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China's Richest Traders Are Rushing To Dump Their Stocks To The Retail Masses, Just Like In The US

Tyler Durden's picture




 

One of the things you will never hear on propaganda financial comedy TV, is that for all the endless prattle of cheap stocks and unlimited upside, the only purpose of pundit after pundit appearing inbetween commercials for incontinence diapers and get rich quick while trading options books (call now for a free copy while supplies last, for the next 3 years, is to sucker you, dear reader, in a casino that has been rigged by HFTs, and manipulated by central banks, into buying stocks so someone can collect a commission and someone else can offload a bag of overvalued toxic garbage to the infamous "dumb money" retail investor.

The only problem is that after the Lehman collapse which revealed to everyone just how rigged everything truly was, the "dumb money" refused to participate in this so-called bull market, forcing global central banks to monetize $13 trillion in risk assets, and corporations to buyback their own stock at a record pace since Joe Sixpack refuses to bid it up.

But who can blame the "dumb money" - here, as a reminder, is what the "smart money" has been doing not only in 2014...

 

... but ever since the start of the second great depression also known as the "bull market":

 

As it turns out it is not just in the US that the "smart money" is bailing out as fast as it can: according to Bloomberg, the wealthiest investors in China’s stock market are also scrambling for the exits. To wit:

The number of traders with more than 10 million yuan ($1.6 million) of shares in their accounts shrank by 28 percent in July, even as those with less than 100,000 yuan rose by 8 percent, according to the nation’s clearing agency. While some of the drop is explained by falling market values, CLSA Ltd. says China’s rich have taken advantage of state buying to cash out after the nation’s record-long bull market peaked in June.

Visually:

Now the reason the smart money is called that, is because, by and large, they know when the game is over and only some last minute government bailouts are keeping the farce upright, although as selloffs such as last night in China showed, it doesn't take much to spook everyone that the government may not be backstopping the market for long unleashing a furious selling rampage.

And, as Bloomberg adds, "investors with the most at stake are finding fewer reasons to own Chinese shares amid weak corporate earnings and some of the world’s highest valuations. With this month’s devaluation of the yuan adding to outflow pressures, bulls have started to question whether there’s enough buying power to prop up prices once the government pares back its unprecedented rescue effort - - a concern that contributed to the Shanghai Composite Index’s 6 percent plunge on Tuesday."

As a reminder, the median mainland stock traded at 72 times reported earnings on Monday, more expensive than any of the world’s 10 largest markets. The ratio was 68 at the peak of China’s equity bubble in 2007, according to data compiled by Bloomberg.

Just a tad frothy. "The high net worth clients are the ones who moved the market,” Francis Cheung, the head of China and Hong Kong strategy at CLSA, wrote in an e-mail. “They tend to be more savvy.” What he meant is "they tend to be more selly."

Not only that, but they tend to own the government, and the press: the same press that promised untold stock market riches on the way up, and is now promising that the government can halt the market crash on the way down so please come back in, the water is warm.

The problem is that only the dumbest money believe it, those with "<100,000 Yuan", which will be nowhere near enough to satisfy the selling pressure once the whales start really dumping their holdings, leading to another Hanergy-type perpetual halt.

“There is not a lot of fundamental support for the A-share market,” Cheung said. “Earnings are weak.”

The rich know this: "the ranks of investors with at least 10 million yuan in stocks dropped to about 55,000 in July from 76,000 in June. Those with between 1 million yuan and 10 million yuan declined by 22 percent, according to data compiled by China Securities Depository and Clearing Corp."

The bottom line: “Wealthy investors, who have been through bear markets, are better at exiting,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology.

That's true not only in China, it is certainly the case in the US as well, where the Fed has desperately been scrambling to give the impression that a $4.5 trillion balance sheet has made things "normal" again, when it apparently can't realize that the greater the central bank intervention, the less the confidence anyone, not just smart, but dumb, and all other money, has in the market.

Which is why the Fed may be on the verge of throwing the towel, and all those "smart" investors who still have not sold, tough.

