China's
richest lose $50b
5
June, 2015
The
worst monthly slump in Chinese stocks in two years wiped away more
than US$34 billion ($50.8 billion) in combined net worth of the
richest people in China and Hong Kong in June.
Of
those 45 wealthy people on the Bloomberg Billionaires Index, more
than 80 per cent lost money as the Shanghai Composite Index tumbled.
"The
fortunes of billionaires are closely tied to the rise and fall of
stocks," said Zhang Lu, a Shanghai-based analyst at Capital
Securities Corp.
Zhou
Qunfei, chairwoman of Lens Technology, saw her wealth shrink the most
among all Chinese billionaires. Her fortune shrank by US$4.8 billion
in June as Shenzhen-listed Lens Technology tumbled 36 per cent. Zhou
became the country's richest woman after the maker of mobile-phone
glass covers went public in March.
The
fortune of Wang Jing, chairman of Beijing Xinwei Telecom Technology,
dropped from US$9.5 billion at the end of May to US$6.9 billion.
Billionaires
who listed their companies outside China saw smaller declines
Our smug liar reponded to this and the Greek referendum
New Zealand has had a disaster in Christchurch and has a housing bubble in Auckland - so, we'll be OK!
We should keep the following in mind
Guess What Happened The Last Time The Chinese Stock Market Crashed Like This?
By
Michael Snyder
2
July, 2015
The
second largest stock market in the entire world is collapsing right
in front of our eyes. Since hitting a peak in June, the most
important Chinese stock market index has plummeted by well over 20
percent, and more than 3 trillion dollars of “paper wealth” has
been wiped out. Of course the Shanghai Composite Index is still
way above the level it was sitting at exactly one year ago, but what
is so disturbing about this current crash is that it is so similar to
what we witnessed just prior to the great financial crisis of 2008 in
the United States. From October 2006 to October 2007, the
Shanghai Composite Index more than tripled in value. It was the
greatest stock market surge in Chinese history. But after
hitting a peak, it began to fall dramatically. From October
2007 to October 2008, the Shanghai Composite Index absolutely
crashed. In the end, more than two-thirds of all wealth in the
market was completely wiped out. You can see all of this on a
chart that you can find right
here.
What makes this so important to U.S. investors is the fact that
Chinese stocks started crashing well before U.S. stocks started
crashing during the last financial crisis, and now it is happening
again. Is this yet another sign that a U.S. stock market
crash is
imminent?
Over
the past several months, I have been trying to hammer home the
comparisons between what we are experiencing right now and the lead
up to the U.S. financial crisis in the second half of 2008.
Today, I want to share with you an excerpt from a New
York Times article that
was published in April 2008. At that time, the Chinese stock
market crash was already well underway, but U.S. stocks were still in
great shape…
The Shanghai composite index has plunged 45 percent from its high, reached last October. The first quarter of this year, which ended Monday with a huge sell-off, was the worst ever for the market.
Suddenly, millions of small investors who were crowding into brokerage houses, spending the entire day there playing cards, trading stocks, eating noodles and cheering on the markets with other day traders and retirees, are feeling depressed and angry.
This
sounds almost exactly like what is happening in China right now.
First we witnessed a ridiculous Chinese stock market bubble form, and
now we are watching a nightmarish sell off take place. This
next excerpt is from a Reuters
article that
was just published…
Shanghai’s benchmark share index crashed below 4,000 points for the first time since April – a key support level that analysts said had been seen as a line in the sand that Beijing had to defend, below which more conservative investors would start ejecting from their leveraged positions, widening the rout.
Chinese markets, which had risen as much as 110 percent from November to a peak in June, have collapsed at an incredibly rapid pace in since June 12, losing more than 20 percent in jaw-dropping volatility as money surges in and out of the market.
That drop has wiped out nearly $3 trillion in market capitalization, more than the GDP of Brazil.
Did
you catch that last part?
The
amount of wealth that has been wiped out during this Chinese stock
market crash is already greater than the entire yearly GDP of Brazil.
To
me, that is absolutely incredible.
And
now that the global financial system is more interconnected than
ever, what goes on over in China has a greater impact on the rest of
the globe than ever before. Today, China has the largest
economy on the planet on a purchasing power basis, and the Chinese
stock market “is
the second largest in the world in terms of market capitalization”…
Just as in 1929, flighty retail investors make up the bulk of China’s stock market and, just as in 1929 in the U.S., they have heavily margined their accounts. The Financial Times puts the number of retail investors in the Chinese stock market at 80 to 90 percent of the total market. Retail investors, unlike sophisticated institutional investors, are prone to panic selling, which explains the wild intraday swings in the Shanghai Composite over the past week.
