On the heels of a massive plunge in the Chinese stock market, today one of the greats in the business sent King World News a fantastic piece that warns about the possibility of a black swan, and also includes an incredible note from Peter Boockvar about the chaos in China and what is really taking place behind the curtain.
August 18 (King World News) – From Art Cashin’s notes: “Overnight And Overseas – The Shanghai market got dinged over 6% with selling accelerating as the session wore on. There are conflicting claims on whether the government did try to intervene in the market (more on China below).
The China selling seemed to spill over into emerging markets in the region. Indonesia and Australia fell the equivalent of 260 Dow points, while Thailand got nicked for 430 Dow points. Tokyo fell slightly.
Copper fell to a six year low and other base metals are under pressure, as is crude. Gold is unchanged. The dollar is a bit mixed.
Markets in Europe are softer but not in anything resembling freefall. The key takeaway is in the area of emerging market currencies, which are ugly to say the least. Let’s hope they don’t go into domino mode.
U.S. futures are softer, looking to give back most of Monday’s gains.
China – Another View – We thought we’d pass along these comments on China by our friend, Peter Boockvar, over at the Lindsey Group:
“While the yuan was slightly higher overnight, the Shanghai index got slammed by 6.2% putting it at a 1 1⁄2 week low and thus giving back all of the modest gains post devaluation. The H share index in Hong Kong was lower by 1.8% and the rest of the region was red as well (the Thailand terrorist attack led to a 2.6% drop in the SET index). Copper and aluminum in response are breaking to a fresh 6 yr low for each. Data wise, there was a modest improvement in the pricing of homes and this better data implies maybe less room for more stimulus and thus the decline in stocks.
Also, as the stock decline picked up steam throughout the day and the China Securities Finance Corp (their stock buying government slush fund) didn’t step in, the selling accelerated. On Friday, the CSF reminded investors that they will only step in now when there is ‘unusual volatility and systemic risks.’ Yes, China is now experiencing what so many global markets have over the past few years, they want their central bank monetary fix and without it we get the tantrums. Thank you central bankers for destroying free market (or something close to it) price discovery.
For new apartments in China in July, 31 cities of 70 surveyed said prices rose m/o/m vs 27 in June and 20 in May. The price gains exceeded price drops m/o/m for the first time in 16 months. On a y/o/y basis, 3 cities reported a gain in prices vs 2 last month. For existing apartments, prices rose in 39 cities, down from the 42 seen in June but up from 37 in May. Prices though did rise in 5 cities y/o/y vs 4 in June and 3 in May.
Between an easing of home buying restrictions combined with the mess that is their stock market, housing may again be a more attractive investment. Also, the PBOC injected almost $19b (120b yuan) into the money market system via a 7 day reverse repo that replaced 50b yuan that matured. That is the largest amount in about a year and a half. It was likely in response to capital outflow concerns in light of the weaker level of the yuan. There remains talk that we’ll soon see another reserve requirement cut.”
Consensus – Nervousness pervades the emerging market currencies and there’s always the risk that one of them turns into a black swan, as happened in 1997 and 1998. Best to keep an eye on crude, which could be a key equity influence here. Stick with the drill – stay wary, alert and very, very nimble.” ***KWN has now released the incredible audio interview with 50-year veteran Art Cashin, where he discusses why the worldwide liquidation scramble could morph into a full-blown 2008-style collapse, the chaos in China, global stock markets, commodity markets, whether the U.S. stock market has finally put in a major top and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Richard Russell: Shanghai Plunges Over 6% But Gold Bottomed As China Shocked The World – Here Is What To Expect Next CLICK HERE.
***KWN has also now released the extraordinary audio interview with Michael Pento, where he discusses why the fantasy is now coming unraveled, what this will mean for the gold and silver markets and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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The audio interviews with Michael Pento, Art Cashin, Rick Rule, Gerald Celente, Bill Fleckenstein, Dr. Paul Craig Roberts, Robert Arnott, Eric Sprott, John Mauldin, Stephen Leeb, Egon von Greyerz, Nomi Prins, Andrew Maguire, David Stockman, Chris Powell, Dr. Philippa Malmgren, Marc Faber, Felix Zulauf and Rick Santelli are available now and you can listen to them by CLICKING HERE.