As we have noted for a while, the Ultimate Crony Capitalist state, China, is seeing very rough waters economically. A massive property bubble (and bust) fueled by Keynesian shortsightedness, not unlike the one we experienced here a few years ago, but much bigger is gripping the country. The Chinese dream is “maturing.” For the first time since emerging from the insanity of Mao the PRC is experiencing real economic pain.
Even with all the insanity out there right now the bulls it seems haven’t completely capitulated yet. Perhaps they shouldn’t, or perhaps they are delusional and they will find destruction. Or perhaps the bulls will provide just enough hope in the market to keep things from going into complete meltdown. A safety valve. Or maybe they are on the edge of giving up.
I have no idea. That’s what makes a market.
It’s never time to panic. That is certainly doubly true when it comes to investing. But it takes a disciplined mind to avoid freaking out as shares continue to march lower day after day. And in the midst of the chaos to make wise decisions.
I mean sure, but what does “massive” really mean? He could have said “super-duper colossal” bubble and that would have been way worse right? It’s not until we’re in super-duper bubble territory that we need to worry? Right?
Gee, where’d everybody go? I have some stocks and bonds I need to sell.
People are starting to get sketched out on Wall Street. The market is wobbly this morning. The Alibaba IPO (which did well) has people looking around wondering what’s next. Europe slowed last month. China continues to slow. India’s SENSEX was down almost 2% today. The Ebola “worst case scenario” just jumped from 500,000 to 1,000,000. And we just started bombing Iraq and Syria.
We’ve had an amazing run in the markets and many people think the bull will just keep on running. Maybe so. But eventually every bull runs out of steam even ones which are fed by the Fed.
In the attached article from CNBC the point is made that the real bubble is likely an inflated confidence in the Federal Reserve.That come what may, the Fed will intervene in markets and buoy them. So what if stocks are over extended, Yellen and the FOMC will save the banker’s posteriors. As we’ve said before this sounds very much like “housing prices always go up” to us. If sentiment regarding the Fed were to change, if traders were to fear that things were bigger than the Fed, a downdraft could be wicked.
We’ll see. There’ve been many blips over the past 5 years and for the most part the pro-Fed folks have been right as far as equity prices are concerned. (Little else.) Maybe this is just another blip on the way to Dow 20,000 and beyond.
But maybe not.
We reported before that Marc Faber thought the worldwide asset bubble was bursting. We’ll see, but things are getting interesting again.