Trader’s Narrative

Last week we reviewed the white hot Chinese stock market with a cautionary note. I wanted to return to it briefly because the situation is serious and deserving of much more attention.

Putting aside price charts of the Chinese equity market for now and turning to monetary measures, we can see something rather alarming happening. China’s M2 has enjoyed a constant rate of acceleration as shown in the chart below (in semi log scale). But in late 2008 the rate of acceleration suddenly increased dramatically:

This was a consequence of the massive stimulus plan put into motion by the Chinese government. They pumped unprecedented amounts of liquidity into their economy to offset the world-wide economic slowdown. There would be nothing singularly alarming about that since all central banks around the world, as well as governments in charge of fiscal policy, have orchestrated a collective burst of activity.

What is alarming is that the Chinese economy, stock market and especially real estate market are just now displaying bubble-like characteristics. The government controlled banking sector is a mystery wrapped in an enigma. No one can begin to fathom the amount of non-performing loans on the books. Unlike the US which went through a gut wrenching cleansing - thanks to the largess of the lobby-less taxpayer, the financial sector is once again back in fighting shape (privatized profits, public losses). China has yet to address their toxic assets

As we briefly touched on before, since last year’s low the Shanghai market has now appreciated more than 100%. Once again the stock market has enthralled the average person in China with thoughts of wealth and the possibility of making more in a month than what they earn in a year at their regular job. Speculation in the market is seen as not only a legitimate way to make money but a very lucrative one with low barriers to entry.

A sure sign of a bubble is extreme turnover. Recently, the total Chinese stock market turnover (in one day) reached $63 billion. That’s more than the combined total turnover of $58 billion in London, New York and Tokyo for the same day!
Continue reading ‘China’s Bubble 2.0 Threatens Global Recovery’

Here are the top 10 cities for traders, according to Trader magazine:

1. Chicago
2. London
3. New York
4. Dubai
5. Miami
6. Boston
7. Dublin
8. Los Angeles
9. Toronto
10. Sao Paolo

Cities were ranked according to amenities, nightlife, taxes, and other relevant factors. I wasn’t surprised to see Chicago or the other American cities. But Dubai? C’mon. Who wants to live there? Visit, maybe. The place is museum set of what happens when you have gobs of money but no taste. Dubai actually makes Trump look elegant. In any case, as the magazine confesses, Dubai made it on the list because they have no taxes whatsoever - no personal income tax, not capital gains, etc. But on that score, why not put tax havens like the Turks & Caicos on the list? Complete and utter balderdash.

On the other hand I’m glad to see Toronto on the list. Although a relatively small city on a world wide scope, it is the largest city in Canada and has one of the best lifestyles. Especially if you’re a single professional. The other Canadian city on the list was Montreal, but it came in at #24. Montreal is a very cool place, probably the most European city you can get without crossing the pond.

And lastly, Sao Paolo. Yes! Brazil rocks. Finally people are beginning to realize it. The country has come a long way in the past 20 years. Although you still have to be cautious when it comes to crime, it is an amazing place to live and work. If you’re a male, unattached professional, the night life is beyond this world. And no, you don’t need any game. As cliche as it sounds, you can just be yourself. Even the most gorgeous Brazilian girls are friendly, approachable and they don’t play mind games nor waste time.

Of course, if you’re living in one of these cities, you need to be hooked up with the markets via a prop firm. Here’s a complete list of proprietary trading firms. Although most are based in the US, almost all of them allow remote trading.