“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.
Elon in the last few months (okay maybe weeks) have sharpened up; lost some weight, made serious gains with Space X and other TSLA initiatives, laid-off weed and twitter. Aside from likelihood that he sold off all his real estate probably shows we're doomed on Earth and he's hitching a ride on the 2nd rocket as soon as first Mars rocket with astronauts land successfully. Don't get me wrong, I got in TSLA years ago before split well under $200 and I get cold feet every time the stock almost doubles and sold and I can't count how many times I bought back in. We all know the demise of the TSLA short-sellers as well. All that said, the company does mostly rest on his vision and not quite like AAPL to stand on its own without him.
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.
On the contrary, depending on how he plays his cards, he has a lot to gain if he manages to portray himself as the man who swooped in and saved the day at great cost, AND "punished" the rich and powerful culprits.
That would be in stark contrast to the "west" who basically let the entire finance sector off scot free in the aftermath of the GFC.
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. :(
There’s no crisis with TSLA priced where it is
Elon in the last few months (okay maybe weeks) have sharpened up; lost some weight, made serious gains with Space X and other TSLA initiatives, laid-off weed and twitter. Aside from likelihood that he sold off all his real estate probably shows we're doomed on Earth and he's hitching a ride on the 2nd rocket as soon as first Mars rocket with astronauts land successfully. Don't get me wrong, I got in TSLA years ago before split well under $200 and I get cold feet every time the stock almost doubles and sold and I can't count how many times I bought back in. We all know the demise of the TSLA short-sellers as well. All that said, the company does mostly rest on his vision and not quite like AAPL to stand on its own without him.
And now you know why I don’t write about Tesla. I’d spend all day replying to the cult.
100% correct and you were generous in your cut in half estimation, when it could easily be down 90%......
Funny you wrote that.. I was just thinking last night about knock-on effects on tsla if China implodes.
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.
On the contrary, depending on how he plays his cards, he has a lot to gain if he manages to portray himself as the man who swooped in and saved the day at great cost, AND "punished" the rich and powerful culprits.
That would be in stark contrast to the "west" who basically let the entire finance sector off scot free in the aftermath of the GFC.
Oh yes, definitely possible. Whatever happens, I expect him all chinese media to portray him as the heroic figure struggling for the common man.
Could be. He'd better act soon though!
dang. slice tesla by half?
**here come the trolls...*