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Thread: China's Market Down 8.5% Monday 08/24/15

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    This might be the beginning of the end. I hope it ends fast, I don't want America to end up like Japan. Slow death sucks, gimme the Zombie Apocalypse!

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    It's a blip.
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    It's a buying opportunity.

    Actually, it is not, at least not for Chinese stocks, which have questionable fundamental values. But for US stocks, yes, a buying opportunity. After they fall just a bit more. I like a bargain.

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    Chinese foreign investors quietly bought out and took over the majority of Canada's oil resources and companies (thanks to a generous for corporate federal conservative government) The same is happening in forestry. China's domestic markets might be experiencing a dip, but the country itself is in no way in trouble.
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    I'm not sure buying up Canada's oil resources is such a great idea at this point. If the oil companies thought that the reserves were worth a lot, they'd have never sold them off. The world has an oil glut right now. In the latest US govt lease sales, almost no one bid. Evidently, the carbon energy companies have realized they have enough reserves for the foreseeable future. In fact, their proven reserves are sufficient to turn this planet into Venus and end all life more complex than anaerobic bacteria if they are burned. So, I would say that the Chinese are mercantilists rather than capitalists, especially because they are buying up land for crops in foreign countries. This is neither a profitable nor a durable strategy, if push comes to shove.
    The last time something like this happened was in the mid 1980's, when the Japanese were popularly thought to be ready to take over the world economy as the US economy exported the most highly polluting manufacturing jobs and started building IT jobs. The Japanese paid extremely high prices for property on Times Square, and sold it off at a terrific loss a few years later. I believe China's long-term situation is not much different.

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    Quote Originally Posted by Adam Strange View Post
    I'm not sure buying up Canada's oil resources is such a great idea at this point. If the oil companies thought that the reserves were worth a lot, they'd have never sold them off. The world has an oil glut right now. In the latest US govt lease sales, almost no one bid. Evidently, the carbon energy companies have realized they have enough reserves for the foreseeable future. In fact, their proven reserves are sufficient to turn this planet into Venus and end all life more complex than anaerobic bacteria if they are burned. So, I would say that the Chinese are mercantilists rather than capitalists, especially because they are buying up land for crops in foreign countries. This is not a durable strategy, if push comes to shove.
    The last time something like this happened was in the mid 1980's, when the Japanese were popularly thought to be ready to take over the world economy as the US economy exported manufacturing jobs and started building IT jobs. The Japanese paid extremely high prices for property on Times Square, and sold it off at a terrific loss a few years later. I believe China's long-term situation is not much different.
    Never thought of it like that before, as China being mercantilist.

    About oil being down that is very true, all over the news here saying oil is below $50 a barrel, which is really hurting the oil economy here. Unfortunately Canada's federal government has put all its eggs in the oil resource basket for the past 8 years, and is now experiencing a huge down turn with tens of thousands of lay offs in the oil fields.

    As it stands, China already owns much of the oil extracting former Canadian companies (see Nexen). I think actually that Chinese government and interests are extremely forward thinking by buying the oil and means of extracting it from wherever they can because as they see it, the Empire needs to last for a VERY long time into the future. I'm sure that for them, they neither care about where, or how they get these power resources, they only care about getting them, period. I think that for them it is less about economic superiority like it has been for the Japanese (although this would be a welcomed aspect of reserves control) and more to do with security of the people and bureaucracy of the Chinese nation itself longterm. Being able to control the flow of natural resources, no matter where it is located on the planet, is the means in which a country can use to bargain and survive with well into the future.

    Canada contains the third largest reserves of oil on the planet, below Saudi Arabia and Venezuela. It also happens to be in the most dirtiest form of sludgy, gravelly sand that is extremely power intensive to extract and process. Sadly, the Canadian government sold its wealth for short term gain.
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    Here is one perspective on the recent US stock market losses against its gains over the past few years. Note that the stock market valuations have doubled, as US companies bought back their stock (instead of increasing wages) to raise their share prices.
    Attachment 6134

    Now look at China's market over the past few years.
    Attachment 6135

    The global economic demand for goods has been slowing for the past few years, and China's manufacturing output reflects that, as did its stock market. however, the Chinese government decided that reducing the economic expectations of its workers was politically untenable, and instead encouraged its citizens to buy stocks, thereby creating a bubble. That bubble is bursting.

    After China lands flat on its back, the US should devalue the dollar to make US goods cheaper for the world to buy. Making these goods would boost the amount of work that US workers would have, and would keep the US economy going strong and would support wage increases. But politicians will probably not do that, because they are surprisingly affordable to corporations that would just as soon see US workers idle in order to keep wages low, because multinationals are just as happy to manufacture in other low-wage countries.

