Juggling Dynamite

Amid the usual perma-bull prognostication, nonsense, fraud and rampant willful blindness in the investment community, Chinese stocks closed today at 2147, the lowest level since Feb 2009 and now a full 35% lower than the latest “recovery” peak at 3300 in July 2009. (Hey wasn’t that 1.3 billion population the commodity bulls talk about supposed to have prevented this? Where are a billion+ consumers when you need them?)

This is the same index that was above 6,000 at the peak of the credit bubble in October 2007 before falling 72% in one year to bottom at 1671 in October 2008. Worth noting is that the Chinese economy has been leading the global economic cycle for the past several years and its stock market has led other global stock markets by several months. In the last recession, the Shanghai market bottomed October 2008 some 5 long months before North American stock markets hit bottom in March 2009. If the Shanghai were to bottom any time soon, that would still suggest a few more months of potentially nasty decline in global stocks before the present cyclical bear market has run its course.

Source:   www.cnbc.com

The LIBOR scandal that has engulfed London’s financial and political elites is entering its third week and picking up steam on this side of the Atlantic. Among the latest developments:

The NY Times reports the Justice Department’s criminal division is “building cases against several financial institutions and their employees.”
State Attorneys General in New York and Connecticut are investigating whether states incurred losses because of LIBOR manipulation which “could lead to a wider multi-state enforcement action,” The WSJ reports.
Top officials of the British version of the SEC, the Financial Services Authority, will testify before Parliament on why regulators failed to respond to concerns about LIBOR rigging going back to 2008. Congress is set to hold similarly themed hearings later this week and Fed chairman Ben Bernanke is almost certain to be asked about the matter when he testifies on Capitol Hill Tuesday and Wednesday.  Here is a direct link.

San Bernardino, Calif., is the latest municipality to seek bankruptcy protection for its $45 million budget shortfall, following Mammoth Lakes and Stockton, which was the largest U.S city to ever go bust. Bankruptcy filings by these three California cities have raised questions about the scope of budget issues on the local level and whether there will be more.

“This is the tip of the iceberg for different reasons in different places,” says Richard Brodsky, senior fellow at Demos.org and former 14-term New York State assemblyman. Here is a direct link.