We added the question mark to the end of this headline.
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.
There is actually a pretty good case for the idea that insider trading should not be illegal. That information is information and that sales or purchases of stocks based on such information just makes the market more efficient.
That aside it is still illegal and that means if you and I were to engage in it we might go to jail. For others however this does not seem to be a concern.
Interesting article. It is very true that the Oracle of Omaha has benefited handsomely from sweetheart deals and political connections over the years. He has played the crony game very well.
I will say though, as much as I agree with the general sentiment of the author, I’d still go long on the USA before Kazakhstan. We do still enjoy the reserve currency of the world. As long as we do the bet is still to the upside for US equities generally. Reserve currency status is the linchpin. If you ever hear that the US dollar is no longer the reserve currency it is time to sell. Of course when we hear it it will be too late.
An aside. – My first real job was working for GEICO (One of Warren Buffett’s companies. His “cash cow” as he calls it.) selling insurance over the phone. To this day – “Thank you for calling GEICO Direct. This is Nick Sorrentino speaking. How can I help you?” – rolls right off the tongue.
(From Nomad Capitalist)
…allow us to examine just how Warren Buffett became so wealthy, because while he is obviously an astute investor responsible for generating huge returns, he has also enjoyed advantages few other Americans do.
It is such advantages, propped up by his cronies in government, that perhaps contribute to so much of his optimism.
To begin with, much of Berkshire Hathaway’s holdings are in the equities markets. While Buffett has done an excellent job over the years of picking winners and losers, he has no doubt benefitted from the amazing impact that inflation – and recently endless money printing – have had on the American stock markets.
Interesting things happening in the markets. We’ve had a dozen or so of these flare ups over the last few years so we’ll see how this one goes. But it’s definitely one of those times where brokers aren’t going on vacation.