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    Hmm, that's cool. Everything seems so tenuous. It's kind of nerve-racking actually.
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    Kabu makes things go kaputt!
    Let's fry some stocks everybody!
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    @wacey
    I find it a little annoying frankly. Changing one thing for the better seems to imply changing something else for the worse. It would be nice if there could be economic solutions that benefited everyone involved, but I just don't see how that's possible. For example, I could argue lower oil prices benefits everyone involved because the cost of transporting goods goes down and everything should become cheaper; however this hurts the people that produce and profit from the oil, as well as any economic activity they create with that profit. I suppose the best people can do is to benefit many in favor of a few.

    Honestly it seems the only way to truly increase the wealth of a country is to ignore monetary valuations and look at how much is produced and the quality of the production, as well as how easy it is to produce. If you have all three of those, it becomes easier to create and do things in general. Though that can only be certain to work if production is mostly kept inside your own country's economy. China for example produces a lot, but it's low quality and requires a lot of labor, despite it being cheap labor; and they send their goods outside the country so that its citizens do not benefit from them, print money so that any profit they receive from the transaction keeps the Chinese currency from increasing in value, and then reinvests all their profits+printed money back into the US as debt. The Chinese are slaves to their own economic system; yet it's ironic that if the US economy collapsed, they would have an opportunity to invest their production for themselves and increase their standards of living, i.e. actual wealth. Then you have the US which doesn't produce much anymore with the quality of production usually being good, but requiring expensive labor to produce; and it seems content replacing their quality goods with a higher quantity of low quality Chinese goods with a constantly diminishing rate of the US dollar in foreign buying power. That seems like a terrible trade-off, but no one seems to care or maybe no one can really do anything about it.

    But this probably isn't much to be concerned about. Stock markets undergo correction when people get too optimistic and overvalue stocks. The Chinese government has been encouraging business growth and investment and now it has probably hit a plateau and people are disillusioned by it. Something psychologically to do with people expecting much more from their investments than they get; so the jerk reaction is to take their money out and do something else with it, even if it means taking a loss. This is the best time to buy because once the pessimism subsides, things can only go up and get optimistic again; consider it a psychological cycle I suppose. I suppose in a lot of ways stock valuations are quite arbitrary in this sense, aside from dividend stocks. But I wouldn't consider this a stock market crash, since the economy isn't failing, as it seems to be stagnating and undergoing a correction.

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    hardly the first time chinese stocks displayed the notorious Eiffel Tower pattern (straight up, then straight down)

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    who wins?
    unholy water sanguine addiction

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    Quote Originally Posted by kalinoches View Post
    who wins?
    We all win, since life expectancy and living conditions (for humans) are improving. The only problem is, no one gets out of the game alive. But that was true of the last few games, too.

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    This is hardly the end I think, it does however signal a shift in Chinese market strategies. Their growth is not sustainable without more domestic consumption.

    They don't have a floating currency and they peg their currency to the USD, all fiat currency has no value except in relation to the stability of the government. As long as the Chinese system is stable these sort of market corrections are just blips, they have very little effect on anything except stockholders. The government is the bank, and it will not fail thru economic mechanisms. Currency is no more than say share in your national organization, its nominal value is 1 cent like shares in any business, valuation is entirely determined by stability and the potential for future profits.

    I think commodities like oil are really undervalued at the moment, political stability can easily shift oil prices up, any sort of political disturbance in Saudi Arabia can do that.

    I think the Chinese's goal is to prop up the existing global finanical system while acquiring power over natural resources around the world, and it does this with a currency entirely controlled by the government and pegged to the dollar which people accept because of Chinese political/economic strength.

    I think Chinese trained economists simply don't see money the same way as Western Economists, althrough they've adopted some neo-liberal concepts in recent history, they're still basically Marxist in origin and Keynesian in practice.

    I think trying to analyze why/what the chinese are doing from a western economic perspective is doomed to miss out on the control they're asserting over various spheres of influence even if somehow they're "losing money".

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    It's time to buy their stock. You know what they say...if there's blood on the street buy real estate

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    Quote Originally Posted by Nyx View Post
    @wacey
    I find it a little annoying frankly. Changing one thing for the better seems to imply changing something else for the worse. It would be nice if there could be economic solutions that benefited everyone involved, but I just don't see how that's possible. For example, I could argue lower oil prices benefits everyone involved because the cost of transporting goods goes down and everything should become cheaper; however this hurts the people that produce and profit from the oil, as well as any economic activity they create with that profit. I suppose the best people can do is to benefit many in favor of a few.

    Honestly it seems the only way to truly increase the wealth of a country is to ignore monetary valuations and look at how much is produced and the quality of the production, as well as how easy it is to produce. If you have all three of those, it becomes easier to create and do things in general. Though that can only be certain to work if production is mostly kept inside your own country's economy. China for example produces a lot, but it's low quality and requires a lot of labor, despite it being cheap labor; and they send their goods outside the country so that its citizens do not benefit from them, print money so that any profit they receive from the transaction keeps the Chinese currency from increasing in value, and then reinvests all their profits+printed money back into the US as debt. The Chinese are slaves to their own economic system; yet it's ironic that if the US economy collapsed, they would have an opportunity to invest their production for themselves and increase their standards of living, i.e. actual wealth. Then you have the US which doesn't produce much anymore with the quality of production usually being good, but requiring expensive labor to produce; and it seems content replacing their quality goods with a higher quantity of low quality Chinese goods with a constantly diminishing rate of the US dollar in foreign buying power. That seems like a terrible trade-off, but no one seems to care or maybe no one can really do anything about it.