Until, of course, they scream and demand to be bailed out once again, when it's all comes crashing down, which is precisely what will happen because in a banana republic like the US, it is those who never believed that the worst could happen to them for the second time in under a decade, that call the shots and control not only the legislative and the judicial branches of government, but the clueless economists who control the money printer as well. 

Rinse. Repeat.

 

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Tue, 08/18/2015 - 17:56 | 6440921 dimwitted economist
dimwitted economist's picture

it's a dog eat dog thing...

 

or rat eats rat... 

 

or snake eats snake...

Tue, 08/18/2015 - 18:18 | 6441002 38BWD22
38BWD22's picture

 

 

Wealthy Chinese are invited to track me down if interested in buying a waterfront condo on the USA's "equivalent" of Hainan Island.

Tue, 08/18/2015 - 23:44 | 6442343 atomp
atomp's picture

.

Wed, 08/19/2015 - 04:52 | 6442731 fx
fx's picture

"smart rich traders fleeing"?? WTF?! When stocks crash between 25-70 % you would expect that the size of brokerage accounts shrink dramatically - just due to the losses incurred. take the leverage into account (pun intended) and you easily have account down anywhere between 40%-99%. Voila, accounts over 1 mio or 10 mio diasppearing  the hard way. Not by "smartly" withdrawing, but just by way of decimated value. Just basic math, tyler, don't ya think?

Tue, 08/18/2015 - 18:20 | 6441009 813kml
813kml's picture

He who go Wei Tu Long end up Wei Tu Lo.

Tue, 08/18/2015 - 18:50 | 6441109 Takeaction2
Takeaction2's picture

"cum flows by client type...."   Hmmm    Really?  They graph that?

Tue, 08/18/2015 - 17:56 | 6440926 Wahooo
Wahooo's picture

Upur premise is that they are smart. You sure about that?

Tue, 08/18/2015 - 18:03 | 6440954 WhackoWarner
WhackoWarner's picture

Sooner or later it comes down to greed,  And greed plays loose with theft and ethics.

Tue, 08/18/2015 - 18:37 | 6441054 Arnold
Arnold's picture

Who do they turn failing accounts over to? / rhetorical

 

 

(gotta keep some of those guys around)

Tue, 08/18/2015 - 18:04 | 6440956 TeethVillage88s
TeethVillage88s's picture

So if the Wealthy are being subsidized by government buying and the poor are buying more stocks... it could end up badly for the people on main street as their savings is "Purged" in a classic Communist Move.

Remember here in the USA we had some fascist purges too:

- Purges of Retirement & Pension Wealth
- Purges of Savings Account Interest Earning
- Purges of Housing Wealth
- Purges of Good Full Time Jobs
- Purges of Middle Class Wealth
- Purges of State and Voter Influence in Vichy DC
- Purges of Privacy
- Purges of Justice & Individual Rights & Opportunity
- Purges of total Banks down to 5,501
- Purges of Free Press & Media through Nationalization

Tue, 08/18/2015 - 18:01 | 6440946 Latitude25
Latitude25's picture

In the US managed money is appropriately called the dumb money.  Who would be dumb enough to let someone else manage their money?

Tue, 08/18/2015 - 18:39 | 6441070 Arnold
Arnold's picture

come on.

Real statistically?

all of us.

Tue, 08/18/2015 - 18:03 | 6440955 CHC
CHC's picture

"Humpty Dumpty sat on a while....Humpty Dumpty has a great fall..."

Tue, 08/18/2015 - 18:06 | 6440966 JLM
JLM's picture

This just goes to prove that there is no such thing as a fundamental objective value for any stock.  

The whole premise behind retail investing is "The Greater Fool Theory".  One fool buying somthing and hoping to unload it on a greater fool down the road.  That is something worth putting all your life savings into, or even worse borrowing to put money into.  Ouch!

When you realize that every stock in the US universe is turned over every 6 or 7 months on average, there is no buy and hold.  It is all momentum trading based on fear and greed.

 

 

Tue, 08/18/2015 - 18:06 | 6440967 buzzsaw99
buzzsaw99's picture

it would be nice if the central banks would post the prices they've set instead of making people guess.

Tue, 08/18/2015 - 18:06 | 6440968 The Count
The Count's picture

The stock market....one of the biggest scams of all times. Created by the same folks who brought you the fiat money system and the FED!

