Slashdot Mirror
China's Stock Crash: $3.5 Trillion Wiped Out, $2.6 Trillion Frozen
An anonymous reader writes: The stock market crisis going on in China is notable for the huge numbers involved. $3.5 trillion ($3,500,000,000,000) in value has been wiped out by falling prices, and over a thousand companies have forced a pause in trading. The combined value of all of these companies exceeds $2.6 trillion, and it represents about 40% of the total market capitalization. This follows attempts by the exchanges and the government to instill confidence in trading once more, but investors are still wary. The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental. It is hard to see how the prices as of a month ago were justified, and easy to see why the sell-off of the last month would occur. That, in turn, implies that Chinese officials are fighting an uphill battle in their policy moves to try to stop the correction, and helps explain why their policy actions have had little effect so far."
Lately this seems to be how stock markets work.
It has nothing to do with actual value, just the psychotic glee of investors and speculators who envision doubling their money every six months.
The stock market has become separated from reality, with the people running the giant pyramid scheme feeling entitled to skim off the top with high-frequency trading.
In the long term, the assumptions used in the stock market seem to be irrational, unsustainable, and pretty much impossible. And corporations are often overvalued based on valuations which is more than the company will ever earn in the next few centuries.
Stock markets are going to fuck up our economies more than they seem to be helping. Because they stopped having anything to do with fundamentals and sane valuations a VERY long time ago.
The stock market is a reflection of mass delusion and wishful thinking.
Lost at C:>. Found at C.
It shot up 150% fro mid-2014 and then corrected way down so that now it's only up about 75%.
Up about 75% in a year is doing fucking awesome. It's just that the big drop from the ridiculous 150% valuation will let some people sell fear and hurt the economy a bit in the short term.
Remember the endowment effect--people who made money during the 150% rise are now going to be complaining about how much they've *lost* even though they're still up.
They tear down my shitty wall street!
SJW's don't eliminate discrimination. They just expropriate it for themselves.
As I'm writing this:
Shanghai's average P/E is 17.31.
( Source: http://www.sse.com.cn/market/d... )
Dow Jones Ind Avg P/E is 16.2.
( Source: http://www.wsj.com/mdc/public/... )
1. The idea is to buy low and sell high. Prices aren't low yet.
2. A lot of people in China bought at very high valuations and hoped to sell at an even higher level to a "greater fool" to make a profit. This is called greed, and these people are in pain. Especially since so many of them bought on margin.
On the up-side, the gov't has been pouring tons of money into infrastructure (partly fueling the bubble), and they still control their own currency. So they have some room to maneuver. And with a technocratic, authoritarian gov't, they have some leeway to take drastic measure that would be difficult if not impossible in a democracy. It will be interesting* to see how this plays out in the coming days and weeks.
* BTW, about that Chinese curse "May you live in interesting times," after decades in Asia, I have yet to find a native speaker who can tell me the original Chinese. So it seems this curse is apocryphal, most likely invented by a Westerner as a joke.
XML is like violence. If it doesn't solve your problem, you're not using enough of it. --AC
The most interesting factoid in the links is:
The Chinese stock market has dropped 26% in a month and The Chinese stock market is up 83% over the last year. Both are factually accurate.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
Fortunately for China, this is a bubble that formed as the usual speculative excess on top of a building boom. Unlike our own latest market bubbles, the Chinese boom has created enough durable infrastructure - dams, power plants, rail lines, freight terminals, water systems - that the financial effect of this crisis will be muted and temporary. For years now, China has done all the building we have not been able to break ground on. China can build bullet train lines thousands of miles long, while we can't even start a research telescope.
When our current tech bubble pops, the dollar will have been backed up by...social media apps?
No value has been wiped out. What has been wiped out is valuation. There's a big difference.
Posting anonymously for reasons that will be clear in a moment...
I work at a company that manufactures large items made from steel. Many companies in China, and the Chinese government itself, are customers of my employer.
Every contract we receive from China or Chinese companies has a clause that demands our company to certify that our products that will be delivered to China contain no Chinese-made steel.
I find this very interesting, indeed.
Yeah, it'll make junk from Wal-Mart suddenly expensive. I can't say I'm upset about that.
And there's the guy who doesn't have any idea what happens when the poor and middle class that would be directly impacted in more than one country. Suddenly it costs more for things in the US, Canada, Europe and Asia. Suddenly, everyone but the rich and ultra rich are now struggling, and no longer buying items but rather scraping by after paying for basic necessities. Well tell me what happens when growth in the economy comes to a screeching halt because people aren't buying anything?
Om, nomnomnom...
The growth has halted because nobody is buying anything because nobody in those countries have jobs any more.
So every time we give corporations tax breaks, and then watch them waltz the jobs offshore, what we're doing is transferring money from the economy to the shareholders.
It's the lie of globalization being good for anything but corporate profits which is killing our economies. Basically it transfers the value of our jobs to the corporations.
Kill a CEO, feed a banker to the bears, and throw the lobbyists to the alligators. They're the ones fucking up the economy.
As long as we stay on this suicidal path of assuming that sucking up to corporations and the wealthy is good for everybody else this will continue.
The biggest lie perpetuated on mankind is modern economics and free trade. It's really just the corporations and the wealthy ripping us all off.