China is using the same tactics that America used to fight the 1929 Wall Street Crash

•July 7, 2015 • Leave a Comment

China stock market 3

While European attention is focused on Greece, China is having a serious market meltdown.

After exploding earlier in the year due to deregulation, China’s benchmark Shanghai Composite has collapsed a crazy 29% since the highs of early June. China’s other stock markets have had similarly steep falls.

The steep falls are despite efforts by the Chinese government to prop up the struggling stock markets. In late June, China’s central bank, the People’s Bank of China (PBOC), cut interest rates by 0.25% and reduced the amount of cash reserves required to be held by some Chinese banks by 0.5%.

Having failed to put a floor under market losses, China’s stock market regulator, the CSRC, banned short selling from some market participants and announced an investigation into potential market manipulation. China’s ministry of finance also announced that it will allow its basic endowment pension fund to invest a greater proportion of its funds under management into the nation’s stock market.

The latest attempts to prop up markets closely mirrors the efforts of the US banking system to bailout the Dow Jones during the Wall Street Crash in 1929, as Bloomberg notes.

Over the weekend China’s top stock brokerages pledged that they would collectively buy at least 120 billion yuan (£12.3 billion, $19.3 billion) of shares to help steady the market, with backing from the PBoC.

The central bank is effectively becoming the buyer of last resort, printing money to buy up shares and prop up prices.

In 1929, Wall Street’s banks did something similar. JPMorgan and several other top financial firms agreed to pool resources and buy up shares to put a floor under prices. It happened following a similar drop of around 30% for the Dow Jones Industrial Average.

The US banking systems efforts only had the briefest of effects on the index and America was eventually plunged into the Great Depression.

It’s too early to tell whether China’s latest move will work, despite the insistence of state media. So far its failed to curb the huge volatility that has been plaguing China’s stock markets recently. The Shanghai Composite opened up over 7%, eventually slipped back into the red, before ending the day up 2.4%.

“Still a long way to go”

Citi thinks China’s indices have further to fall. One of the causes for the slump has been margin buying — people buying stocks on borrowed money.

As prices fall and share holdings become worth less, investors are being asked to give banks more money to keep up the balance of their accounts — so-called “margin calls.” This is forcing people to sell shares to raise cash, which in turn lowers prices because everyone in the market is a seller.

Citi says: “Despite the sentiment help, we believe continued deleverage, and possible reform concerns given recent administrative intervention, will cap index upside. We estimate one-fourth margin buys forced out, still long way to go.”

Deutsche Bank’s macroeconomic analyst Jim Reid says: “We need to keep an eye on this story this week as there’s a danger Greece could distract us from what would otherwise be the main story.”

But Deutsche Bank says that even if shares to continue to plummet, it’s unlikely to lead to the same kind of deep recession as the US experienced in the 1930s.

Analyst Zhiwei Zhang says China’s banks have relatively little exposure to leveraged buying so are unlikely to get burnt. China’s economy is also much more reliant on banks for financing than equity markets. That means even if the current slump continues and companies can’t get access to cash on the public markets, the economy won’t grind to a halt as banks will still be there to grease the wheels.

Zhang’s main concern is that the correction makes it harder to predict what will happen to China’s growth and inflation.

Australian Macquarie agree with Deutsche Bank that the slump is unlikely to have much impact on ordinary Chinese, saying: “We are more concerned about the negative impact on China’s financial reform, i.e., whether intervention under pressure would cause policymakers to slow the pace of financial deregulation.”

Original article: http://goo.gl/0Ysruy

Surprising Reasons Why China’s Stock Market Is Not In A Bubble

•July 7, 2015 • Leave a Comment

china stock market 1
An epic freefall in China’s stock market the past month has sickened investors with fear and anger. The bursting of China’s alleged stock bubble is being blamed for at least two people committing suicide — one in Shanghai and another in Shenzhen. China’s government has enacted emergency measures to stem the bleeding. The China Securities Regulatory Commission (CSRC) suspended new initial public offerings while brokerages and fund managers pledged to buy stocks.

Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS), tracking 500 companies listed on the Shanghai and Shenzhen stock exchanges, nosedived 30% in the past month. Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) and Market Vectors ChinaAMC A-Share (PEK) each plunged 21% the past month. They both track the CSI 300 Index, made up of 300 names traded on the two major mainland stock markets. iShares China Large-Cap, tracking 50 of the largest firms listed in Hong Kong, slipped 7%. As did iShares MSCI China ETF (MCHI).

