iBankCoin
Stock advice in actual English.
Joined Sep 2, 2009
1,224 Blog Posts

Refreshing Day

European bonds are now back under control and the EURUSD refuses to cede $1.10. This may sound circumstantial but I read it as a line in the sand which is not being crossed.

The Greek referendum was a major joke. No one will ever take Syriza seriously again. You cannot force a referendum like that, then just turn right around and bend over. Greece will be the butt of jokes for 100 years. I mean, we still make fun of the French for losing wars, don’t we? ‘Greek negotiating’ is now a dark punch line.

Oil dropped $10 in a hurry, but it is still only testing the old lows. I’m getting some constructive information from the oil field services sector. BAS reports that some numbers have rebounded (albeit new drilling activity is practically nonexistent).

So I guess what happens next is all about China.

The Chinese market collapse would have been the start of something serious in the US; but China is not the US. China remains at a junction, where they need to decide what they want to be when they grow up. If they decide that the Red Revolution is still their destiny, then they’ll keep pulling moves like they did last week. But that is not the recipe for a successful world power and each of us knows it.

China’s path forward is to embrace the capitalism spirit. That means letting crashes do what they will and not threatening to behead people for having private property rights.

For now though, we may have been spared something worse. Chinese stocks are not widely connected to their overall economy yet (America would be in another recession if that had happened here and so would maybe a tenth of the planet).

So for China, they are still executing the transfer towards a more free and secular society (at least on their word anyway) and this damage may yet be passed over. And Chinese stocks globally are taboo and I would be ashamed if it were discovered that I owned any, so my guess is foreign exposure is going to be reasonable. Not non-existent, but reasonable.

This leads me to guess that the China crash will be a one off.

The real damage is the permanent shredding of credibility that China’s leadership is undergoing by trying to dictate a market outcome. That’s stupid and doesn’t work and really highlights the problem the Chinese are going to have maturing past the technocrat paternalism that has barely been keeping it together up to now (see Chinese stocks as taboo, my refusal to own any).

Globally, if we’re going to keep hitting new highs, we need China to hold water. That means the China boys pulling their pants up, leaving that Marx childishness behind them, and pushing forward towards Western finance. Stumbling now would not be a good sign for global trade, which could be a real issue if the markets reopen and the Chinese people themselves decide their Emperor is ass naked.

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5 comments

  1. mx2101

    That’s excellent, op-ed quality work, suitable for WSJ or NYT, sir.

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  2. gunrunner

    Any thoughts on HCLP lately? Would appreciate your thoughts on it, sir.

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    • blackgld

      HCLP has been a disaster for me. I’m holding it and will double up if we get down to IPO level at $17. All the frac sand plays have been crushed lately.

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    • Mr. Cain Thaler

      I still love the US domestic oil play and believe that ultimately the Saudi bid will fail. OPEC will break before the US does.

      But you need to be very very cautious. HCLP is probably safe. Looking at the balance sheet, I’m sticking with BAS as well.

      But there will be US bankruptcies.

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  3. pyromonoxide

    Nice piece on this! this line “shredding of credibility that China‚Äôs leadership is undergoing by trying to dictate a market outcome. ” speaks volumes about the control mentality they have been laying down and the fallacy of it.

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