Tag Archives: overnight trading

Wow: The Perfect Storm, And China Stocks Crushed

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What an ugly day. China stocks are being absolutely crushed today. The news out of China is a “worst case scenario”.

Today is likely to be capitulation day, and I would expect something better next week. September can be an ugly month, and its living up to its reputation.

In over news night there were two items out of China that have fund managers just blowing out of equities today. There was news China’s manufacturing sector slowed for the third month in a row. The HSBC Purchasing Manager’s index for September- and early forecast, showed a reading of 49.9- anything below 50 suggests contraction.

I don’t believe this was a big surprise to the world as this is a measure of exports, and the global slow down is creating less demand.

However, resilient and growing domestic demand is keeping inflation high. Thursday’s data showed rising input costs, which suggests inflation is still strong.

As I said- the perfect storm. You have manufacturing slowing, but you’re not getting the much needed corresponding drop in inflation. This double whammy has the markets reeling.

In overnight trading:

  • The Shanghai A shares were down 2.78%, and the B shares down 2.58%, giving back all the previous day’s huge gains.
  • The IMF cut its forecast for China growth for this year and next. This year was cut to 9.5%, and next year was cut to 9%.
  • Economists in China are still forecasting waning inflation.

That’s enough for today. I’m going to turn off the computer and leave today. I’ll let this market blow its brains out.

Gold is also getting clobbered today, which suggests no one cares about any asset class today.

Buffet Loves B of A

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  • There’s limited news flow out there, and stocks are trading very light volume. All then news flow is US- Buffet puts $1 billion into BofA, Google buys Motorola, Gold is getting clobbered.

  • In overnight trading, the China markets were very strong with the Shanghai “A” shares up 2.82% and the B shares up 2.34%
  • The Wall Street Journal features an article that points out China consumption numbers don’t match with a China “implosion”.
  • In a move to further “open its borders” to international investors, China daily carries an article today suggesting in September, the Central Government will change to regulations and make it easier for foreign investors to buy and sell RMB from outside the country.
  • If this is true, this might accommodate China small caps, many of whom would like to do major buy backs of their shares, but have difficulty moving their cash out of the country to brokerage accounts where the transactions can take place.
  • The NY Times reports China is going to have a hard time “rebalancing” its economic growth away from a dependence on the manufacture of goods for exports and government sponsored infrastructure build out to a consumer driven economy wherein it benefits China to allow the RMB to strengthen.
  • There’s a great lesson for investors on Apple shares today. The next time you read “it’s all priced in”, think of Apple. Steve Jobs finally tendered his resignation yesterday afternoon due to health concerns, and the stock is only down 2%. I know it’s not China, but if you’re looking for a cheap stock, consider AAPL. Obviously, Jobs resignation was all priced in, and you can now buy the greatest tech growth stock in the world for about 7x this year’s earnings. This is a great stock to own and sell covered calls against.