Chen Ding serves as CEO of CSOP Asset Management overseeing $6.2 billion in assets in Hong Kong and chairperson of the Chinese Asset Management Association of Hong Kong. Her firm launched in mid March the CSOP FTSE China A50 ETF (AFTY), which invests in the 50-largest companies listed on China’s restricted mainland stock exchanges in Shanghai and Shenzhen. She shared some compelling and surprising reasons why the Chinese stock market is not in a bubble, despite the recent bloodbath.

Ho: There’s a lot of media coverage about how China is the world’s biggest stock market bubble. In general, is China really in a bubble? Why or why not?

Ding: No. The price-to-earnings ratio for the two major indexes for Chinese stocks – the FTSE China A50 Index and the CSI300 – are only 11.06 and 16.98, respectively, as of closing on July 3, 2015, according to Bloomberg data. That’s compared with 18.29 for the S&P 500 Index (based on earnings in 2015). Therefore, it is hard to say China’s blue-chip stocks are in a bubble. However, the current valuation for some growth sectors such as technology is relatively high compared with blue-chip names.

The price-to-earnings ratios of the Growth Enterprise Market board (GEM) in Hong Kong and the Small and Medium Enterprise board (SME) in Shenzhen are 84.6 and 42.4 now, respectively. That’s based on earnings in 2015, compared with 55.9 and 34.1 at the beginning of 2015. Today’s GEM and SME valuations are still quite high after the recent correction.

But the high valuations of GEM and SME boards reflect the dramatic change of China’s economic growth from a labor-driven model to an innovation-driven one. China’s government is encouraging entrepreneurship and innovation. And China’s capital market is rewarding those innovative companies. This shift in capital allocation to higher-growth innovative companies is often overlooked or underestimated by observers outside of China.

Ho: China’s stock market has created $6.5 trillion in value in 12 months, according to the Washington Post. Is this trajectory sustainable?

Ding: Yes. In the long run, the A-shares market, the term for equities listed on the Shanghai and Shenzhen exchanges, has the potential to go up again due to a package of government reform policies. First, China’s government will continue to provide favorable monetary policy. More interest rate and required reserve ratio (RRR) cuts are foreseeable because the real interest rate (nominal interest rate minus inflation) remains at a very high level.

Second, Chinese residents will continue to move their money from widely used forms of investment – property and high-yield “wealth management products” offered by banks – to stocks. The returns of property and high-yield products are less attractive compared with stocks.

Third, there are some encouraging changes happening in China’s economy, such as the reform of state-owned enterprises to improve productivity, the “One Belt One Road” policy to digest domestic over-supply through greater economic integration with China’s neighbors, and innovative business models adopted by many traditional companies to increase efficiency.

Ho: Are valuations justifiable given corporate profits, sales, and assets?

Ding: Yes and no. The increase of valuations was driven by monetary stimulus, namely interest rate cuts, and the re-allocation of residents’ savings (movement of investments from property to equity). The valuation is hard to justify by the falling of corporate profits and sales. In fact, China’s industrial profits have been quite weak in recent years. In the first five months of 2015, total headline revenue of industrial companies only grew by 1.3% year over year, much slower than 2014’s 7%. Industrial profits declined by 0.8% year over year, also weaker than 2014’s 3.3%, according to the National Bureau of China…

Full article: http://goo.gl/SvsJK3

Greed is like the sun: it always looks the same no matter from where you view it.

White House Officials Plot Ways to Pressure Lawmakers Into Supporting Iran Deal

•July 7, 2015 • Leave a Comment

Urge liberal groups to launch lobbying campaign

White House officials on Monday held a private conference call with liberal organizations to discuss ways of pressuring Democrats and other lawmakers on Capitol Hill into supporting a nuclear deal with Iran that is expected to be finalized in the coming days, according to an audio recording of that call obtained by the Washington Free Beacon.

The call, in which there were more than 100 participants, was organized by the liberal pro-Iran group Ploughshares Fund, which has spent millions of dollars to slant Iran-related coverage and protect the Obama administration’s diplomatic efforts.

The White House officials described a nuclear deal with Iran as President Obama’s “signature foreign policy accomplishment” and urged liberal groups to launch an all-out lobbying campaign to pressure lawmakers, especially Democrats, to back the deal.

Progressive leaders on the call told participants to prepare for a “real war” and repeatedly declared that “the other side will go crazy” in the coming days. The call also included the anti-war group MoveOn.org.

“This has really been on the front burner from a foreign perspective, although not in the public eye necessarily, since the very beginning,” Matt Nosanchuk, an official in the White House Office of Public Engagement, told participants. “This is not an issue of the day, this is really an issue of the presidency.”

