Shanghai Stocks Drop Following Failed 3 Month Bill Auction

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Fri, 12/24/2010 - 00:40 | 827571 Calvin Jones an...
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Freakin' YouTube.  I can't believe the Don Meredith version isn't on there, so this will have to suffice:


I think it is appropriate.

Fri, 12/24/2010 - 01:43 | 827617 dlmaniac
dlmaniac's picture

Well since Fed already assured us rate dropping / flatening / rising are all sign of economy recovery, we really have nothing to worry about so keep partying. Greenshoots to infinity.

Fri, 12/24/2010 - 11:32 | 827962 SheepDog-One
SheepDog-One's picture

Right excellent point, up, down, or sideways, its all good and definite signs of recovery. $25 trillion debt by 2012? Nevermind all that, stocks are what americans need to be buying, on a credit card, and media says to sell your gold and silver because kids are somehow harmed in African mines which is somehow my problem and Im responsible for it since I bought PM's. But stocks are 'good and wholesome' of course. Max out those credit cards for Christmas, american sheeple. All youre good for is debt slavery anyway.

Fri, 12/24/2010 - 12:22 | 828010 malikai
malikai's picture

Just curiosity here. What good is a debt slave that cannot service their debt?

Fri, 12/24/2010 - 20:20 | 828857 Clycntct
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It's a make works program.

Give a bailouter a job

Sun, 12/26/2010 - 03:04 | 830264 jeff montanye
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excellent question mali.  

on that thread hangs much: are the debt slaves recapitalized by their own default or by hyperinflation or by a slow, earned debt paydown or by debt forgiveness?  the last seems too revolutionary for the bankers and the politicians (except for themselves of course) so looks like more of the first three, which tend to turn the debt slaves more revolutionary.  

isn't it ironic?


Thu, 12/30/2010 - 15:40 | 838262 Ken P
Ken P's picture

Debt slavery is even better than real slavery because the slaves don't even realize they are slaves.  The whole point of slavery is not to own people for the sake of ownership.  It's to force people to work for you at minimal cost to you.  Slavery allows the slave owner to maximize what he receives from the slave's labors with minimal benefit to the slave.  That's what happens with debt slavery.  Once someone reaches a certain level of indebtedness their labor is mostly devoted to paying off debt with little benefit to himself.  Now imagine that you are the Federal Reserve.  Every dollar that they create is a unit of debt to them.  They create money and lend it to banks at interest and lately they are creating money and buying government debt.  The creation of dollars costs the Fed nothing, but every dollar they create means more debt slavery for them.  We have now reached the point where individuals are maxed out on debt and state, local, and federal governments are maxed out on debt.  We can never repay all the debts that have accrued, but to the Fed that is of no consequence.  To a certain extent we are all debt slaves to the Fed because so much of whatever we produce will go to paying off interest and the beauty of it is that the Fed paid nothing to create the money but has a country full of slaves.

Fri, 12/24/2010 - 02:09 | 827640 JLee2027
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Search for Dandy Don...several of them


Fri, 12/24/2010 - 07:35 | 827800 4xaddict
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......strike with great deferred vengeance and furious accrued anger



Fri, 12/24/2010 - 09:07 | 827845 Cognitive Dissonance
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Ezekiel 25:17

Payback is a bitch.


Fri, 12/24/2010 - 00:41 | 827572 Oh regional Indian
Oh regional Indian's picture

Funny this, Reserve Bank of India had a weak auction of medium term paper earlier thsi week also.

Chindia, going to take it on the chin, together it seems.

Real Estate is the bell-weather though. When the leak begins out of that bubble, watch out below.

All of this other stuff is distraction.



Fri, 12/24/2010 - 09:05 | 827844 Landrew
Landrew's picture

Bubbles don't leak, they pop!

Fri, 12/24/2010 - 10:39 | 827910 Oh regional Indian
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Trew Landrew, but it seems that the master's of finance have managed to make many bubbles leak an awful long time without popping eh?

Maybe leaking bubbles is a part of the new normal?


Sun, 12/26/2010 - 03:14 | 830271 jeff montanye
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ben's blowing as hard as he can into the inflator hole (his cheeks are turning purple) but the leaks show little sign of slowing.  the betting in the casino on the remaining life of the balloon is furious.  imo the bears may have most of the happy new year.  

Fri, 12/24/2010 - 00:43 | 827573 wretch
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If a market falls (fails) in the forest...

Fri, 12/24/2010 - 02:19 | 827650 JLee2027
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Ben won't hear it.

Fri, 12/24/2010 - 00:50 | 827579 wintermute
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The Ministry of Finance does not need money for itself as China is running a monumental trade surplus and has mountainous reserves.

So the auction is purely to drain CNY internally to fight inflation which is evident in ramping retail prices. There is enough CNY sloshing about - just that the interest rate offered by MoF on their bills is too low.

