This should end well…Chinese farmers have set up village monitoring centers so locals can watch their ‘investments’ minute by minute in the stock market. No wonder Macua revenues are down 25%. Who needs casinos when you have insanely levered financial markets to gamble in? See: China rally making stock market history.
Mainland speculators have borrowed a record $348 billion to bet on further gains, novice investors are piling into shares at an unprecedented pace and price-to-earnings ratios have climbed to the highest levels in five years. The economy, meanwhile, is mired in its weakest expansion since 1990…
People’s Bank of China Governor Zhou Xiaochuan, who cut interest rates three times since November, has voiced his support for equity investment as a way to bolster the economy…
Of course, a flood of share sales runs the risk of overwhelming demand, especially now that valuations have climbed to the highest levels since 2009. At 19 times projected earnings, the Shanghai Composite is 62 percent more expensive than the MSCI Emerging Markets Index.
Profits in the Chinese gauge trailed analyst estimates by the most in six years in 2014 as the nation’s economic growth slumped to 7.4 percent, the slowest pace in more than two decades.
As the world economy gears down from the secular credit boom, the last big idea of policy makers everywhere has been to encourage financial bubbles as a way to buy banks and companies a little more time before the inevitable ‘give back era’ that began in 2008, resumes with a vengeance. In the present reckless episode, the Shanghai stock market has lept 150% in the past 12 months, and yet is still 20% below its previous bubble peak of 6000 in 2007. Some of the latest participants are the same folks who lost their savings in the 2007-2009 collapse and have recently been sucked back in to the game, others are a fresh new crop of the gullible and the greedy.
Each wave of this manic time makes a handful of lucky gamblers rich and leaves everyone else poorer in the end. Of course, while the game is on, those winning think they are earning returns through their own investment acumen: “My advice is to follow the country’s economic development and government policies”, a young player says in this clip. Follow it minute by minute that is. While the economy slumps lower and lower. As if these stock market gyrations have anything to do with fundamentals or analysis.
Here is a direct video link.