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China's Margin Debt Is "Easily The Highest In The History Of Global Equity Markets"
Back in March, when not many outside of China had actually noticed the ridiculous Chinese asset bubble, and when the PBOC had yet to announce the arrest of malicious stock buyers (come to think of it, it still hasn't), we posted "That Ain't No Margin Debt: THIS Is Margin Debt" in which showed the catalyst behind China's unprecedented stock market move higher: a gargantuan increase in margin debt (a reorientation of shadow banking whose conventional conduits were closed since late-2014) which allowed every local illiterate tom, dick, farmer and grandma to participate in the great wealth transfer from the lower and middle classes to corporations and insider sellers.
But so what: the NYSE margin debt at half a trillion is greater, some say and indeed, in isolation China's stock market leverage was not a very useful indicator. So here it is in some truly sensation context thanks by Goldman Sachs:
The explosion in margin financing behind the recent astonishing run-up in Chinese A shares is a new twist on China credit concerns, a long-standing grey swan for Chinese and global growth. As of the beginning of June, the balance of margin financing outstanding was RMB2.2tn, an estimated 12% of the free float market cap of marginable stocks and 3.5% of GDP—easily the highest in the history of global equity markets. And these estimates do not take into account “hidden” leverage from other types of borrowing (i.e., consumer loans and trust products) where proceeds were used to invest in stocks, which we estimate at RMB 1tn to RMB 1.5tn, assuming effective system-wide leverage of 2.2x.
We estimate that a significant portion of the hidden leverage has now been unwound and the reported official margin balance has dropped to RMB1.5tn. This unwinding has contributed to a dramatic correction in Chinese equity markets, erasing a sizable portion—though not all—of the stock gains this year. While a range of market-supporting policies (banning of selling from large stakeholders for a period of six months, suspending IPOs, relaxing the forced selling requirement of underwater margin positions, among others) finally halted the sell-off on July 9, questions remain about whether the equity market turmoil could threaten other Chinese assets, economic growth and broader financial market stability.
And here it is visually:
In other words, there is a lot more margin debt unwinding yet to come which also explains the unprecedented panic by Chinese authorities to step in and prevent the ongoing market crash at all costs...
... even if it means filling up China's prisons with malicious sellers who refuse to see how this epic, Frankenstein experiment in central-planning ends and, daring to break the law, sell.
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Some people live on the edge...Chinese stock market is living on the margin...
It doesn’t matter where the debt is growing in a debt based monetary system, as long as its growing, if not the system destroys itself. As evidenced in China. This is still the best explanation I have read of our very flawed system.
Wall Street 1928 redux. Investor who is fail learn history is doom by margin call.
Frothy exuberance of leverage investment is subject of more sensitive tipping point because underly security is also collateral for margin loan. Effect of small market downturn is amplify to full crash when creditor is shackle to debtor-investor.
... but what is Boris know!?
Honorable GS reft-hand not row what right hand rill do!
Goldman Sachs Says There’s No China Stock Bubble ...
by Cindy Wang
Yeah, like ban selling! And GS now recant and point-out that in fact, it is a massive speculative debt bubble in equities! Like I said the other day, "Snake in the grass much GS?" Bought to you by the people who make all equities investment mechanisms a casino that GS does their best to rig. They should be shuttered and put to productive work growing turnips, if they really think like that and advise whole countries, regions and planet with outright lying crap, that destroys the future of whole populations.
Just so they can get just a little bit richer.
When in doubt: https://www.youtube.com/watch?v=ux3_KBGTfdw&list=PL5A183780AE95D147
I am under the impression that the PROC actually runs and controls the banks in China. If not overtly, then through proxies.
Does the margin actually matter if those who bought on margin are communist party minion? Who's fronting them the money or securities? Margin downside "calls" and further funding liabilities are mitigated by The Party... Hand/Glove sort of thing. Like all the "easing" FRB has done for their cronies here in USA... Never let a crisis go to waste when you can loot the national treasury and throw it on the backs of The People...
Margin only counts when it gives holder of your debt the right to call for more $$, IE classic squeeze to enable further trading profits, or right to liquidate your position. The Party of PROC has no need to give a damn about this. Who audits the auditor or his master?
The Party has instructed banks to pay the freight, absorbing the losses so bubble don't pop. There is no middle-man in China in the money processes. Why should there be? Big Mistake to equate their circumstance to call for what we have used historically as solution. Hell, we don't use historical solutions anymore...
