Sunday, August 30, 2009

Better Safe than Sorry

As the stock markets continue to move up, here are some sobering thoughts from the blogosphere.

US Markets may be in risk as insiders sell in large numbers
Insider selling in the USA is reaching record levels, even as more speculators borrow to go long stocks.
Insider Selling in August Soars to 30.6 Times Insider Buying, Highest Level Since TrimTabs Began Tracking in 2004. NYSE Short Interest Plunges 10.3%, While Margin Debt Spikes 5.9%.
"The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon," said Charles Biderman, CEO of TrimTabs.

World stocks controlled by a select few

A recent analysis of the 2007 financial markets of 48 countries has revealed that the world’s finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power.

If you would look at this locally, it’s always distributed,” Glattfelder said. “If you then look at who is at the end of these links, you find that it’s the same guys, [which] is not something you’d expect from the local view.” (

Those who invest in China or ignore the consequence of very likely Chinese economic malaise do so at great peril.

Today, Chinese economic growth is the force pushing the global economy. The quality of this growth, however, is low as it is predicated on massive (forced) lending and thus unsustainable. As Chinese growth slows, China will turn from a wind into sails of global economy to its anchor. The impact will be felt in many, often unsuspected places.

It will tank the commodity markets, commodity producers and commodity exporting nations. Let’s take oil, for instance. As incremental demand from China collapses, oil prices will follow, taking the Russian economy with it, as Russia is for the most part a one-trick-petrochemical-pony. According to GavKal Research China accounts for 15% of Brazil’s exports (up from 1.5% a decade ago), significantly impacting the economy of that South American nation..

Demand for industrial goods will fall off the cliff. China consumed a lot of those goods - $550 billion worth annually (also according to GaveKal Research). So if Caterpillar expects to sell more of its yellow earthmovers to China, it will have put that thought on hold for awhile…..
Finally, Chinese appetite for our fine currency will diminish, driving the dollar lower against the renminbi and boosting our interest rates higher. No more 5% mortgages and 6% car loans.

Identifying bubbles is a lot easier than timing them. An astute observer could have seen the Japanese bubble developing in 1986, 1987 and 1988, but he would have been “wrong” until 1989….



Surely the party is going to end very soon on dalal street too.Thanks for ur post sir.

Pi said...


Can you write a post on the post 4700 breakout. Technically we did see a 2009 high, but it didnt really seem like a strong breakout to me. Maybe we might have it on monday - or maybe not.

Can you suggest, when we can say with confidence that we have a breakout (though with so many ppl anticipating i doubt it will happen). Or it might turn out to be a false breakout. How/when does one decide that the breakout was a false one and to distinguish any pullback from a deeper correction of the Mar-Aug bull run ?