Here in China, I visited a friend today in her office, on the 34th floor with a great view of the city. I walk in and see 20 or 30 young people packed into rows of desks (including a 16 year old high school dropout girl), staring at charts w/ MACD and ticker lists and chatting excitedly... I found out, the boss is a young girl of about 25, "second generation" (meaning, having money from rich parents). She had started some kind of international trade business in this office, which although well capitalized by her family, was never profitable. So with the recent Chinese bull market she turned to investing her sizeable funds in the stock market, hiring ordinary people and also a rock-star looking "technical analysis expert" to train them to trade her money. She provides all the training, all the capital, and still they keep 80% of their profits plus a modest salary. Sensing that this is a very naive business arrangement for her, I asked what happens if a trader comes in and loses money. She simply said, that has never happened. Not so suprising, considering this is a bull market, and they can only go long... Despite this seeming like a classic scene from the top, I think the rally in Chinese stocks has a long way to go, simply based on the sheer amount of money sloshing around China, due to the Chinese government policy of enriching (mostly themselves).... consider that although the size of the economy is a bit smaller (or just passed the USA by some measures), the money supply in China is almost twice that of the USA, and much more if you adjust for purchasing power (and the IMF is considering the yuan as a reserve currency?) And secondly, the retail investors who are driving this rally have no idea about valuations, and when to stop buying, it is seemingly a pure function of the exploding money supply... June '01 Shanghai Composite peak = 2242, M2 = 14.78 trillion, ratio = 14.78/2242 = 0.00659 Oct '07 Shanghai Composite peak = 6092, M2 = 39.42 trillion, ratio = 39.42/6092 = 0.00647 Interesting ratio... And consider that now, the M2 has more than tripled since 2007, now at 125 trillion ...
Yes, but the fact right now is that brokers are in no hurry to make shares available and update their systems to allow shorting for their retail clients. So most of the market (retail), still has no or very limited ability to short shares. Also most people don't understand shorting, and if explained, the reaction is like "you'd have to be crazy" or "why would you do that, it's unpatriotic!" In the office I visited, certainly, they are only trained to go long.
hmmmm yea this bull market is just about over after hearing that story, when she said they have never lost money, either she is just making that up to make you believe that they are the best investors or its that easy to make money trading stocks in China..either way this shows a market top is almost near and that the next collapse will wipe out probably 40-50% of $70 trillion total market value of all stock markets around the world....
If this is anything like dot com, or nikkei of the 80's, which it's more and more starting to look like that it is....a lot of these speculators will go bankrupt
hope everyone noticed sky high chinese consumer sentiment. never in history there was soooooo many upbeat consumers living at the same time. Current laws set by western democracies (hahhahahaha) what can and what cant be done, do not hold as proven already. proof of that is that soros was wrong on every single call for china. there are large fortunes to be made for open minded. chinese bluff a lot. not that easy to figure out though.