Last night amazed me. I didn't check to see how China opened. I didn't watch to see if the government came in to protect the "3000" line, that line in the sand that it seems to have drawn to hold back the flood of sellers. I didn't have to wait for "worse-than-expected" data, because there was no data, because China's on holiday, celebrating Victory Day.
It's funny how something hits the radar screen, isn't it? For years, China's stock market meant nothing to us. There would always be one or two red-hot stocks that we would be thinking about, like Vipshop (VIPS) or JD.com (JD) or Baidu (BIDU) and then, of course, Alibaba (BABA).
For the most part, though, we know that the "mainland" China stocks were for them, not us, and who knew what they were really like?
Then, after a plod along at a unnoticeable pace a year ago, someone in the Communist Party decided that the common folk should own common stock. The next thing you know, millions of people are opening five accounts each and borrowing money to buy stocks from all sorts of banks, and a quaint backwater index doubles based on not nothing, but worse than nothing. And now, despite the fact that it didn't matter one whit when they were going up, we know that we are going down when they do.
Solvent companies' stocks. Real companies. Real earnings.
But because this index and its sister index the Shenzen, which is even more insanely valued, roared for the better part of last year before crashing, we are all hostage to its ramifications, including the obvious one, that the great communist emperor of China and his prevailing party have no clothes.
We know they are doing everything they can to stay in power, but this stock market gambit was just plain silly. It has, though, become like a beacon showing the party for what it is, a totalitarian mess that seems to have run on graft, and without graft it seems devoid of any natural and organic growth.
The stock market's simply become a manifestation of that.
As has the incredible military build-up, another thing a government can do when it has nothing else to do with its citizenry after it's already made everything it needs to grow for years and years to come.
Now, I have been adamant about two things:
- That China shouldn't matter, because other than for a handful of companies it never allowed us to do much business there anyway, and
- It matters, because we are obsessed with the need to raise rates just when the Chinese are devaluing -- they will do it again, believe me -- and that means that the "emerging markets," especially Brazil, are going to be in for a tumble.
We can't ignore that. We have to at least wait for the impact and then pick up the pieces, rather than pretend nothing "bad" is going to happen.
So understand that we aren't out of the China Syndrome. We are simply waiting for the reactor to get hot again after a day's respite.
This one won't stop until all the gains of the indices are wiped out and then the Chinese can try another, smarter, way to jump-start their economy than having millions of people throw away their lives' savings on the U.S. equivalent of penny stocks.