 

 

Tue, 08/18/2015 - 18:23 | 6441018 TeethVillage88s
TeethVillage88s's picture

And in the USA they are Self Regulatory Organizations (SROs).

Just like US Congress.

Tue, 08/18/2015 - 18:13 | 6440990 nmewn
nmewn's picture

Wever up Comwades! Do it faw Mao! Do it faw de Communist Pawty! Do it faw yaw cuntwey!

Wed, 08/19/2015 - 04:47 | 6442729 ThroxxOfVron
ThroxxOfVron's picture

No shit, nmewn!

Party Bosses, 'Princelings' and the politically connected are cashing out.

 

The Central Bank, the Trading Desks under command of Politiboro guns, etc. are buying out the Oligarchs with phony money, are stuffing shares into captured Corporations and shell 'State Enterprises', palming them off to leveraged fools that think the Chinese Gov't is in their corner, etc. etc.

Rigged Casio..

...Fucking pathetic.

Tue, 08/18/2015 - 18:15 | 6440993 new game
new game's picture

68 times earnings, huh, lol. try x68 (where x is>1)...

Tue, 08/18/2015 - 18:16 | 6440996 lakecity55
lakecity55's picture

"I don't often Buy stocks but when I do, I buy low and get out when my buddies tell me to.

"Stay thirsty, my friends."

Tue, 08/18/2015 - 18:16 | 6440998 Never One Roach
Never One Roach's picture

I still regret not buying the POS NTFLX that went from 50 to over 500 then split. hard to believe streaming cow dung to people is good business.

Tue, 08/18/2015 - 18:45 | 6441089 Arnold
Arnold's picture

My wife has it, there is no selection that I would want to watch.

Captain America: Winter Soldier was not there a month ago.

Tue, 08/18/2015 - 18:24 | 6441024 f16hoser
f16hoser's picture

Thats funny, I'mm dumping everything into PM's... Weird

Tue, 08/18/2015 - 18:34 | 6441051 stock market loser
stock market loser's picture

I love Chinese food. Hate the Chinese. Love Filipino food love the Filipino people. 

Tue, 08/18/2015 - 18:47 | 6441097 Arnold
Arnold's picture

nice.

Tue, 08/18/2015 - 18:47 | 6441095 NotApplicable
NotApplicable's picture

Not that I don't agree with the gist of this article, but how can you measure anything by account size when the value of the market itself is collapsing? Even if you held all of your shares, you're still likely to cross these thresholds as the value of your portfolio collapses. (I've got a dead dot-com era IRA as proof)

Tue, 08/18/2015 - 18:57 | 6441147 Arnold
Arnold's picture

Though not a a fan at all, in the late 60/ 70 era I would recommend acid for understanding of understandable times.

How those guys had so relevant music, so stoned , will be forever beyond my understanding.

 

https://www.youtube.com/watch?v=DED812HKWyM

Tue, 08/18/2015 - 19:49 | 6441389 negative rates
negative rates's picture

I comfortably got out of that hole I dug for myself, hows about you? 

Tue, 08/18/2015 - 18:56 | 6441138 Bluntly Put
Bluntly Put's picture

The "financial" sector is bloated and overweight relying on government subsidies (i.e. the fed) to exist. It needs to shrink down to about 5-6% of GDP so we can return to a functioning economy.

Let them all die.

Sun, 08/23/2015 - 00:49 | 6441576 monad
monad's picture

1987

http://www.imdb.com/title/tt0094291/

With love to the only charlies I respect. Except for "Beyond The Law". Those were my friends, chuck. The race stuff waz 100% tv.

Ain't no racists in my army.

Tue, 08/18/2015 - 22:31 | 6442143 TheRideNeverEnds
TheRideNeverEnds's picture

So since everyone is selling but the price keeps rising does that mean there will be a time where nobody owns any stocks but they still keep making new all time highs because the HFTs are still quoting higher and higher prices between each other even though nobody owns anything to sell so nothing actually trades they just flash bids and offers back and forth towards each other at the speed of light. As if to try and trade but cancel those orders before they can be filled.

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