[AgentR11]

That all sounds like very good news to me. China's leadership is like the girl dipping her toe in the water, afraid to get wet. They need a push, and excitable markets can give quite the solid push to just about anyone.

The internal/external order limits need to come off. Margin accounts need to be common, and they need to say, "fly be free!" to the renminbi!

They'll panic and hurry real fast into doing it over the course of a decade..... grrrrrr.

[GoghGoner]

You appear to have a grasp of Chinese thought, agentR.

The People's Bank of China (PBOC) also rolled over 250 billion yuan of medium-term loans to banks late on Friday to ensure adequate liquidity in the system.

"The government must rescue the market, not with empty words, but with real silver and gold," said Fu Xuejun, strategist at Huarong Securities Co, before the CSRC and PBOC announcements, adding that a market crash would hurt banks, consumption, companies and even trigger social instability. "It's a disaster. If it's not, what is it?"

[SeaGypsy]

& a few other places. If it were up to me Agent would be POTUS.

Sent from my HUAWEI Y320-U151 using Tapatalk

[AgentR11]

I'd get us all into so much trouble, so fast... so so very fast....
You do not want me as POTUS.

[SeaGypsy]

If there was a POTUS like you, who actually grasped the dynamics of international relations, I doubt there would be half the crap going on at that level right now.

Sent from my HUAWEI Y320-U151 using Tapatalk

[americandream]

If there was a POTUS like you, who actually grasped the dynamics of international relations, I doubt there would be half the crap going on at that level right now.

Sent from my HUAWEI Y320-U151 using Tapatalk

I would not be unduly perturbed by what is underway at the moment other than from self interest of course., Like the 2008 crisis, this is simply another inflection point in globalisation as it gathers momentum with London very much in control.

Greece may well spell the death throes of worker friendly initiatives such as not so costly health and education worldwide, but for the markets it is the continuation of the cyclical nature of capital as the forces of consolidation drive austerity to new levels.

[GoghGoner]

The comparisons to what happened to the stock market before the Great Depression seem apt. Wall Street bankers tried to protect against the plunge in much the same way as China's central bank is now.

China stocks fall again despite support measures

Exchange data shows the balance of outstanding margin loans has fallen more slowly than the market drop and that leveraging has consequently increased to a record proportion of the market, creating a vicious cycle of pressure to sell.

Global investors have grown increasingly concerned that a full-blown crash could destabilise the world's second-biggest economy.

Commodities markets are also taking fright at what the slump says about the underlying economy, with prices of copper, coal, natural gas and iron ore falling toward their 2015 lows.

[Pops]

Kind of interesting to me how little interest there seems to be here about the slowdown in China. A big part of the shortage of spare oil capacity last decade was to do with China's crazy growth rate, and now that it's growth is cooling it is an obviously large part of overall demand decline in commodities.

[dolanbaker]

Not much that many can add due to it not being in the script of peak oil leading to eventual shortages and price spikes.
In reality just like in the 1970s, a massive investment programme has eventually brought on extra supply at a faster rate than it can be consumed.

This may lead to a sharper downturn in supply when the present phase of fracking ends, so lets get it while it's cheap!

[AgentR11]

Kind of interesting to me how little interest there seems to be here about the slowdown in China. A big part of the shortage of spare oil capacity last decade was to do with China's crazy growth rate, and now that it's growth is cooling it is an obviously large part of overall demand decline in commodities.

Insane growth rates are insane. They are bad for stability, bad for the regulatory environment, bad for rational markets; they make it very hard to price the currency, or to make sane infrastructure investment choices.

Its important to remember, despite what some call "cool down"; China's growth rate is still too high to be stable; and needs to come down to a non-distorting 3-5% growth rate. Enough to overcome the remaining legacy undeveloped economic potential; but gently.

Short term, they've got some serious mismatch between capacity and demand; steel being the worst I think. But they'll lay a bunch of rail, finance it in domestic currency, try to export a bunch to Russia, etc; so hopefully they can slow distortion before things get too out of hand.

[Tanada]

Kind of interesting to me how little interest there seems to be here about the slowdown in China. A big part of the shortage of spare oil capacity last decade was to do with China's crazy growth rate, and now that it's growth is cooling it is an obviously large part of overall demand decline in commodities.

I Kinda Sorta agree so long as we all remember that the growth from the past is still requiring plenty of stable demand in China. Even if they go into a full blown recession a lot of the demand they developed over the last decade is not going to just fade away, it has been made into structural demand.

[Pops]

hmmm, not sure what "structural" demand is T. If "structural" means what happened last week, I'm pretty sure that things have to be the same for the to happen again this week.

NPR's Anthony Kuhn reports that over the past three weeks, the markets have lost some $4 trillion.

http://www.npr.org/sections/thetwo-way/ ... ets-plunge

I read that the stock markets there are not as big a deal as here as far as where people have their money. Still 4T is a chunk of change.

As well, the market is highly leveraged. What dawns on me is that whenever one issue falls in value and the margin call comes, it isn't just one person who loses, it is the guy who is underwriting him, and the guy who is on the other end of that guy's hedge, and the clients he represents, etc, etc...

I guess that is the definition of contagion.

[Tanada]

hmmm, not sure what "structural" demand is T. If "structural" means what happened last week, I'm pretty sure that things have to be the same for the to happen again this week.

NPR's Anthony Kuhn reports that over the past three weeks, the markets have lost some $4 trillion.

http://www.npr.org/sections/thetwo-way/ ... ets-plunge

I read that the stock markets there are not as big a deal as here as far as where people have their money. Still 4T is a chunk of change.

