Wheeeeeeee – what a ride!
It's 7:39:11 am and Greece is "fixed" at the moment and we have to time-stamp it to the second or it may change again. European markets are LOVING IT with 1.5-2.5% gains across the board but, on the whole, the DAX (the only one we really care about) isn't even close to our weak bounce line at 11,250 yet – so we don't care. We do care about CHINA!!! (see yesterday's post), who dropped over $200Bn in stimulus this week and they fell another 5% this morning anyway. That's not good, folks…
5% would be a 900-point drop in the Dow in one day. I think I need to put that in perspective because we say "China fell 5% today" and people go "well, isn't that a shame" and that's the end of it. It's not a shame, folks, it's a TRAGEDY! To sum things up, the Shanghai has fallend from 5,200 to 4,000, which is 23%, which would be over 4,000 Dow points and it bounced back to 4,300, which was a weak 25% retrace of the drop that was IMMEDIATELY reversed DESPITE massive stimulus measures.
Of course the 3,900 line is bouncy – it represents a 25% drop from 5,200 so SOMEONE is going to speculate and buy that dip but the dip buyers ran straight into a new round of sellers and now 3,900 MUST HOLD on the Shanghai or Greece will be the last thing you're worried about next week!
We are nowhere near unwinding the 2 TRILLION Yuan ($339Bn) of margin debt that has built up in China, much of it financed at the 22% capped interest rates. When your market is gaining 100% a year, taking a 22% loan out to buy stocks seems to make sense – especially when all of your state-controlled media (not to mention the Corporate Propaganda you pick up in the US) tells you how AWESOME everything is.
There are now more registered stock traders in China (90M) than there are registered Communist Party Members (87.8M) – interesting news on the 94th anniversary of the party's founding. It’s safe to assume this is not…
