Posted on 08/29/2015 8:37:02 AM PDT by BenLurkin
There is a stark contrast between the PBOC and the US Federal Reserve’s approach to managing markets. The Fed tends to treat investors like the recently burgled: reassurance at every stage, no loud noises during the night. American central bankers have been signalling for two years that the crisis-era programme of vacuuming up bonds from the market, known as quantitative easing, would be wound up as the economy improved.
...
China’s abrupt interventions have therefore come as a surprise to investors who have only recently gained direct access to the country’s A-share market.
By Friday night, after five days of frenetic trading, the world’s biggest markets ended up more or less back where they started overall, despite an 11pc drop in the Shanghai Composite.
The longer-term significance of the crash remains up for debate. The more optimistic watchers point out that the US markets have just been through the third-longest period in the past 90 years without a major market fall of at least 10pc. China was simply the spark for an overdue correction.
Some also sound a note of caution about the timing of the rout, during what is normally the height of the summer slowdown on trading floors around the world. The lack of trades magnifies the effect of the deals that take place, particularly if the only players left making bids and offers are computer programmes designed to seek out and exploit any liquidity.
Nigel Brahams, a partner in financial services and markets at the law firm Fox Williams, said: “High-frequency trading doesn’t ultimately change the direction of the market but it accelerates and exaggerates it.”
(Excerpt) Read more at telegraph.co.uk ...
Any U.S. investor in this position is a damn fool. Chinese assets are worthless outside of China, and the events of the last couple of weeks reinforce this point. What is the purpose of investing in an "A-share market" in a closed economy dominated by state-controlled industries?
Maybe it is time to start speculating on the occurrence of these periodic “crashes” -— you can bet some are making big bucks off of them.
‘American central bankers have been signalling for two years that the crisis-era programme of vacuuming up bonds from the market, known as quantitative easing, would be wound up as the economy improved.’
Any program that goes on for as many years as Quantitative Easing, is no longer a temporary affair.
It is now permanent and any attempt to end it will cause the market will cause a massive crash. About six trillion dollars of funny money has been pumped into the market in the last Seven years. That constitutes about 7,000 points of the DOW average. Meaning the real value of the market is about 40% lower than the price reflects.
The Federal Reserve has pumped and pumped causing the largest bubble in history. The only question is when and how it will burst.
“...It is now permanent and any attempt to end it will cause the market will cause a massive crash....”
Your post summarizes what has been going on nicely. And it is shocking how many people do not even realize it. The Fool in the WH has been pumping money into Wall Street for so many years and the “value” of the market is just a fraud.
Many folks are moving out while the getting is good. I think we will see the exit trend rising soon.
define “judders” please.
Near as I can tell, it’s like what you get when you cross an elephant with a rhino.
You get an “’EllifIknow”
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