Posted on 09/10/2007 4:12:09 PM PDT by TigerLikesRooster
Chinese warned against stock market
Sep 10, 2007 5:26 PM
A Chinese province has told schools to caution students against dabbling in the stock market, warning that failed investments could fuel social instability.
Chinese students have followed pensioners, housewives and people from all walks of life into the stock market as prices have rocketed in recent months, despite experts' warnings of a dangerous bubble.
"Local education departments and schools must instruct students to think twice before investing in highly risky stocks," the Beijing News said, citing a government notice in the southeastern coastal province of Fujian.
"(The regulation) is to prevent failed investments from affecting family and social stability," it added, warning students not to see the market as an easy way to make a living.
Teachers had a responsibility to help their students get a "correct view" about the stock market, the report said.
Chinese financial officials have expressed concern the market may be overheating and warned the public to be careful about letting go of their money.
China's ruling Communist Party prizes stability and brooks no challenges to its power, and unrest of any kind is highly sensitive.
But it is even more cautious about student activism, after the 1989 pro-democracy demonstrations in and around Tiananmen Square in central Beijing were crushed with troops and tanks.
Ping!
What is the potential play here? If the Chinese currency is fixed, then how can a foreigner short the market?
warning that failed investments could fuel social instability.
Everything the Chinese government hates “fuels social instability”. People having the opportunity to become wealthy “fuels social instability.”
Recalls one of my favorite investment aphorisms:
“Everyone’s a genius in a rising market.”
I’m pretty risk averse and so diversify, but I have done OK in the market (so far). Have lost a little bit too - well, if I were to sell certain “gambling” stocks right now. I don’t make a lot of money but I can afford to spend a few hundred bucks a year to ride on something risky/crazy but might pay off, what the hell. A lot more entertaining than SP500 index funds or T-bills!! I don’t play lottery or gamble otoh.
But when they are going up up up - it’s the most fun a guy can have with his clothes on I swear. What happens when the chinese market tanks?? It’s just completely out of control in the last couple years.
The underlying source is that the Yuan is continually strengthening against hard currencies, despite the willingness of Chinese banks to create more Yuan with the abandoned of drunken sailors. On the back of a trade surplus that the world wants corrected by currency appreciation, they believe they have been granted a license to print not merely money, but real wealth.
The stock touts are just trying to get in on the party. So to speak.
This is the typical danger a developing country could be into. Their sudden growth creates an dangerous illusion that they pretty much figured out the market economy. However, the economy is run by those who were wearing Mao suits not long ago. They installed a lot of capital equipment and churn out the product, but their mentality is slow to change.
They have not fully grasped the inner workings of industrial economy. Especially when it comes to finance and banking, they are more or less blind. They never exposed to this kind of system before. Chinese are collectively making a big mistake.
I have some money in FXI. Its a Chinese exchange traded fund. You could short that.
Its up about 100% for the past year, so I'm thinking of getting out for obvious reasons.
Yahoo lists the average PE as 21, not 1000, but I expect the real number is somewhere in between.
While the fools deserve the eventual wipe out they will receive, the vacuum of available capital to fund innovative/risky startups in the US is having a significant impact on quality US jobs.
Of course capital, manufacturing and other business flight to China and other offshore locations isn’t helped by over-regulation, out-of-control tort liability, unreasonable labor union demands and high taxes in the US.
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