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This Is How Much It Cost To Keep The Shanghai Composite Green For A Day
Over the weekend, as China scrambled to put together a coherent plan to combat the vicious equity sell-off that has pruned nearly 30% off the market’s world-beating rally, we remarked that the entire effort looked quite similar to what took place in the wake of Black Thursday some eight and a half decades ago:
“The move by the broker consortium is reminiscent of an ill-fated 1929 effort by JP Morgan and others to support the US market after Black Thursday and is, according to some, doomed to fail because i) it is a laughably small effort compared to daily turnover in China, and ii) it targets the wrong kind of stocks.”
The “consortium” refers to the 21 brokers who came together on Saturday and pledged 15% of their net assets to support the flagging Chinese stock market. The PBoC later (on Sunday) announced it would channel funds to the China Securities Finance Corp which will in turn use the cash to help brokerages expand their businesses and reinvigorate stocks.
The message was clear: stocks absolutely could not open red on Monday morning.
Consider the following from BofAML which shows just how imperative it was for the SHCOMP to open green: “We suspect that the initial PBoC loans to CSFC will be used on Monday morning to fund the MSF until brokers’ funds arrive (by 11am on Monday as ordered by the CSRC).”
In other words, the $20 billion or so in committed broker funds needed to be in place the second the market opened and not a minute later and if that meant the central bank had to front the money while the CSFC waited on the broker cash to clear then so be it. Here’s Bloomberg:
21 Chinese brokerages had transferred at least 128b yuan to China Securities Finance Corp. as of 11am Monday, Shanghai Securities News reports on Weibo, citing Wang Min, deputy head of Securities Association of China.
That explains the opening 8% ramp on the SHCOMP. Of course by the end of the session, whatever boost stocks received from early buying had almost entirely worn off, supporting the contention that, to quote one Bocom equity strategist who spoke to Bloomberg over the weekend, “that CNY120 billion won’t last for an hour in this market.”
With all of the above in mind, we bring you the following chart which, by way of comparison with the above-mentioned JP Morgan Black Thursday plunge protection team, shows you how effective China's effort is likely to be.
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mo monay mo ponzi
http://vimeo.com/132616261
1.35 billion smart cats for the central planners to attempt to herd.
nickels are the only money left in the bank
The Chinese need to get "Benny, and the Magical Mystery Printing Machine" on the horn fast.
dayaaam, I thought you were going to say benny and the jets...so disappointed
OK, then how about Benny, and the Jet-printers?
NOw thats funny...
which is exactly why we should all hoard nickels...to drive the point home. Even though they take up space. Everyone should at least have a few hundred dollars worth stashed. (no, this is not an 'investment' strategy....it's a piss of your local Treasury'man strategy.)
If the PBOC can't hold this together it's going to be a supernova.
Decillion Dollar Derivative Death Star approaching the third planet.
- Jul 2015
"If the PBOC can't hold this together..."
It will, TPTB held out SDR as the carrot;
and Death Star, um....
soon, likely 09-15.
F' me, $20 billion in one day? They're putting the FED to shame. Yellen better shut her yap about raising rates and get with the money printing program pronto or look like a slacker.
Not good. Pluto has entered China's (Mao's founding) 2nd natal House and its 5th [derived] House of speculation. There's a reason they named it "plutonium" in 1941.
Here is what happened in 1929:
http://xroads.virginia.edu/~HYPER/ALLEN/ch13.html
A few minutes after noon, some of the more alert members of a crowd which had collected on the street outside the Stock Exchange, expecting they knew not what, recognized Charles E. Mitchell, erstwhile defender of the bull market, slipping quietly into the offices of J. P. Morgan & Company on the opposite corner. It was scarcely more than nine years since the House of Morgan had been pitted with the shrapnel-fire of the Wall Street explosion; now its occupants faced a different sort of calamity equally near at hand. Mr. Mitchell was followed shortly by Albert H. Wiggin, head of the Chase National Bank, William Potter, head of the Guaranty Trust Company; and Seward Prosser, head of the Bankers Trust Company. They had come to confer with Thomas W. Lamont of the Morgan firm. In the space of a few minutes these five men, with George F. Baker, Jr., of the First National Bank, agreed in behalf of their respective institutions to put up forty millions apiece to shore up the stock market. The object of the two-hundred-and-forty-million-dollar pool thus formed, as explained subsequently by Mr. Lamont, was not to hold prices at any given level, but simply to make such purchases as were necessary to keep trading on an orderly basis. Their first action, they decided, would be to try to steady the prices of the leading securities which served as bellwethers for the list as a whole. It was a dangerous plan, for with hysteria spreading there was no telling what sort of debacle might be impending. But this was no time for any action but the boldest.