The second White House official, John Bisognano, went on to stress “the importance of this to the president.”

“This is clearly an issue that is very close to his heart and something that’s extraordinarily important for the future of frankly the world,” Bisognano said. “I want to make sure everyone understands this is a top priority for the administration, and this is clearly something that we’re all focused on moving forward and excited about hoping that we can come to a solid agreement.”

Leaders of the call emphasized that the assembled groups should target Democrats in order to build a veto-proof majority when the deal eventually comes to Congress for a vote.

Robert Creamer, a member of the liberal political shop Democracy Partners and the general consultant to the anti-Republican Americans United for Change, urged participants on the call to “step up” their pro-Iran efforts.

“We have to take to our memberships all over the country,” Creamer said during the call. “We all have to step up. The other side will go crazy with intensity.”

Progressives should target Democrats by “blitzing the hell out of the Hill,” Creamer said.

“What will be ultimately decisive is the level of intensity that members of Congress feel, particularly Democrats,” said Creamer. “Democrats are actually the key people here because if we can have enough votes to prevent a presidential veto override [of the deal], then we win.”

“That means tons of phone calls, lots of lobbying contacts, not just a couple of good conversations, I mean just blitzing the hell out of the Hill,” he said, rallying participants to prepare for “a big, big battle” over the deal. “This is going to be a real war for the next week.”

At another point in the call, Creamer jumped in to offer a word of encouragement from his wife, Rep. Jan Schakowsky (D., Ill.).

“Let me just also note, my wife, Congresswoman Schakowsky, just yelled across the room to me to make clear to everybody that we have to be clear that this is a good deal because it prevents Iran from getting a nuclear weapon,” Creamer said. “The other side will go crazy. We have to be really clear that it’s a good deal.”

Nosanchuk sought to defend the administration from critics who are concerned that the billions of dollars in economic sanctions relief to Iran will be used to fund the country’s terrorist activities.

“With respect to criticisms that any agreement that affords sanctions relief will open the floodgates so that Iran receives all this money it can then pour into its nefarious activities in the region, our response to that is they’re doing it anyway,” Nosanchuk said, explaining that the administration believes Iran will use the money to fix its stagnating economy.

“Our expectation is that sanctions relief will go into bolstering the Iranian economy and not into supporting all these other activities, which as I pointed out, are being supported anyway,” he said.

The White House officials told participants the administration is invested in trying to reach an agreement by July 9.

That date has been set by Congress as the last day the administration can submit a draft of any final deal for a 30-day review by lawmakers. Any draft submitted between July 10 and Sept. 7 would sit in front of Congress for 60 days, providing lawmakers with extra time to scrutinize the deal.

Nosanchuk explained that if Congress fails to act within this time period, “the president has the authority to issue waivers and begin implementing the agreement” without legislative approval.

The White House remains confident that if Congress rejects the deal, the president could veto that action and continue to move forward.

“They could vote to approve it or they vote to disapprove it, and then, of course, if that occurs, we’re put in the position of having to sustain a veto by the president, which we’ll want to work very hard, and we’re confident that if congressional action does take place, we’ll come out on the other side of this with the deal in tact and the president’s signature foreign policy accomplishment being upheld,” said Nosanchuk.

by Adam Kredo

Original article: http://goo.gl/b2298M

I have no words. That a sitting president of the United States of America would would demand a nuclear proposal with a regime as demented as Iran is far beyond criminal negligence.

This feels like extortion: like Iran has something on us and they are forcing us to give them these concessions.

This is as close to international horror as I have found myself in the last few years.

Good Luck Finding a Place to Hide as Global Markets Crumble

•July 7, 2015 • Leave a Comment

Economics
Investors tend to respond to impending doom by selling risky stuff and hiding out in safer assets — namely, bonds in places such as Germany and the U.S.

There’s a problem with that formula this time around: Traders aren’t so sure they can find anything that’s truly safe right now. So, instead of piling into sovereign debt of developed nations, traders are pulling their money out of those places as the Greek economy teeters on the brink of collapse, Puerto Rico talks about delaying some debt payments and China’s stock market suffers its biggest selloff since 1992.

Investors yanked $2.9 billion from European government bond funds last week, more than ever before, and pulled $699 million from short-term investment-grade U.S. bond funds, Bank of America Corp. and Wells Fargo & Co. data show. While these assets have traditionally been havens during rocky periods, they look less appealing now after more than six years of unprecedented monetary stimulus that pushed yields to record lows.

