Tuesday, November 6, 2007

Savvy Chinese Know Exactly When Bubble Will Burst!

China scrambles to teach masses financial ABCs
Zhu Qiuxia, for one, is not worried about a bubble. The power grid worker has put all her savings into shares, and is planning to keep them there until the Olympic Games next year, when she plans to put her original principal back in the bank and continue to speculate with the profit she's made.

All in until the Olympics! Then take profits! It is a cunning plan!

“I'm pretty confident in myself,” she said, flipping through a well-worn notebook filled with newspaper clippings and notes.

“Before the Olympics are over next year, just like before the return of Hong Kong (to China), as long as it hasn't happened yet, the market won't collapse. That's the main policy.”

Zhu's attitude is common among retail investors – that because of Beijing's desire to present a good face to the world when it hosts the Summer Olympics next August, it will come to the rescue should the market suffer any major volatility.

We've finally found a sure thing that simply can't lose. May the Olympics do far better for the Chinese than the Olympics did for the Americans!

Summer Olympics: Los Angeles, 1932
Because the 1932 Olympics were held in the middle of the Great Depression and in the comparatively remote city of Los Angeles, half as many athletes took part as had in 1928.

Winter Olympics: Lake Placid, 1932
Faced with major obstacles raising money in the midst of a depression, the president of the organizing committee, Dr. Godfrey Dewey, donated land owned by his family to be used for construction of a bobsleigh run.

We were on top of the world back then. We were quickly becoming the world's superpower and manufacturing juggernaut. We got both the Summer Olympics AND the Winter Olympics. How lucky is that?

Great Depression in the United States
The depression was caused by a number of serious weaknesses in the economy. Although the 1920s appeared on the surface to be a prosperous time, income was unevenly distributed. The wealthy made large profits, but more and more Americans spent more than they earned...

That's just crazy talk.

But there was an underlying economic problem. Income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded. This was due largely to two factors: While businesses showed remarkable gains in productivity during the 1920s, workers got a relatively small share of the wealth this produced. At the same time, huge cuts were made in the top income-tax rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds.

That's ridiculous! Out of curiosity, who was hurt the worst?

As people lost their jobs and savings, mortgages on many homes and farms were foreclosed.

That's a relief! People haven't even lost their jobs and foreclosures are up. See! It isn't even remotely the same. I'd also like to point out that much of our manufacturing base is apparently in China these days. Therefore, if manufacturing plummets, it isn't even our problem. It is their problem. Hurray!


Anonymous said...

Stop... laughing... too.. hard...

Curious, does one sell before the Olympics start or before they end? That two weeks should be worth like 2%.

Of course if it's before they start, is it before they light the torch or before the first athletic event. Qualifying or final? Or before the athletes arrive? This is all so confusing, maybe I'll just beat the rush and sell August 1.

Stagflationary Mark said...

I bet we could make money helping people decide the exact moment to sell. Perhaps we could hold some sort of public auction where people could bid when they wish to sell. You know, some sort of derivatives mumbo jumbo safety mechanism of financial innovation and prosperity! This is what I'm picturing.

You: This is all so confusing, maybe I'll just beat the rush and sell August 1.

Me: I'm selling on July 31st!

A friend strategically placed in the audience: July 30th!!!!!

I suspect that within a few minutes of bidding we'd cause a stock market collapse. Just a theory!

Then again, maybe we should just stay out of it. The natural forces of the market will do it far more efficiently than we can no doubt, at some point anyway. ;)

Stagflationary Mark said...


Too many people are taking profits during the Year of the Fire Pig!! That's not how it was SUPPOSED to work!!! ;)

18 February 2007 - 6 February 2008: Fire Pig

When others despair, they are often there to offer support.

Where's the frickin' support? The Year of the Earth Rat doesn't start until February 7th, lol.

7 February 2008 - 25 January 2009: Earth Rat

Traditionally, Rats born during the night may face extreme hardships and suffering throughout life. Rats in general should guard themselves against hedonism, as it may lead to self-destruction. Gambling, alcohol and drugs tend to be great temptations to Rat natives.

This Zodiac's a killer. If you can't trust the charts, what can you trust? (Some might argue the fundamentals of unsustainable trends. Those people are probably insane though and would talk about themselves in third person. That's what Stagflationary Mark believes. Yeah, that's exactly what Stagflationary Mark believes. D'oh! ;))