MR. MARKET IS BIPOLAR
20 August 2009 by Cullen Roche
15 Comments
Truer words were never spoken than when Warren Buffett referred to the stock market as a troubled man with bipolar disorder. After falling 2.5% on Monday, the market has recovered all of its losses and now sits bewildered like a drunken man who can’t remember where he lives. Futures are currently tanking on the same “no news” event they rallied on today:
The roulette wheel is the PERFECT picture TPC. Please explain the reflation trade to me brother, I am slow and don’t understand it.
There are two green slots that are soon coming up man, where only the house wins.
I gotz a feeling we’re gonna see that soon… Think hard, we are losing over 500k jobs still.
That is scary shite man.
I suspect that this is the news that has the futures tanking ….
Aug. 21 (Bloomberg) — China plans to tighten capital requirements for banks, threatening to curb the record lending that’s fueled a 60 percent rally in the nation’s stock market, three people familiar with the matter said.
The China Banking Regulatory Commission sent a draft of rule changes to banks on Aug. 19 requiring them to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, said the people, who have seen the document. Banks have until Aug. 25 to give feedback, said the people, who declined to be identified as the matter is private.
As a result, banks may need to rein in lending or sell shares to lift capital adequacy ratios to the 12 percent mandated by the regulator. Chinese stocks briefly entered a so- called bear market this week on concerns the government would stymie new loans that exceeded $1 trillion in the first half. A news department official at the regulator declined to comment by phone and didn’t immediately respond to a faxed inquiry.
“This move will cut one of the most important funding sources for banks,” said Sheng Nan, an analyst at UOB Kayhian Investment Co. in Shanghai. Banks will “have to either raise more equity capital or slow down lending and other capital consuming businesses to stay afloat.”
I don’t even bother applying news to the market’s movements anymore. Bad news you buy the dip. Good news you buy the dip. That will work until it doesn’t. It has stopped working in China that’s for sure. U.S. markets have a tendency to ignore China as a recent leading indicator.
That is a dangerous move….
TPC, good to see you up man. I’ve got a conference call at 8 a.m. so I gotta jet. But you bet, the Chinese may crash this thing after all.
I bet they do.
AptCapital,
Good catch on the news story. Funny, as I write (10:17 PAC), all the Asian markets are down . . . except China. I have been watching this news story develop over the last week or two. I have noted contradictory reports, but no news reporting as definitive as the one you post here. Funny too that marketwatch.com is running stories about how the story China is cutting off lending may not be credible, and another story about how China is still the place to invest.
Increasingly the US stock market seems, for lack of a better word, fictitious. I have the sense that the run up has reached the point where there is little belief in its sustainability, yet it still persists, creating a mixture of anticipation that it could keeping running up . . . contrasted with equal apprehension that it could, and perhaps even more likely will, turn quickly down. There seems a paralysis that leaves one incapable of decisive action one way or the other. Of course, I could simply be projecting my own internal state, but my sense is that I am far from along here. Oddly enough, over the last couple of days, I find myself in a state of growing calm, with the sense that this about to have stretched as far as it can, and the feeling of stasis is about to give way. If it remains range bound for another week or two, the tension might become just about unbearable. The situation is getting to the point of being laughable.
Don,
Have a peak over at HK: http://www.hkex.com.hk/index.htm
Don’t trust Shanghai. It’s like the backroom VIP room at a casino.
Prescient,
I rarely sleep. Unfortunately for my life I stare at stock screens all day and night.
Ok, now I’m gone. No worries buddy, at least we were there for the show…
and it will be a big one. I’ve been center stage since the $2 buck offer for BSC. Best seats in the house man.
Is it beyond belief that China would not mind if their markets really tanked? The way they are handeling the Rio Tinto problem and the lack of effort in establishing a fixed price for iron ore semms to me to suggest that all is not well in China.
The blame for stock losses would lie with the “Capitalists of this World” and the Chinese Leadership would be further entrenched. Perhaps they need that at this time of economic turmoil, or do I see a problem where none exists, and a conspiricy therory simply provides the grey matter with stimulus?
The Chinese are definitely stepping on the brakes. Perhaps they see issues that our central bank doesn’t….
Hi TPC, reversed all losses like a couple of daysago, new highs today?
Hi TPC, new highs, better than expected continues!
It’s too funny. I was looking at this futures snapshot and thinking to myself: I’ll bet these numbers are all green tomorrow.
Hi TPC, what’s the likelihood late August and Sept when traders come back after the Hamptons will push them higher and much higher, no catalyst no China in sight to go lower?
Paul,
I am still playing this cautiously. We nailed the first 10% of the move. Traders can have fun chasing the last 5%. The risk/reward of this market has changed dramatically. My gameplan doesn’t change due to the S&P going 20 points over my near term targets….