The bankers separated. Mr. Lamont faced a gathering of reporters in the Morgan offices. His face was grave, but his words were soothing. His first sentence alone was one of the most remarkable understatements of all time. "There has been a little distress selling on the Stock Exchange," said he, "and we have held a meeting of the heads of several financial institutions to discuss the situation. We have found that there are no houses in difficulty and reports from brokers indicate that margins are being maintained satisfactorily." He went on to explain that what had happened was due to a "technical condition of the market" rather than to any fundamental cause.
As the news that the bankers were meeting circulated on the floor of the Exchange, prices began to steady. Soon a brisk rally set in. Steel jumped back to the level at which it had opened that morning. But the bankers bad more to offer the dying bull market than a Morgan partner's best bedside manner.
At about half-past one o'clock Richard Whitney, vice-president of the Exchange who usually acted as floor broker for the Morgan interests, went into the "steel crowd" and put in a bid of 205 -- the price of the last previous sale -- for 10,000 shares of Steel. He bought only 200 shares and left the remainder of the order with the specialist. Mr. Whitney then went to various other points on the floor, and offered the price of the last previous sale for 10,000 shares of each of fifteen or twenty other stocks, reporting what was sold to him at that price and leaving the remainder of the order with the specialist. In short the space of a few minutes Mr. Whitney offered to purchase something in the neighborhood of twenty or thirty million dollars' worth of stock. Purchases of this magnitude are not undertaken by Tom, Dick, and Harry; it was clear Mr. Whitney represented the bankers' pool.
The desperate remedy worked. The semblance of confidence returned. Prices held steady for a while; and though many of them slid off once more in the final hour, the net results for the day might well have been worse. Steel actually closed two points higher than on Wednesday, and the net losses of most of the other leading securities amounted to less than ten points apiece for the whole day's trading.
All the same, it had been a frightful day. At seven o'clock that night the tickers in a thousand brokers' offices were still, chattering; not till after 7:08 did they finally record the last sale made on the floor at three o'clock. The volume of trading had set a new record -- 12,894,650 shares. ("The time may come when we shall see a five-million-share day," the wise men of the Street had been saying twenty months before!) Incredible rumors had spread wildly during the early afternoon -- that eleven speculators had committed suicide, that the Buffalo and Chicago exchanges had been closed, that troops were guarding the New York Stock Exchange against an angry mob. The country had known the bitter taste of panic. And although the bankers' pool had prevented for the moment an utter collapse, there was no gainsaying the fact that the economic structure had cracked wide open.
And, yes, some bids did go bidless:
On that black Tuesday, somebody--a clever messenger boy for the Exchange, it was rumored--had the bright idea of putting in an order to buy at 1--and in the temporarily complete absence of other bids he actually got his stock for a dollar a share!
Now, since the dollar is no longer backed by gold they can create infinite fiat money and they have absolute computer control of price.
If it happens again, then you know that it will be planned to happen.
With guaranteed liquidity, regulatory capture and a few computers one can rig every market.
Exactly, now you know how ms. fucking ugly clinton felt as she multiplied her monies on the CBOT with cattle futures...
This looks like a job for
Money Boo Boo
The best part is that after the sell off the market is still up 90% since last year and they are shitting their pants. Seriously, it gave up like three months of performance and they act like it's the end of the world.
This mentality is so fucked up there are not even words to describe how fucked up it is. Is like a CDO squared of fucked up.
Chalk it up to another fake "market". Like the entire bondmarket, prices are set by government fiat and completely distinct from economic reality.
I had the same reaction khakuda. This is the twilight zone we are living in.
well, people are lost averse
This SOP for what Western banks will be forced to do...
Welcome to "Western-Style" short squeeze brought to you by the "Wall Street Gang Inc.". The the war-games begin....humanity will never learn.
Exctly what is the China Securities Finance Corp going to do with all the Krap they just bought? LoL!
FRAUD is very expensive compared to the relative return. It draws on a closed system and destroys a large portion of the wealth of that system.
Wonder who is actually 'shorting' the market... .fed (on behalf of .gov)?
i think the problem is that in china, the color red is used for then the stocks go up... this has caused confusion as the puppet-masters have been going the wrong way. there - fixed it for ya.
If all else fails, the Chinese can just pay half the poor people to kill the other half.
Crazy as it sounds, that might be a better plan (for the leaders) than the pitchforks and torches alternative plan.
The PBOC does have a 4.85% rate to cut, not 0.25% as in the U.S.
Funny how the graphs line-up like a small child tried to copy one with a crayon
I got an idea to help making shanghai index green. Just let the communists government to announce the new rule of color coding. Just swap the color of up and down. Then it will be green all the time. Just like how the communists government changing the hazard safety limits on air pollution.
See... simple solution.
good thinking, comrade. That is what power can do: shape perception, and maybe even reality.