    But this probably isn't much to be concerned about. Stock markets undergo correction when people get too optimistic and overvalue stocks. The Chinese government has been encouraging business growth and investment and now it has probably hit a plateau and people are disillusioned by it. Something psychologically to do with people expecting much more from their investments than they get; so the jerk reaction is to take their money out and do something else with it, even if it means taking a loss. This is the best time to buy because once the pessimism subsides, things can only go up and get optimistic again; consider it a psychological cycle I suppose. I suppose in a lot of ways stock valuations are quite arbitrary in this sense, aside from dividend stocks. But I wouldn't consider this a stock market crash, since the economy isn't failing, as it seems to be stagnating and undergoing a correction.

    Not really sure who benefits from lowered gas prices, certainly not the people in this country who still pay the same amount at the pump no matter what the price of a barrel of oil.

    Domestic markets go up and down truly, the point I was pressing is that nations like china are purchasing resources themselves from other countries as well as the power to extract them at legal will makes them a dominant force with much buying power. In doing so they are providing their own people with the means to energy security at the loss to another set of people on Earth, namely Canadians. This could been seen as unfair as the oil belongs by right to Canadian Sovereignty.
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    Quote Originally Posted by wacey View Post
    Domestic markets go up and down truly, the point I was pressing is that nations like china are purchasing resources themselves from other countries as well as the power to extract them at legal will makes them a dominant force with much buying power. In doing so they are providing their own people with the means to energy security at the loss to another set of people on Earth, namely Canadians. This could been seen as unfair as the oil belongs by right to Canadian Sovereignty.
    Not sure what you mean. Oil doesn't last forever, whether Canada sells it to China or uses it just for themselves. Relying on it is a dead end for everyone involved, as well as Canada. Eventually it will run out. But I'm guessing you're talking about how Canada will be reliant on China when their reserves go out, putting China in a better position to take advantage of Canada economically in the future?

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    Quote Originally Posted by Nyx View Post
    Not sure what you mean. Oil doesn't last forever, whether Canada sells it to China or uses it just for themselves. Relying on it is a dead end for everyone involved, as well as Canada. Eventually it will run out. But I'm guessing you're talking about how Canada will be reliant on China when their reserves go out, putting China in a better position to take advantage of Canada economically in the future?
    No China has boughten the oil from the ground up. They own the oil before it is extracted from the ground and then they own the raw oil (bitumen). They also process the oil, it is not refined in Canada, it is pipelined across the continent and then shipped to China. There it is refined as they see fit. The value of oil is not in the raw resource, it is in the final oil products, for instance, gasoline.

    Put it this way...its like you owning the rights to your neighbours fridge. Your neighbour may have the fridge in their kitchen yet because you own the food and condiments inside of it, your neighbour may not eat the food himself. He sold you the fridge and the food, still he shoulders the cost of running it. The burden is on him, for less of the value of the "right to fridge".
    "Traffic lights and loneliness. Paper cans and tape cassettes. When the world feels like this. Static shocks and bitterness."

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    Oh, heh,

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    Quote Originally Posted by Maritsa View Post
    It's time to buy their stock. You know what they say...if there's blood on the street buy real estate
    You wish. There is no blood, the Chinese government has things under control. I know it is hard to understand this for us, populations in a barbarian stage the Chinese overcame millenia ago, just try a different perspective.

    BTW, I have this feeling they might unban the stock sales earlier than those six months. In the end that action's single purpose is a simple message: "get a grip". Any opinion, our well-informed fellow @Subteigh ?
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    (... I'm well-informed? are you confusing me with @InvisibleJim maybe?)

    It seems fairly clear to me that it would definitely been worth investing in a Chinese ETF at this time...but Meb Faber would suggest that it would be wisest to spread risk by investing in ten national ETFs with the lowest CAPEs...(and I think China would almost certainly be one of those 10 at the moment).

    This is not something I am going to do any time soon though.
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    I trust you are the most informed.

    Investing as in buying stock, or something else? Let alone that the former would not be very easy ATM, just asking Confucius about it, wouldn't he say that you take something from someone for nothing?
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    Quote Originally Posted by The Ineffable View Post
    I trust you are the most informed.

    Investing as in buying stock, or something else? Let alone that the former would not be very easy ATM, just asking Confucius about it, wouldn't he say that you take something from someone for nothing?
    investing in a fund that tracks the overall Chinese market in some way. Of course if it is impossible to buy shares, that is rather difficult .
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    I bought Chinese in 2010. I should have stuck with them.
    salmon

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    Most investors never see hard cash or anything of real value, so what meaning does it have to lose or gain 8.5% anyway?
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