China's Market Crash and the Man Who Saw It Coming | Hacker News Reader

China's Market Crash and the Man Who Saw It Coming

ozy.com

27 pointsrrggrr16 comments

Everybody saw the crash coming. It was clearly a bubble as the Shanghai Stock Exchange went up 250% in 12 months while every indicator (company profits, manufacturing prices, etc) were showing bad news.

https://au.finance.yahoo.com/q/bc?s=000001.SS&t=5y&l=on&z=l&...

Stock exchanges don't double in price year over year on bad news. That's just stupid.

I'm surprised the SSE has only fallen 30%. It still looks like it needs to lose another 30% (it's still up nearly 100% since early last year).

The only reason the entire world isn't shorting Chinese stocks is it's tricky to fight deliberate market manipulation by the Chinese government. Although I don't doubt this crash has made a few people very rich.

Seriously. The average P/E ratio for a stock on the mainland indexes was 84. For a frame a reference, Facebook's is around 78. There's no way that could last.

Wow. If that was the average, that's insane. Anybody investing in that market was gambling on the hype keeping it going.

Textbook bubble.

When widows and orphans are borrowing money to gamble because they've been told it's a sure thing, it's time to get out.

Here is my source, btw: http://www.bloomberg.com/news/articles/2015-06-16/china-bubb...

Came to basically say exactly this. The only people who didn't see it coming are the Chinese "aunties" who put everything in without any real knowledge of truthworthy advice. There's a lot of people who lost a lot of money in China this way. That's the danger of armchair expertise, I suppose.

I have said it before and I will repeat that advice here: anyone who can predict economic crises and when they will occur is just plain lucky.

There are enough people on this planet staking their reputations on one claim or another that we should expect people to "see things coming". Those many millions of people making grand claims are usually, but not always, incorrect.

There is a very important quote to remember here, if you're ever told by someone to make an economic bet:

"Markets can remain irrational longer than you can remain solvent."

You may know, for a fact, that a commodity is overpriced, that a stock is overvalued, or that the entire market is operating under "irrational exuberance". Okay, but in the history of the discipline, no economist has ever been able to predict when the party will stop. Prices can soar to many multiples of their values, and selling short will bankrupt almost everyone who thinks they know, for certain, when the party will stop.

Every once in a while a few economists stake their reputation on a market crash and are correct, and sometimes they get a little too full of themselves, write a book on their ability to forecast the market, and disappear into obscurity. Michael Pettis seems he may very well be one of these people.

Just about every economist I've read has thought the party would stop in China soon, no nation can sustain growth rates like theirs indefinitely. Short of the Chinese discovering and secretly using cold fusion or a perpetual motion machine, I would think.

So why is it the "Pettis hypothesis"? Sheesh.

I look forward to another person fleecing poor investors to fade into obscurity. The man who saw this crash coming was dealt a good hand, that's true, but he won't always win.

Still, I would read something titled "China's Market Crash and the Man Who Earned >10M$ Having Precisely Predicted It".

pretty much this. The timing is where the gold is. another interesting question is do these economists put money where their mouth is? Money talks bullshit walks as they say.

However, I do add that, as much as I think technical analysis is garbage, I almost always end up using it to time my entry. I don't know why I do this but putting money down to make a bet, suddenly superstition and all sorts of weird beliefs start to manifest. It's a totally different psychological mind state when you are making a bet vs paper.

Pettit didn't even hypothesize this. I've never seen him even comment on the equity markets. His blog and book are about the rebalancing of the economy. He doesn't predict what will happen, he just lays out three different scenarios that may occur. Read his blog http://blog.mpettis.com

There's no luck and gilgoomesh is right, many people saw it coming.

There are stories about it and relating tadbit such as Chinese ghost towns and Chinese build projects. These segment alluding to the fact that China's economy is base on building stuff constantly and that the government is encouraging loans for these projects. There were also shadow loans that a few articles were talking about where bank were loaning outside of the government consents.

There's an article on Jalopnik about a Chinese car bridge that was the longest but it didn't save any time at all. It was built just cause they can.

I'm pretty much moderately on top of this because I got hacked by Chinese IPs and invested in Chinese stocks in the mid 2000 decade. Ended up doing research of China in general and it's a very fascinating country. Oh, and also China is flexing its muscles against my birth country so yeah.

We should just watch and wait to see how severe it is. The 6 months stop gap isn't gone yet. I think we'll have to wait a year or at the latest after 6 months.

There's always greedy people and if they think they can make money in China they will invest in China.

I am bearish but I find myself unable to trust China's stock market to make a bet because the government is manipulating the prices in order to not have something like two times the entire population of Canada angry and out for blood because they lost money in the stock market, which btw, encouraged by the government.

The quote 'market can stay irrational longer than you can stay solvent' really hits home here. Especially when it's half way across the world, and a government that doesn't like to open it's books to outsiders.

Just looking at the chart there could be another crash seeing that the SSE has failed to close above the crucial 4000 line. People are taking profits and looking to park their money in West Coast real estate. When the 1400 companies banned from trading suddenly find the herd is gone, they are in for a nasty surprise since they put up their company as collateral to raise capital and they will face margin calls and in turn banks facing margin calls themselves with each other, and being forced to write off the mountain of debt from overbuilding will cause catastrophic failure that will make Tokyo's bubble look tiny.

One thing is for sure, the China that emerges from this market collapse will be a very different one from the one we have today. Further manipulation and showing lack of control of the markets will be the CCP's final undoing. Some members of the party including the current leadership Xi knows this and save himself as the guy 'that tried' and save himself to the trip to Hague when they throw jiang zemin under the bus instead.

This has been one my issues with the CCP. They seem to feel the only good policy is to keep the markets growing rather than focusing on making the lives of the average citizen better. Building highways and airports are nice if you have a population that can afford to use them, but what many people in China need is to have their healthcare and schooling made affordable (they basically took away most of the socialized medicine and schooling programs they still had in the 1980s which by then were half-govt-covered/half-citizen-covered affairs). The wealth of the economy shouldn't serve a few if they really support socialism. But that's just my take on the matter.

California's earthquake and the man who saw it coming. I'd only believe in the value of a financial prediction if a) it was timely and actionable and b) the person making the prediction has made scores of similar predictions satisfying point a)

Anyone can get lucky predicting a disaster once, that says nothing of the persons ability to model and predict actual useful scenarios.

We all know there will be boom bust cycles. They exist in human endeavors, they exist in ecosystem predator/prey relationships. It's interesting to look at the causes, but predictions like this are only worthwhile to the individual if they can tell you the best time to get out.

I saw it coming too - having advised my Chinese cousin to stay out last month. My last name is also "Man". Thank you.

If no-one sees the crash coming, then it doesn't come.

When enough people see the crash coming, then it comes.

Reply on news.ycombinator.com