For updates visit
Retail Investors Are All-In
Saturday, June 2, 2007
In 1929, retail investors flocked to bucket shops to trade $200 of stock on $1 margin during their lunch hour.
In 1999, lawyers and doctors quit their jobs to trade stocks at day trading firms.
In 2007, Chinese are quitting their jobs to trade stocks. Over 27 million brokerage accounts have been opened in 2006, bringing the total to well over 100 million.
From Chinadaily.com...
Xiao Feng, a former investment consultant at a futures company in Nanjing, put his three apartments and two vehicles - worth 5 million yuan - up as collateral days ago to get a 10 million yuan loan to invest in the stock market.
But the cost of borrowing is high - with an annual interest rate of 25 percent, he`ll have to pay the lender 2.5 million yuan in interest at the end of the year, reported the Nanjing Morning Post on Wednesday.
In addition, the lender will monitor his stock trading account. If the value of Xiao`s portfolio drops below 8 million yuan, the lender will liquidate his stock holdings to prevent a further decrease in the principal, spelling a loss of two million for Xiao.
When the 2.5-million interest payment is also taken into account, Xiao Feng will lose what he has worked for in the past 10 years - all his collateral.
Then why take such a risk? "Maybe it is the lure of the stock market. If an investment in a stock triples, or quadruples in a short period, then why not try?" he replied.
No wonder the Chinese government is so concerned. The road to capitalism will get much more bumpy if people actually start getting a sense of risk and lose money. It will be an in vitiation for more, not less, government intervention - if that`s even possible in a communist country.
So, three out of four on the Bubble Top Checklist are definitely confirmed, and one is not. That`s probably close enough to call for a significant "correction". Soon, I`ll take a look at how US investors might be able to make some money off of the China stock bubble "correction".
In 1999, lawyers and doctors quit their jobs to trade stocks at day trading firms.
In 2007, Chinese are quitting their jobs to trade stocks. Over 27 million brokerage accounts have been opened in 2006, bringing the total to well over 100 million.
From Chinadaily.com...
Xiao Feng, a former investment consultant at a futures company in Nanjing, put his three apartments and two vehicles - worth 5 million yuan - up as collateral days ago to get a 10 million yuan loan to invest in the stock market.
But the cost of borrowing is high - with an annual interest rate of 25 percent, he`ll have to pay the lender 2.5 million yuan in interest at the end of the year, reported the Nanjing Morning Post on Wednesday.
In addition, the lender will monitor his stock trading account. If the value of Xiao`s portfolio drops below 8 million yuan, the lender will liquidate his stock holdings to prevent a further decrease in the principal, spelling a loss of two million for Xiao.
When the 2.5-million interest payment is also taken into account, Xiao Feng will lose what he has worked for in the past 10 years - all his collateral.
Then why take such a risk? "Maybe it is the lure of the stock market. If an investment in a stock triples, or quadruples in a short period, then why not try?" he replied.
No wonder the Chinese government is so concerned. The road to capitalism will get much more bumpy if people actually start getting a sense of risk and lose money. It will be an in vitiation for more, not less, government intervention - if that`s even possible in a communist country.
So, three out of four on the Bubble Top Checklist are definitely confirmed, and one is not. That`s probably close enough to call for a significant "correction". Soon, I`ll take a look at how US investors might be able to make some money off of the China stock bubble "correction".
0 comments:
Subscribe to:
Post Comments (Atom)
IMPORTANT DISCLAIMER
Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
