“Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits.” – Hyman Minsky The situation in China went from bad to worse in the past week, with the collapse of Evergrande leading to early signs of significant contagion. By most measures, Evergrande’s collapse is a more meaningful event than Lehman’s implosion, which is why the two words are so closely associated with each other on social media. Whether Evergrande is a catalyst for the next great financial crisis remains to be seen, although the early signs are worrisome.
I think outside of China, Evergrande's collapse won't have as much of an effect as most think it will. However, stocks are extremely overvalued and everyone is looking for an excuse to stampede to the exit. It doesn't have to be a good excuse and at some point, just about any excuse will be good enough for a selloff.
There are reflexivity factors at work that make prediction impossibly complex. In previous busts, we haven’t had market inflows dominated by passive funds that don’t care if a given stock in the index is doomed. We didn’t have a generation of home-based traders who have been conditioned to buy every dip, regardless of fundamentals. And we didn’t have opaque private money operations (crypto) operating. Their is a retail army who *will* BTFD even when it appears suicidal. And passive is just a dumb lump of money that has to buy regardless of circumstances. So, they’ll only be shaken out if the remaining active managers dump everything, moving the market enough to make even the HODLers shit the bed.
I think it’s more likely that the dip gets bought, and equities continue on the path to being vastly expensive trinkets that get passed from hand to hand, like cowrie shells, not expected to perform any genuine economic function.
In my totally uninformed opinion, I think you underestimate how much the Chinese value "face" and not losing it. Having evergrande collapse would be a sign of weakness for Xi.
I think Xi’s disconcerted that US is beating CNY down the Silk Road to socialism?
I think outside of China, Evergrande's collapse won't have as much of an effect as most think it will. However, stocks are extremely overvalued and everyone is looking for an excuse to stampede to the exit. It doesn't have to be a good excuse and at some point, just about any excuse will be good enough for a selloff.
There are reflexivity factors at work that make prediction impossibly complex. In previous busts, we haven’t had market inflows dominated by passive funds that don’t care if a given stock in the index is doomed. We didn’t have a generation of home-based traders who have been conditioned to buy every dip, regardless of fundamentals. And we didn’t have opaque private money operations (crypto) operating. Their is a retail army who *will* BTFD even when it appears suicidal. And passive is just a dumb lump of money that has to buy regardless of circumstances. So, they’ll only be shaken out if the remaining active managers dump everything, moving the market enough to make even the HODLers shit the bed.
I think it’s more likely that the dip gets bought, and equities continue on the path to being vastly expensive trinkets that get passed from hand to hand, like cowrie shells, not expected to perform any genuine economic function.
OTOH if this is like the Japan prop bubble it might not be the Big One?
I was with you until the TSLA half thing and the article became the ending of Spielberg's A.I. :(
In my totally uninformed opinion, I think you underestimate how much the Chinese value "face" and not losing it. Having evergrande collapse would be a sign of weakness for Xi.
dang. slice tesla by half?
**here come the trolls...*