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Originally posted by: snidely333
So says Mr Bear. I'll just stick to what I know. My biotech stock fund did very nicely this year. Wish I bought more and didn't fool around with silver.
DonDiego suggests he is not a "market bear" in the normal sense of that term, . . . because the times are not normal. In fact, DonDiego is pretty much fully invested in the stock market; he hasn't sold any stocks for years.
What DonDiego is concerned with is that the normal market forces which normally affect normal price movements in normal markets have all been distorted worldwide by Government/Central bank policies implemented to keep the markets up.
Specifically the purchase of Government bonds by Central Banks to keep interest rates low has driven investment funds into stocks as opposed to market-determined normal-yield bonds. [One of the results of these policies has been a significant transfer of wealth from the middle/lower income folks to the wealthy; but that's a debate for another time/post.]
If/when the non-market suppression of interest rates subsides the costs of borrowing will rise, especially the cost of Government borrowing. This is likely to let the air out of the markets pretty quickly. DonDiego, like lots of other investors hopes to get out of the markets immediately before this happens; he hopes he will be the 2nd or 3rd guy out of the stock-market, like right after Warren Buffet, . . . because if he's, say, the 5,628,557-th or later guy out he's gonna have gotten hurt financially.
Today's Observation:
"Updated Dec. 9, 2014 7:47 a.m. ET
SHANGHAI—China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.
The bond market was the first to fall, which sent yields higher, after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan, which recorded its biggest two-day tumble ever, while the benchmark Shanghai index slumped 5.4% to record its biggest fall since 2009.
The slump in the stock market was especially stark, though not entirely unexpected, after it had surged recently to become the world’s top performing index. Retail investors had fueled the rally, with many using borrowed cash to leverage up their bets, contributing to the market’s wild swings in recent days and drawing warnings about the market’s instability.
The broad Tuesday selloff was triggered when China’s securities clearing house said late Monday it raised the threshold for corporate bonds qualifying as collateral for repurchase agreements, or repos, which are short-term loans with maturity spanning from overnight to 182 days. These are used as a key channel of short-term funding for bond investors.
'The Chinese stock market is sick,' said one post from the eastern Chinese city of Linyi.
'It earned a lot in the morning, and it dropped deeply in the afternoon,' said another post on Weibo. 'I don’t know why this stuff dropped, and I don’t know why it goes up either. There’s almost no logic.' The microblogger added, in reference in the Chinese territory where gambling is legal, 'it isn’t as good as going to the casinos in Macau.' ”
Ref: The Wall Street Journal
In short, the technical adjustment pertaining to Chinese corporate bonds was equivalent to a small rise in interest rates; and the stock market index fell over 5% !