So we know for certain that the CNY is artifically low. China has to increase interest rates , and their exchange rate, or their economy gets a slow roast in the fires of inflation.

Fri, 12/24/2010 - 02:28 | 827661 AUD
AUD's picture

Ain't these 3 month bills marketable securities though? If so they would be 'money good'. Don't quite see how this drains any 'liquidity'. Unless it's all just a ruse, which is what I'm thinking.

Fri, 12/24/2010 - 09:44 | 827865 Divided States ...
Divided States of America's picture

Perfect timing on the Chinese part...this news will be swept underneath a rug and in the US, it will be swept underneath a mountain of presents containing useless unnecessary goods that were made in China.

Fri, 12/24/2010 - 11:37 | 827965 SheepDog-One
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Yea, well that rug everything is getting swept under now looks like a postage stamp on an elephants back.

Fri, 12/24/2010 - 12:00 | 827991 jdrose1985
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Sun, 12/26/2010 - 03:37 | 830278 jeff montanye
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aud: yes the bills are marketable and money good (in yuan).  

however, as i understand it, this is traditional monetary policy: offer something of longer maturity than checking account deposits to reduce available cash balances that could be spent on goods and services.  

the bills could be sold and the money spent but the tendency is for it not to be, else why buy them? and, at the margin, it also raises short term rates (as we see here), also liquidity draining, as some, previously indifferent, now buy the more attractively priced bills, further reducing checking account balances.

this ignores external currency flows which tend to counter the contractionary effects of this monetary policy.  

Fri, 12/24/2010 - 09:54 | 827868 TheJudge2012
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Peter Schiff said if China raises interest rates it makes Chinese deposits more attractive than dollar deposits, borrow in dollars and buy RNB and earn that spread, causing more hot money to flow into China. Then they would have to print even more RNB to keep the dollar afloat which means inflation goes up even higher. The only thing that will work is to let the RNB go up.

Depeg which means lights out over here.

Fri, 12/24/2010 - 11:36 | 827966 scatterbrains
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and I thought if they depeg the dollar drops with a reflex spike higher in stocks. How does the "lights out" scenerio unfold if you don't mind?

Sun, 12/26/2010 - 00:17 | 830155 TheJudge2012
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If China depegs, the RMB goes up, our interest rates and consumer prices will be forced higher. He doesn't talk about the stock market in that clip but you can call during the show.

archive for 11/19/2010 about 10 minutes into show. What happens during a default at about 77 minutes.
edit previous post to

"Then they would have to print even more RNB to keep the dollar afloat which means their inflation goes up even higher."

Sat, 12/25/2010 - 01:09 | 829261 wintermute
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If China de-pegs then this should make their exports more expensive for US consumers, encouraging US domestic production to make up the slack. This is good for the US economy in the medium/long-term. However, the blow-fly in this ointment is that other low-cost manufacturers (Bangladesh, Indonesia etc) will fill the cheap goods void and the boost for US domestic manufacturers will become a mirage.

Sun, 12/26/2010 - 00:42 | 830176 TheJudge2012
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There's gotta be something in it for Bangladesh and Indonesia to do that. May be that the only reason China had for supporting the US with its dollar peg was it didn't think the RMB would be taken seriously to trade without it, but why it didn't abandon it a long time ago is the question.

If China depegs, US interest rates and consumer prices go up crushing the phony economy and if the Fed stays on the same trajectory we will have hyperinflation.

"...the Fed will have to choose between holding bonds and letting inflation get worse or selling bonds and going bankrupt in the process."

Sun, 12/26/2010 - 03:44 | 830281 jeff montanye
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c-4 soaked in nitroglycerin bitchez.

Fri, 12/24/2010 - 00:52 | 827581 Mr Lennon Hendrix
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Asia would rather buy gold.

Fri, 12/24/2010 - 02:50 | 827679 Mr Lennon Hendrix
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Daily (rather nightly) flash crash in platinum almost complete. 

Fri, 12/24/2010 - 03:17 | 827699 Mr Lennon Hendrix
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There there now platinum, it's ok, soon the big bad will no longer manipulate you.

Fri, 12/24/2010 - 00:56 | 827584 Trimmed Hedge
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I just came back from China.

They are kicking our asses over there!

Fri, 12/24/2010 - 01:46 | 827620 Id fight Gandhi
Id fight Gandhi's picture

Why? Do tell. Love hearing China stories.

Fri, 12/24/2010 - 10:35 | 827903 Cursive
Cursive's picture

I just came back from China.

They are kicking our asses over there!

They're better at central planning, manipulated markets and widespread fraud than we are?  Good for them.

Fri, 12/24/2010 - 11:37 | 827968 SheepDog-One
SheepDog-One's picture

The Chinese have been doing communism longer than the US, thats all.

Sun, 12/26/2010 - 03:46 | 830282 jeff montanye
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don't you mean crony capitalism?