Oh yes, China is awful (and we are great, or at least the strongest horse in the glue factory... or something !) Tyler, it's getting not only boring but dumb already ! I know you guys have your agenda to push too, but really...
JTRIG Ops.
Aren't you ever confused when you type "we" whether you are speaking as a hypothetical westerner, or as a true-blue chinaman with 50 cents in his pocket? How do you keep those two personas straight?
"We" as in we, the "exceptional" Americans. I'm not confused, but you seem a bit insecure yourself... Don't you feel "exceptional" enough today, or what ?
They should stick to Pai Gow
....and there you have it. The bubble is really created by the [central banker] debt(out of thin air)=money phenomenon....just like the good ole USA....just like every other bubble on our planet.
Yuan bai su ta ku, wi len dyu mo ni an ma jin. Tsu gei za we fu ba!
Chinese version of leverage investing.
Bai za fu king di pu!
New rule from People Ministry of Finance
And it will go even higher as the government keeps inflating the bubble
That just gives us something to shoot for in the USSA
So what? Nobody actually defaults anymore...
nobody fails, nobody goes to jail, nobody is held accountable, no collateral is required for money creation...
Start Xerox Machine -> Sell Gold/Silver -> Profit..../sarc.
Ho Li Fuk
im sure its just coincidence that a fidelity fund manager who concentrates on asia/china just gave his first TV interview on CNBC throwing his weight behind the china market, saying theres no bubble.
kind of hard to have a crash when you freeze 1/2 the stocks & disallow institutional investors from selling.
we got bubbles all over the fucking place. need proof? raise rates to the yield on the S&P 500 & watch people who have been hiding-out in dividend payers vomit those out & rotate into fixed. that will disprove all these people who say there are no bubbles. to NOT allow the elderly to AT LEAST get 3.5-4.0% on a "risk-free" investment is fucking pathetic 7 years "after the crisis". we've belted them along with everyone else so far out the risk curve and the longer this shit compounds, the more violent the moves are gonna be on the back-end of this thing when it eventually gets unwound. only question is, will it be a man-made engineered unwhind or a market-induced.
The markets are so fatally screwed, with bubbles blown all over the place, the only solution seen by most talking heads and managers is to "pretend and extend"- bury your fuckign head in the sand and ignore what's happening all the while wishing for the best. They need the illusion of health to keep the show rolling since QE and government intervention has painted the douchbags into a corner. Sooner (China) or later (Western economies; not by much) it is going to go.
The Shanghai stock crash and China gold demand
What it means for the future of the gold market
http://www.usagold.com/publications/NewsViewsJuly2015SpecialReport.html
sure sure... any day now....
better to be 1 year early than 1 day late.
What about ten years early? 20 years? I can make a lot of money and do a lot of other things during that time.
Let me clear, no money in the system will be safe, period.
When the global debt ponzi blows all that will matter is what is in your possession and that of your tribe.
It's gonna go down....some day.
Say what now? China leads the U.S. The EU will never let Greece secede; China will never let the U.S. default. And the entire earth will never be the same again.
EMP event getting closer.
You want a carenton event, Google it.
this is much better, and last a looooooot longer
http://phys.org/news/2015-07-irregular-heartbeat-sun-driven-dynamo.html
Reverse Robin Hood, rob from the poor and give to the rich. I guess the Chinese got their education at Federal Reserve university.
So I noticed two rather unusal events in my neighborhood (SF Bay Area) the last week. For the first time in two years I have actually seen "For Sale" signs posted outside of houses. I have also seen a sign saying apartment for rent. This is important news to me, and suggests that buyers might be in retreat. I wonder if the Chinks are finally getting out of the real estate market.
RE here in Seattle is absurb. Whole neighborhoods being bought up by foreign investors. One neighbor made 40% in one year and cashed out to only lease back the house. I'm watching Vancouver closely as well for the sign Chinese investors are pulling back.
Chinese LOVE to gamble. They have abandoned Macau for the markets where they get to even margin the bet on the great table. Can't do that in Macau. Macau wants to see the cash, generally speaking that is unless you are the well known local whale. This was amplified by the leadership making an effort to reduce gambling in Macau and so the masses then had a great new gambling hall to go to. Fate, luck and all. They didn't realize this "new" table game is rigged beyond their comprehension.