.
Already, there are warning signs of a slowdown, similar to those that front-ran the 1929 crash โ depressed commodity prices and a virtual hiatus in global trade growth. The Chinese economy is like one of those cartoon characters who manages to keep running long after leaving the edge of the cliff, only belatedly to look down and plunge into the abyss.
Naturally, there are many dissimilarities too, not least that China is still essentially a planned and centrally-controlled economy which has so far managed to defy the usual rules of economics. The consensus is that this time will be no different, that even if the stock market does continue to crash, the impact will be no worse than 2007-08, when the Shanghai Composite fell by two-thirds. Yet after a massive fiscal and monetary stimulus, the wider economy barely lost a beat. Have no fear, the Chinese authorities have it all under control. Believe it if you will.
I donโt buy it. Indeed, I can see very little evidence for Chinaโs technocratic elite having things under control. The firebreaks that China put in place over the weekend to mitigate the panic are, in practice, not much different from those applied during the Great Crash of 1929, only this time itโs public rather than private money that promises to quell the fire. They failed spectacularly in 1929. This time around, theyโve thrown the kitchen sink at the problem, but so far it has produced only a mild, and wholly unconvincing, rebound. The fire still smoulders, threatening to break out anew.
"China cannot forever, Greenspan-like, keep answering each successive bubble by creating another"
