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Mish's Global Economic Trend Analysis |
One Hell of a Round Trip: Chinese Stocks Crash 8.45%, Give Up 60% Gains This Year Posted: 23 Aug 2015 10:25 PM PDT Chinese stock plunged another 296.55 points today (8.45%) to 3211.20. The market was once up over 60% on the year in June, but is now negative. $SSEC Shanghai Index click on chart for sharper image I added that last red bar because Stockcharts reflects last Friday. One Hell of a Round Trip From 3264 to 5178 to 3211 is one hell of a round trip, especially for a stock market index. Bloomberg notes State Support Fails to Stop Rout.
Crash Explained Please consider the Vox article China's Latest Stock Market Crash, Explained. China's stock market had a debt-fueled boom, followed by a crashTrue Origin of Crash What Vox failed to mention is the boom was fueled by ridiculously loose monetary policy, culminating with a massive real estate boom followed by an equity bubble with kids who did not even graduate from high school, buying stocks on margin. US equities and corporate bonds are also in a huge bubble. There are so many bubbles that one has to be nearly blind to not see them. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
Another Asia-Pacific Equities Bloodbath Posted: 23 Aug 2015 06:57 PM PDT Another Asia and South Pacific equity bloodbath is underway this evening (morning or afternoon to those areas). Here is a chart from roughly 8:30 PM central. click on chart for sharper image Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
Huge Glut in European Dairy Cows and Milk Coming Up Posted: 23 Aug 2015 11:59 AM PDT Spain is truly going off the deep end in numerous areas lately. As noted previously, citizens have received huge fines for being disrespectful of police (See Progression of the Police State Spanish Style; Law of Simmering Social Pots). In another recent example, a citizen was fined for posting on Facebook, the image of a police car parked illegally. Today, let's discuss dairy cows. There are so many dairy cows in Spain that farmers have not been able to make any money. There is a glut of milk. The government solution, amazingly, is to Give 300 Euros Per Cow to Farmers With Insufficient Profitability. The Minister of Agriculture, Food and Environment, Isabel García Tejerina, announced on Saturday that the Ministry will grant direct aid of 300 euros per cow for those farms that are selling milk below profitability. The measure will benefit 2,500 to 3,000 farms according to estimates by the Ministry.Too Many Cows, Too Much Milk Any rational person would suggest there are too many dairy cows and perhaps too many farms. But instead we see articles like this one from El Confidencial: Do you buy milk at less than 60 cents? This is what you're doing to farmers. The prices in the dairy sector have plummeted in recent months by the combination of several factors. Historically Europe produces more milk than it consumes and therefore dependent on international markets to survive. Especially Asians. And China has stopped buying milk in recent months. To this must be added the effects of Russia's veto imports of fresh products. The result is that the European market does not absorb all the milk generated and there is an excess of 'stock' that brings down prices.Count the Cows Mind you, closure of farms is precisely what needs to happen (given the inane sanctions on Russia). By country, here is a Dairy Cows Count for every country in the EU. As of 2013, Spain has 857,000 cows. Assuming there are no more cows in Spain now than in 2013, the cost of the guarantee would be €257,100,000. Pity the Farmers? Instead of blaming farmers for producing too much milk, and instead of blaming inane sanctions on Russia, the government and news outlets blame people for paying too little for milk. "This is what you are doing to farmers," states the inane headline on El Confidential. Given there is already a glut of milk and cows, guaranteeing a profit on cows is a 100% surefire way to ensure the glut further expands. In a free trade setup, unprofitable farms would go out of business, but there would also not have been a ridiculous set of sanctions on Russia in the first place. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. |
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