Nobody knows the extent to which the recent stock-markets "correction," which began with the Chinese bourses, was due to anyone from the so many objective factors, such as Chinese overheating, American economical slowdown, or global excess liquidity.
Of significant relevance I find a subjective potential factor and an anecdote. Just before the Chinese sell-off, Greenspan said via satellite link to a business conference in Hong Kong the following: "When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign. For example, in the US, profit margins have begun to stabilize, which is an early sign we are in the later stages of a cycle." The, otherwise widely circulated, anecdote has it that a certain Li Ruichang, a 63-year-old Chinese engineer and speculator, stated the day after the fall of the Chinese bourses that: “Things like that happen. But I’m not worried about a crash. After a five-year-long bear market, the bull market shouldn’t end that fast.” I should add that Mr. Li's statement came a day after the sell-off, as the Asian and European bourses were still falling while some in China regained some of the losses. Before the sell-off, the Chinese major indexes were twice as high as 12 months before. In any case, for some, the strength of the Chinese stock market consists of its number and determination (not to lose) of investors.
As if encouraged by the second day gains in the Chinese and US stock-markets, officials put out several soothing messages. The Chinese regulators gave up on plans to curb speculation and were ready to consider opening their stock markets to foreign investors--it would be interesting to see if foreign speculators get any special treatment. In the US, Ben Bernake, chairman of the Federal Reserve, said that one could reasonably hope for a stronger economy by mid-year IF housing stabilized, and IF manufacturing improved. So far, his twice-conditional message has been taken as support for the rally.
But then again, what's a stock market if not a conspiracy of hopefuls? One would only have to distinguish among the types and motives of hope, and then check for alignment between their own and the economic realities.
On a final note, it's ironic how globalization has been considered to transcend stock-market rules, just as increased productivity driven by technology had been until (twice in) 2000.
Of significant relevance I find a subjective potential factor and an anecdote. Just before the Chinese sell-off, Greenspan said via satellite link to a business conference in Hong Kong the following: "When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign. For example, in the US, profit margins have begun to stabilize, which is an early sign we are in the later stages of a cycle." The, otherwise widely circulated, anecdote has it that a certain Li Ruichang, a 63-year-old Chinese engineer and speculator, stated the day after the fall of the Chinese bourses that: “Things like that happen. But I’m not worried about a crash. After a five-year-long bear market, the bull market shouldn’t end that fast.” I should add that Mr. Li's statement came a day after the sell-off, as the Asian and European bourses were still falling while some in China regained some of the losses. Before the sell-off, the Chinese major indexes were twice as high as 12 months before. In any case, for some, the strength of the Chinese stock market consists of its number and determination (not to lose) of investors.
As if encouraged by the second day gains in the Chinese and US stock-markets, officials put out several soothing messages. The Chinese regulators gave up on plans to curb speculation and were ready to consider opening their stock markets to foreign investors--it would be interesting to see if foreign speculators get any special treatment. In the US, Ben Bernake, chairman of the Federal Reserve, said that one could reasonably hope for a stronger economy by mid-year IF housing stabilized, and IF manufacturing improved. So far, his twice-conditional message has been taken as support for the rally.
But then again, what's a stock market if not a conspiracy of hopefuls? One would only have to distinguish among the types and motives of hope, and then check for alignment between their own and the economic realities.
On a final note, it's ironic how globalization has been considered to transcend stock-market rules, just as increased productivity driven by technology had been until (twice in) 2000.
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