Time To Pull Out The Nasdaq/China Comparison Chart Again

Last August, following the recent Chinese market rout, Deutsche's Jim Reid showed a chart he used for the first time in early June comparing the Shanghai Composite recent performance with that of the NASDAQ back in 1999-2000.

As he said back then, "the ascent was very similar back in June and now the decline is pretty much on exactly the same path. So the NASDAQ '99-00 has almost been like having a stock almanac for the recent Chinese experience. It reminds me of Back to the future II where Biff steals the time machine to take a sports almanac back to his younger self in order to make millions betting on these events. A great film. Although having only watched it recently again, I was amused to note it largely takes place in 2015 and everyone has flying cars. So perhaps the pace of technical change is not as great as was anticipated back in the eighties!"

In any event, if the correlation to Nasdaq 2000 was any indication, the Chinese market was due for a modest rebound, and that is precisely what happened.

Fast forward to today, when Reid did another update of the Nasdaq 1999-2001 vs Shanghai 2014-2015 chart. Here is what he says:

The similarities continue. Both saw an initial sharp 2-3 month fall from their peaks followed by a quarter or so of stability. The NASDAQ then started to fall sharply again and Chinese equities seem to have started a similar trend on a similar timeline. While it's hard to read too much into such a chart's predictive power, it's a reminder that when bubbles pop they can pop hard and carry on falling for some time. Both Oil and Chinese equities are currently victims of such a trend.

Now if only we could find the right historical analog for the Nasdaq 2009-2016 chart, which is increasingly starting to look like the China 2014-2015 chart...

Comments

[Squid Viscous]

Time to pull out, is about right

[BlueStreet]

PPT is failing miserably with only minutes to go. 

[Banker Buster]

They shouldn't be in the market in the first place.

[Sorry_about_Dresden]

Kevin Henry sailed for Monaco on 12.31.2015.

[Sages wife]

Inconceivable.

[Mr. Universe]

Ha ha! You fool! You fell victim to one of the classic blunders - The most famous of which is "never get involved in a  economic war in Asia"

[Ham-bone]

Advising if one simply has a long enough horizon, a positive result is nearly inevitable seems well founded historically but funny thing is, the factors that enabled that have entirely reversed. Over the past 5 decades, here's what happened...

-Interest rates (FFR) fell 99.9%
-Global debt increased by 4500+% (based on the fall in interest rates above)
-Birthrates and population growth peaked and has collapsed in advanced and even most developing nations (these are also known as new consumers) and been replaced by population growth almost entirely in Africa (with little to no income, savings, and/or access to credit).

Population and it's growth is the denominator by which factors of consumption are multiplied. So, as population growth is slowing (outright declining in many nations and younger segments of nations worldwide), it's working population and income growth slowing, it's savings falling, and access and utilization of credit constricted...then the present and future has no resemblance to the past 5 decades.
http://bit.ly/1mS9NYs

It was China that saved the world from global depression in '08-'09 til now by quadrupling their credit / debt ($7 T to $28 T...this was 40% of all global credit over this period compared to 10% created by US over same time) and building 50-100 million excess apartments, ghost cities, 50% of all new global retail sq/ft, represented 55% of all global oil consumption growth (likewise for copper, steel, etc. etc). 

These are entirely unrepeatable, one offs.  Are there any more one offs or rabbits to be pulled from the hat???  No one knows the future but there are no visible sources for new credit but governments printing and spending...

Money must go somewhere and markets / assets may appreciate but suggesting the same / similar drivers are in place for the next year, 5, or 50 is just not valid.

[jakesdad]

mostly agree but population has to peak at some point in our (I'm mid 40s) lifetime if for no other reason than water/energy/food constraints.  no doubt that has significant economic implication (kind of hard to overstate) but that's always been a "when" question.

I was thinking about this the other night:  in all of human history people alive today (or at least ones who make it a few more decades) are going to see peak human population!  that's got some seriously profound implication all over the board.

[Ham-bone]

Global population growth (yoy) peaked in 1988 at 93 million a year and has fallen to 80 million/yr as of 2016.

http://econimica.blogspot.com/2016/01/sources-of-growth-examined-and-found.html

But that totally misses what is really happening..

consider the global population of 0-5yr/olds has been flat since 1990...this means all population "growth" has simply been those alive living far longer than their predecessors, hardly any increase to the young population foot print over the past 26 years (and what tiny growth there is is all due to sub saharan Africa - in fact, if you exclude Africa, population of young is collapsing...aka depopulation or what economists and CB's prefer to call deflation).

http://econimica.blogspot.com/2016/01/populations-of-young-are-declining.html

Population growth has ended and been replaced by population longevity...different

[lifetide]

My new mission (and coming website) is: "A Mission of 4's" .. a 40% reduction of the world's human populations to 4 billion in 400 years. It's necessary and doable. That would be a reduction of only 320,000 each year here at home in the US .. which is only 1/10 of the current immigration quota of 3,000,000 that we allow in each year. But, if we limited immigration to only 2,000,000 per year.. we would maintain current 2015 population equilibrium. A limit of 1,000,000 new immigrants would allow by reproduction rate demographics to regress back to the 1970 population of 200 million and way ahead of schedule in only 65 years. US population in my birth year 1945 was only 142 million (1/2 of today's) and a much less environmentally stressed, more socially manageable, financially prosperous, and a more beautiful and peaceful place for all concerned. So, for the moment it's Lifetide against the corrupt Chamber of Commerce and the diversity crowd. Want in?

[Goldbugger]

Time to PUll OUT Period....

[Sorry_about_Dresden]

Pull out!!!!!

I haven't busted my nut yet!

Shouldn't done all that blow! 

Now this is really funny spoof on Obama last night. It is the funniest thing I have ever seen!

https://www.facebook.com/gregorybrothers/videos/10153884847629284/

I want down arrows bithz! Bring it on!

[Yen Cross]

 I think it's okay for the Deer and Donkey Kong jokes.

 We got NOTHING!

[besnook]

this time is different.

[One-Eyed-Thong]

i heard it was bush's fault

[Janet Shalom Be...]

Same as it ever was, and will be.  Let it be written, let it be done.   Janet "Pontius Pilate" Yellen

[ozziindaus]

hang on there. I thought China was supposed to be eating our lunch by now.

[RagnarDanneskjold]

The analog is tradable. It signaled December as the time to sell. Sho nuff. 

Analog Holds: Shanghai and Shenzhen Suspend Trading, Yuan Slides From current levels, it's still likely to fall another 40% or so over the next 120 trading days, give or take. ChiNext Falls, Shanghai Comp Gives Up Key 3000 Level

[TheDanimal]

Oil is coming back, otherwise people wouldn't fight so viciously for control over it.

[kelley805]

Here are some signs of a coming recession.

1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.

http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell

2. Factory orders continue to drop

http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row

3. Default risk spikes

http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high

4.  M&A set record

http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/  

5. Iron ore prices tumble

http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30

6. Baltic dry shipping index tumbles

http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19

Here is how to prepare.

http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/

Here is how to get your mind off this stuff.

http://michaelekelley.com/category/humor/

Good luck!