As well, the market is highly leveraged. What dawns on me is that whenever one issue falls in value and the margin call comes, it isn't just one person who loses, it is the guy who is underwriting him, and the guy who is on the other end of that guy's hedge, and the clients he represents, etc, etc...

I guess that is the definition of contagion.

By Structural demand I mean the 20 Million cars, 12 Million trucks and scads of motor cycles that have been added to Chinese demand over the course of the last decade. Even if their economy slows down to zero net growth all of those cars, trucks and bikes are still going to need fuel and tires and belts and hoses made from petroleum products. The only way to lower that structural demand is to have their economy actively shrink, which so far has not happened. That's my take on it anyhow, YMMV.

[PrestonSturges]

With the EU and China looking wobbly and commodities in the crapper, the dollar is going to be very solid. Not good for our balance of trade, but otherwise not so bad.

[Timo]

China's stock market was built on debt. That debt was financed by ponzi schemes. Such is the way with diving headfirst into unchartered, and mostly unregulated capitalistic waters. That's exactly what happened with Hanergy Thin Films Solar last month. They got caught cheating and lying to their investors.

Chinese investors are newbies at the game of capitalism, and many western investors bought into their pie-in-the-sky claims until that pie landed right in their face. Now, we're seeing a lot of debts come due, with those investors unable to pay. Hence, the stocks are crashing because everyone needs that money to pay their debts.

China is the world's 2nd largest economy, but their stock market isn't that large a player in the global scheme of things. The current crash is probably a good thing. This will get people's feet back on the ground where they will have a much better view of reality moving forward. I'm not too worried. Hopefully, they'll all learn from their mistakes.

Then again, the sky might actually be falling!

[Outcast_Searcher]

I'm amazed how clueless the Chinese seem to be about "managing" their stock market. For example:

http://www.bloomberg.com/news/articles/ ... six-months

China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.
Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.

1). Stopping capital markets from being freely traded capital markets MAINLY serves to make investors lose confidence in a market when capital is no longer freely traded, but traded at the whim of the powers that be.

2). It's not like people with enough wealth to own 5% of a major company (and access to expert advice commensurate with that wealth) can't find a way to trade or place hedges on some other exchange in some other part of the globe.

3). This is after several other measures, which have cumulatively stopped trading on thousands of Chinese companies. For all intents and purposes, they've practically shut down the entire market, so people can't trade. Now THAT should inspire confidence. (Funny how they weren't trying to inject caution or place limits on trading while the market was booming month after month).

As a long term trader (who has never owned Chinese funds or ETF's), this makes me NOT want to consider doing some buying of those if the market goes down 90% or so -- as a matter of principle AND as a matter of practicality.

[Outcast_Searcher]

China's stock market was built on debt. That debt was financed by ponzi schemes.

I was doing a little reading on margin in China's stock market this morning. 22% margin ratios (i.e almost 5 to 1 leverage) looks mighty dangerous to me.

http://www.bloomberg.com/news/articles/ ... 2-interest

On the other hand, I did some searching on margin requirements for S&P E-mini futures. To me, the margin required looks INSANELY low, considering how quickly the stock market can move.

With the S&P 500 Index at about 2050, and an E-mini S&P 500 futures contract worth 50 times that, I get over $100,000 value per contract. But the maintenance margin is only $4600 currently.

http://www.cmegroup.com/trading/equity- ... bonds.html

Madness. They're stocks. For an index, I can see where the margin might be, say, 25% on a broad index instead of the 50% required on a blue chip stock. But about 4.5%?

Everything is just fine -- until it suddenly isn't during a big panic.

[americandream]

I'm amazed how clueless the Chinese seem to be about "managing" their stock market. For example:

http://www.bloomberg.com/news/articles/ ... six-months

China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.
Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.

1). Stopping capital markets from being freely traded capital markets MAINLY serves to make investors lose confidence in a market when capital is no longer freely traded, but traded at the whim of the powers that be.

2). It's not like people with enough wealth to own 5% of a major company (and access to expert advice commensurate with that wealth) can't find a way to trade or place hedges on some other exchange in some other part of the globe.

3). This is after several other measures, which have cumulatively stopped trading on thousands of Chinese companies. For all intents and purposes, they've practically shut down the entire market, so people can't trade. Now THAT should inspire confidence. (Funny how they weren't trying to inject caution or place limits on trading while the market was booming month after month).

As a long term trader (who has never owned Chinese funds or ETF's), this makes me NOT want to consider doing some buying of those if the market goes down 90% or so -- as a matter of principle AND as a matter of practicality.

Which is why I maintain China and most countries simply do not have the cultural headstart to manage liquidity flows as does the UK or US and which is why the world defers to these two managing the choke points.

On trading generally, there is no beating technical day trading. It cuts out all these sorts of uncertainties when youre out by NY closing. If you can get your head around price discovery, I would recommend it for a stress free life.

[GoghGoner]

If commodities do fall further, countries that depend on oil exports are really going to be impacted. I guess everybody will be impacted. Is/could this be the first time in history that a commodity price collapse leads a global recession? In the past couple of decades, commodity spikes have led to recessions.

http://www.bloomberg.com/news/videos/2015-07-24/china-has-entered-the-bust-phase-whelan?cmpid=yhoo

[onlooker]

In a nutshell, a classic case of supply and demand. Lots of supply but not enough demand.