Fri, 12/24/2010 - 00:58 | 827585 sbenard
sbenard's picture

We need a good correction! A cold shower and a dose of reality are long overdue!

Fri, 12/24/2010 - 01:16 | 827598 froghat
froghat's picture

Eventually the shi* has to hit the fan. I wish they would just get it over already! You can't spend your way out of a depression. The world has completely gone insane!

Fri, 12/24/2010 - 01:40 | 827615 Id fight Gandhi
Id fight Gandhi's picture

I believe people are borrowing and spending without regard. A collective fuck you is what creditors will get when Americans havent the money to pay.

Fri, 12/24/2010 - 12:59 | 828058 centerline
centerline's picture

Yeah - I think there are a couple of major segments in the middle class here.  Some are getting out of harm's way fast (very few though).  Then, there are those who are doing what you suggest.  And another segment who just can't do math...  and simply do not accept (err..refuse to accept) reality.  Most have lived entirely in a fiat fantasy land on the "fun" part of the parabolic curve.  They do not see how future earnings are pulled forward, creating a massive hole.  They are cutting back - but nearly enough to get out of trouble.  They are underestimating the severity of the situation and how dramatically things have changed.  They will continue to bleed off cash, literally until the moment it siezes up.  Then, and only then, will they suddenly panic and do something.  So many people are now simply one major capital expense (replacement car, new roof on house, etc.) away from that moment.  And I am not even talking about stuff like major medical.  I am talking about stuff that does in fact happen.  The same goes for too many small businesses as well.  All in the same boat.

Got a feeling we are seeing what is in effect a major consumer dead cat bounce - as savings, 401k's and investment accounts are stripped to keep the party going just a little while longer.  Not to mention it's all good news about the economy!  Right?  Things will be right back on track come January!  Right?

Anyhow, Xmas is likely the apex of that dead cat curve and the trajectory is soon to be terminal.  Margin compression as a result of soaring input costs will just be fuel on the fire.  Very deflationary... and into a muni clusterfuck.  The only option will be QE3 or some acronym program of monitization to kick the can a little further.

Either way though, I think the collective "fuck you" is coming - not by choice, but by circumstance.  With lots of pain to go around.  Especially for those who drop early.  For those of us with limited resources, I think the trick will be last long enough for a good portion of system to crumble first.  Kind of like getting away from an angry bear... don't need to be fast enough to outrun it... just fast enough to outrun the next guy!  LOL.

Fri, 12/24/2010 - 01:18 | 827601 Itsalie
Itsalie's picture

"The MOF's unsuccessful bill auction is fresh evidence of tight liquidity conditions in the market, due to China's three RRR hikes since November and rising cash demand near the year-end. "

Hey hey, DOw Jones have not heard the loan shark market has increased the shadow market rate lately? Anyway all this silly RRR and MoF auctions are the same as the Fed's money printing - unlike the indians, the chinese do not have the backbone to take away the punch bowl, or maybe they have learnt some can-kicking kungfu from the Chairman (no, not Mao, I mean Ben). They are digging their own graves, but they are probably 2 to 3 years away from their minsky moment. So yes Chanos and Hugh endry are correct to short china but they need to hold the trade for a while more.

Fri, 12/24/2010 - 01:42 | 827616 RobotTrader
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Fri, 12/24/2010 - 12:23 | 828011 hangemhigh
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TO:  RobotTrader
on Fri, 12/24/2010 - 00:42


This looks just  like the MSFT chart of early 2000.....a piece of swiss cheese full of hot money gaps...............

Sat, 12/25/2010 - 07:04 | 829464 lewy14
lewy14's picture

Dude. Those gaps aren't "hot money"... those gaps are lunch.

Fri, 12/24/2010 - 01:42 | 827618 Id fight Gandhi
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Us markets having the best december in 20 years. I wonder how much will be shaved off as the robots power down and the fund managers screw hookers over the holiday week.

Fri, 12/24/2010 - 01:51 | 827622 Id fight Gandhi
Id fight Gandhi's picture

China just put a serious limit to licenses it will issue to cars. This won't be pretty for ford and gm especially when their growth is china based and big gas guzzler trucks are top sellers here. Gas jumping will slap sales down.

Fri, 12/24/2010 - 02:00 | 827631 mberry8870
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This would be important if it mattered.

Fri, 12/24/2010 - 02:07 | 827638 williambanzai7
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I knew something was up. The line at Gucci HK just doubled. 

Fri, 12/24/2010 - 02:35 | 827664 Julia
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I'll never forget one time I was in HK and went shopping in Kowloon. There was a knock-off T-Shirt of Calvin Klein that read Caivln Kieln. Seems their I's and L's were mixed up. They insisted I didn't want those but I insisted that indeed I did. They only had 7 and I bought every one of them... 

Fri, 12/24/2010 - 05:01 | 827757 squexx
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Lots of funny (but usually innocent) translation errors at

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