4 ms·

...1,968 stocks fell by the maximum 10% allowed by regulators…, or 68% of all stocks in China… I don't really understand the way a price regulated stock market

by netcan 11y ago

...1,968 stocks fell by the maximum 10% allowed by regulators…, or 68% of all stocks in China… I don't really understand the way a price regulated stock market would normally work. Anyone understand this? Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? Any time you hit the floor price you are accumulating a backlog of sellers. I don't think getting a call from a broker that he was unable to sell your shares is likely to cause calm tomorrow morning. Basically, how's China's regulatory stuff going, now that it's getting tested in rough conditions.

icebraining 11y ago
Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? I think that's exactly what's been happening for weeks by now. It's like falling down the stairs - a step each day.
branchless 11y ago
It's an attempt to put a break on sentiment. Many exchanges world-wide have "circuit breakers".
adventured 11y ago
It doesn't work particularly well. A lot of people thought China's management of the economy was brilliant while the growth was easy. The same was true of Putin's Russia while they were riding the temporary oil price boom. Now the tide is going out on all of these easy growth scenarios that were riding the cheap dollar (including the $9 trillion in foreign debt issued in dollars that provided a lot of the growth fuel). The dollar has turned and is crushing emerging markets and pulling trillions in capital away from them. When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. China was propping up their markets to give the elites time to get out.[1] The stock market bubble was designed to be a wealth transfer, from household savings, to their extremely debt-laden corporations. That transfer is complete, and didn't work particularly well, so now China is prepared to allow the ceiling to cave in on the average investors holding the bag. That's why they've stopped supporting the market. http://www.bloomberg.com/news/articles/2015-08-18/china-s-richest-traders-are-fleeing-stocks-as-the-masses-pile-in http://www.bloomberg.com/news/articles/2015-08-18/china-s-ri...
- coldtea 11y ago
  >When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. So totally unlike those Wall Street genuises, with the trillion dollar bailouts and huge weath transfer crisis...
  - adventured 11y ago
    Who said anything about the US or Wall Street? You're making the classic logic mistake of assuming because I said X, I also must be implying Y.
    - coldtea 11y ago
      When one criticizes X (and only X), then -X which might be equally bad gets scot free. That's no logical error, it's a fact (that nothing is said of -X). So either one does an exhaustive critique of all classes of X, or his critique implicitly favors one of them (it's like if one's two kids do a similar bad thing and he only scolds one of them). My argument was just trying to bring some counter-balance (to have the -X items people consider as "opposite" to the class of X you criticized, judged too).
      - meric 11y ago
        The U.S. Economy is to a smaller extent a command economy due to central bank control of currency and interest rates, so it's not 'unlike the U.S..' If he'd talk about the U.S., it'd be 'like the U.S.'.
- Sven7 11y ago
  Doesn't matter how competent you are when the tide is unpredictable. In the long run with each cycle, there is some level of wealth transfer between the developed and developing world and that's not a bad thing in the fast changing times we live in.

by netcan 11y ago

icebraining 11y ago

Normally the problem with price regulation is that the market doesn't clear. If the 10% limit was hit, there are sellers out there that tried to get out at the lowest allowable price but failed. Doesn't this mean they are probably going to be shares for sale at a lower price tomorrow? I think that's exactly what's been happening for weeks by now. It's like falling down the stairs - a step each day.

branchless 11y ago

It's an attempt to put a break on sentiment. Many exchanges world-wide have "circuit breakers".

adventured 11y ago

It doesn't work particularly well. A lot of people thought China's management of the economy was brilliant while the growth was easy. The same was true of Putin's Russia while they were riding the temporary oil price boom. Now the tide is going out on all of these easy growth scenarios that were riding the cheap dollar (including the $9 trillion in foreign debt issued in dollars that provided a lot of the growth fuel). The dollar has turned and is crushing emerging markets and pulling trillions in capital away from them. When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. China was propping up their markets to give the elites time to get out.[1] The stock market bubble was designed to be a wealth transfer, from household savings, to their extremely debt-laden corporations. That transfer is complete, and didn't work particularly well, so now China is prepared to allow the ceiling to cave in on the average investors holding the bag. That's why they've stopped supporting the market. http://www.bloomberg.com/news/articles/2015-08-18/china-s-richest-traders-are-fleeing-stocks-as-the-masses-pile-in http://www.bloomberg.com/news/articles/2015-08-18/china-s-ri...

coldtea 11y ago
>When the tide goes out like it is now, you quickly discover that the bureaucrats in command economies are almost always incompetent and that incompetence was being temporarily masked. So totally unlike those Wall Street genuises, with the trillion dollar bailouts and huge weath transfer crisis...
- adventured 11y ago
  Who said anything about the US or Wall Street? You're making the classic logic mistake of assuming because I said X, I also must be implying Y.
  - coldtea 11y ago
    When one criticizes X (and only X), then -X which might be equally bad gets scot free. That's no logical error, it's a fact (that nothing is said of -X). So either one does an exhaustive critique of all classes of X, or his critique implicitly favors one of them (it's like if one's two kids do a similar bad thing and he only scolds one of them). My argument was just trying to bring some counter-balance (to have the -X items people consider as "opposite" to the class of X you criticized, judged too).
    - meric 11y ago
      The U.S. Economy is to a smaller extent a command economy due to central bank control of currency and interest rates, so it's not 'unlike the U.S..' If he'd talk about the U.S., it'd be 'like the U.S.'.
Sven7 11y ago
Doesn't matter how competent you are when the tide is unpredictable. In the long run with each cycle, there is some level of wealth transfer between the developed and developing world and that's not a bad thing in the fast changing times we live in.