Why is that a problem? Well, the European Central Bank’s bond-purchasing program this year sent yields so low (negative, in fact) that investors revolted, selling German debt in the face of some signs of economic growth and causing unprecedented volatility. In the U.S., the economy has improved enough that the Federal Reserve is planning to raise interest rates this year from virtually zero, where they’ve been since 2008.

Debt Heavy

And nations and companies around the world have taken on unprecedented amounts of debt, all with the hope of igniting some growth, with the results being rather tepid.

“All of the mechanisms that function so smoothly when things went wrong, all of those got broken this spring,” said Jim Vogel, an interest-rate strategist at FTN Financial. “No one has confidence that assets are going to go back to their traditional relationships.”

In other words, don’t count on government bonds to be the ballast of your investments through the rockiness that’s coming. Or perhaps that’s already started to arrive.

Investors are clearly getting more concerned about a full-blown selloff in assets globally after Greece rejected austerity measures required to receive additional bailout funds, and as the Shanghai Composite Index fell 25 percent from its peak in mid-June.

Muni Woes

Add to that Puerto Rico, where Governor Alejandro Garcia Padilla said last week he wants to delay payments on some of the $72 billion of debt amassed by the government and its agencies.

This all seems pretty bad, especially if it’s just a sign of a bigger worldwide problem of too much debt and not enough economic expansion.

And investors are certainly getting nervous, returning to government debt to some degree in the past week, sending yields on 10-year U.S. Treasuries down to 2.3 percent from as high as 2.5 percent on June 10. They also stepped away from riskier debt investments, withdrawing almost $3 billion from U.S. high-yield bond funds last week, the biggest outflow of the year, Lipper data show.

But they don’t seem ready to re-allocate their money into Treasuries and bunds instead, at least not yet. Maybe they’ll fully return to the debt if they expect deflation and recession will take hold in the world’s biggest economies. That just seems unlikely at the moment as central banks globally are still committed to their stimulus efforts.

So for now, markets have been relatively sanguine Monday as the ECB expanded the assets it would purchase as part of its stimulus, China’s government pledged further measures to support the region’s stock market and Puerto Rico stayed out of default for another day.

After all, where will investors run? The government debt that used to be their safety looks more and more treacherous.

by Lisa Abramowicz

Original article: http://goo.gl/hsg3Il

Keynesian babble through and through…

boggles the mind.

A Stone Cut Without Hands

•July 6, 2015 • Leave a Comment

Hyperextensions

You were designed with the power and privilege to improve yourself: your mind, your emotions, your body, and your opportunities.

Don’t let others, whoever they may be—friends, family, your denomination, the government, strangers—usurp those rights that more truly belong to you.

You are a sapient tenant of the universe equal to all who have ever walked this Earth before you.

You are Kings and Queens.

So pick out a crown, polish it, and starting ruling your empire.

Start with ruling yourself.

2012 Hate Crime Statistics (Texas vs. California)

•July 5, 2015 • Leave a Comment

Texas Flag1

This is for my hyper-liberal associates who enjoy misrepresenting Texas a the “bastion of antebellum racism”.

From the Federal Bureau of Investigation’s own website (www.fbi.gov), here are the hate crime statistics for Texas and California.

Listed are each state’s hate crimes based on 1) race, 2) religion, 3) sexual orientation, 4) ethnicity, and 5) disability.

The below numbers are for 2012, the last available state and national metrics.

Texas

Population: 27,695,284

Crimes based on:

Race: 27
Religion: 4
Sexual Orientation: 14
Ethnicity: 7
Disability: 0

FBI link: https://goo.gl/yDQp3q

California

Population: 38,802,500

Crimes based on:

Race: 379
Religion: 144
Sexual Orientation: 234
Ethnicity: 151
Disability: 2

FBI Link: https://goo.gl/9Z13lF

Summary

As you can see California only has 29% (1/3) more people than Texas, but it has:

  • 14x crimes based on race
  • 36x crimes based on religion
  • 16x crimes based on sexual orientation
  • 21x crimes based on ethnicity
  • and technically 200x crimes based on disability

Now here’s the crazy part: if you doubled the population of Texas to 55,390,568 (that means Texas would now have 16,588,068 more people than California) and doubled all its hate crimes as well… the math is pathetically simple here…

California would still have:

  • 7x crimes based on race
  • 18x crimes based on religion
  • 8x crimes based on sexual orientation
  • 11x crimes based on ethnicity
  • and technically 100x crimes based on disability

and with a far smaller population.

You think Texas is the problem?

This is called hypocrisy.

Texas wins.

Perfect Your Progress

•July 5, 2015 • Leave a Comment

Awesome

 
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