Last night, the Shanghai Composite broke a key technical support level, closing below 4,000 at 3,912.77. The index is now down 24 percent since it peaked earlier this month and has wiped out more than $2.4 trillion in value. China’s stock market is the second largest in the world in terms of market capitalization, with the U.S. ranking number one.
Making world markets even more worried about the situation in China, its regulators are showing a similar brand of leadership as Mario Draghi. After previously pledging to trim back risky margin lending, they have now done a complete flip flop and are permitting individual brokerage firms to avoid selling out accounts that miss margin calls by setting their own guidelines on the amount of collateral needed.
I
know that a lot of Americans don’t really care about what happens
over in Asia, but when the second largest stock market in the entire
world crashes, it
is a very big deal.
The
great financial crisis of 2015 has
now begun,
and it is just going to get much, much worse. On Thursday, Ron
Paul declared that “the
day of reckoning is at hand“,
and I agree with him.
So
what comes next?
By the time it’s all over, I expect:
1) Numerous emerging market countries to default and most emerging market stocks to lose 50% of their value.
2) The Euro to break below parity before the Eurozone is broken up (eventually some new version of the Euro to be introduced and remain below parity with the US Dollar).
3) Japan to have defaulted and very likely enter hyperinflation.
4) US stocks to lose at least 50% of their value and possibly fall as far as 400 on the S&P 500.
5) Numerous “bail-ins” in which deposits are frozen and used to prop up insolvent banks.
I
tend to agree with most of that. I don’t agree that the euro is
going to go away, but I do agree that the eurozone is going to break
up and be reconstituted in a new form eventually. And yes, we
are going to see tremendous inflation all over the world down the
road, but I wouldn’t say that it is imminent in Japan or anywhere
else. But overall, I think that is a pretty good list.
Why The Puerto Rico Debt Crisis Is Such A Huge Threat To The U.S. Financial System
The
debt crisis in Puerto Rico could potentially cost financial
institutions in the United States tens of billions of dollars in
losses. This week, Puerto Rico Governor Alejandro Garcia
Padilla publicly announced that Puerto Rico’s 73 billion
dollar debt is “not payable,” and a special adviser that was
recently appointed to help straighten out the island’s finances
said that it is “insolvent”
and will totally run out of cash very shortly. At this point,
Puerto Rico’s debt is approximately 15 times larger than the per
capita median debt of the 50 U.S. states.
Yes, the Greek debt crisis is larger, as Greece currently owes about $350 billion to the rest of the planet. But only about $14 billion of that total is owed to U.S. financial institutions. But with Puerto Rico, things are very different. Just about the entire 73 billion dollar debt is owed to U.S. financial institutions, and this could potentially cause massive problems for some extremely leveraged Wall Street firms.
Yes, the Greek debt crisis is larger, as Greece currently owes about $350 billion to the rest of the planet. But only about $14 billion of that total is owed to U.S. financial institutions. But with Puerto Rico, things are very different. Just about the entire 73 billion dollar debt is owed to U.S. financial institutions, and this could potentially cause massive problems for some extremely leveraged Wall Street firms.
There
is a reason why Puerto Rico is called “America’s Greece”.
In Puerto Rico today, more than 40 percent of the population is
living in poverty, the unemployment rate is over 12 percent, and the
economy of the small island nation has continually been in recession
since 2006.
The
result of the referendum in Greece is a great victory for freedom,
but it is also threatens to unleash unprecedented economic chaos all
across Europe. With almost all of the votes counted, it is being
reported that approximately 61 percent of Greeks have voted “no”
and only about 39 percent of Greeks have voted “yes”.
This is a much larger margin of victory for the “no” side than almost everyone was anticipating, and it represents a stunning rejection of European austerity. Massive celebrations have erupted on the streets of Athens and other major Greek cities, but the euphoria may not last long. Greek Prime Minister Alexis Tsipras is promising that Greece will be able to stay in the euro, but that gives EU bureaucrats and the IMF a tremendous amount of power, because at this point the Greek government is flat broke. Without more money from the EU and the IMF, the Greek government will not be able to pay its bills and virtually all Greek banks will inevitably collapse.
Meanwhile, the rest of Europe is about to experience a tremendous amount of pain as financial markets respond to the results of this referendum. The euro is already plummeting, and most analysts expect European bond yields to soar and European stocks to drop substantially when trading opens on Monday morning.
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