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Cramer Says Sell! Sell! Sell! China Stocks

I don’t know if anyone still watches CNBC and, if so, whether Mad Money’s Jim Cramer still has people tuning in, but there’s a strange sense of deja-vu in this clip from yesterday in which he laments the recent market crash correction and provides some free advice.

Things become kind of surreal at about the 2:15 mark when he comments on (and successfully pronounces, apparently) Guangdong Meiyan Jixiang Hydropower Company and the now failed Chinese government’s support of its share price.

I had to stop the video there…

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Panic on the Street

It looks like they’ll have plenty to talk about this week beyond the official topic of  Inflation Dynamics and Monetary Policy at the Federal Reserve’s annual gathering of the brain trust in Jackson Hole, WY, what with the sky being full of smoke from physical fires burning to the West and financial markets around the world figuratively going up in smoke.

What’s interesting about recent developments (if not surprising) is that China’s disappointing economy is being blamed for the market turmoil, prime evidence being the graphic below in this Wall Street Journal story today:

What gets short shrift from most media outlets (this Forbes piece by Steve Keen being the exception to the rule) is that we may be looking square in the face of yet another ugly unwind of yet another reckless expansion of credit and debt. Oh well…

China Readies More Stimulus

The sharp 8 percent drop in China exports last month has many thinking more stimulus is on the way for their sputtering quasi-command economy as detailed at Bloomberg.

On a related note, What if Mao still ran China? at the Financial Times points out that growth was pretty good long ago when there was no “quasi-” associated with the economy.

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Given the remarkable increase in the number of stock trading accounts and soaring margin debt in China over the last year or two, stories such as the one below about a farmer losing his life savings (and then some) should be expected, but, after seeing this man’s distress and learning of the dollar amounts and approach involved, it is a little surprising.

Investing his entire stake of $164K in one company and then being extended $1 million in margin probably weren’t the best moves Yang Cheng could have made.

Clearly, the government should have provided some basic instruction about investing in stocks when they began their effort to promote stock ownership. Maybe they did and he thought he knew better – the only thing missing from this sordid tale is the claim that Yang Cheng at one point was worth $4 million, or something like that.

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China Stocks, Circling the Earth, etc.

The financial media is inventing new and interesting ways to talk about the China stock bubble that, almost unanimously, they think is going to get even bigger (perhaps much bigger) before it meets its pin. In this Bloomberg report, they equate the one-year rise in stock market “value” – $6.5 trillion dollars – to circling the earth 250 times with $100 bills.

It is clearly the newbie investors in China that are driving share prices higher (see this illuminating AP story for more evidence of that), but the financial media isn’t helping either. To wit, the Bloomberg story casually refers to the $6.5 trillion change as “value creation” (i.e., “The figure, $6.5 trillion, sums up the value created in just 12 months of trading on Chinese stock exchanges…”) and this serves to legitimize the gains.

Isn’t there a better phrase than “value creation” when referring to mature asset bubbles?

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