Posted on 08/27/2015 7:07:41 AM PDT by SeekAndFind
The ongoing stock market meltdown is just the tip of the iceberg that is the dangerously precarious China economy. The back story -- the extraordinary market manipulation that has allowed the global economy to come to this potentially disastrous pass -- is what few commentators have yet spelled out.
Here are some particulars.
Most of the trillions of fiat dollars the Federal Reserve Bank has pumped into the U.S. economy as part of its Quantitative Easing (QE) strategy since 2009 have gone directly into the stock market, inflating the value of stocks to unsustainable levels. The Shiller Price/Earnings Ratio has reached ~28x -- significantly higher than the 16.6x historical average -- meaning that stocks are dangerously overvalued as their price is some 28 times higher than corporate earnings warrant.
But if 28x earnings constitutes a bubble in the U.S., how bad is the Chinese bubble? Six weeks ago, stock prices on the Shanghai index were estimated to be 70 times greater than the Last Twelve Month (LTM) earnings of the companies whose stock is traded on the exchange.
For the past quarter of a century, China’s economy has been rising to what many analysts have claimed is a level that will challenge the U.S. for the title of largest economy in the world. In fact, the Chinese economy, fueled by state-funded credit and money-printing, has enabled the size of the Chinese stock market to rise to dangerously overblown levels more than 50 times higher than they were only two decades ago.
The Chinese have created a bubble so inflated out of proportion to anything the real Chinese economy could generate that, despite what the Obama administration economic apologists want us to believe, as the Chinese economy implodes, we’re unlikely to be able to avoid a serious economic downturn ourselves.
(Excerpt) Read more at americanthinker.com ...
“Communist Stock Market” is an oxymoron.
You know when UPS has a p/e of 30 there are real problems. Nothing against UPS, but it should have a p/e under 10.
Wrong! It's 11.4x higher than the historic average. Anyone with even a little finance under their belt knows that a viable company sells for a multiple of earnings. His statement that it is 28x higher assumes a zero multiple on earnings and that is just plain wrong.
Yet Trump thinks we need government intervention to bring down the Chinese.
Aw, come on Greg...get it right. Read your own source. It says the gov't is trying to discourage short selling in the market, which is vastly different than what you're saying. Clearly you're writing on a topic you do not understand.
I’ve been to China at least two dozen times in the past 10 years... I wish I could say that this guy is all wet. But, I’m not sure. I have seen super-highways that go practically nowhere. I’ve seen forests of 24 story empty apartment buildings.. I’ve seen airports build 20X larger than they need to be.
I think, China is the biggest FRAUD in the history of the world.
Their market correction isn’t over, IMO.
That, and rat-meat + glue passed off as beef.
Nope, its 67% higher than the historical average.
I think, China is the biggest FRAUD in the history of the world.
Their market correction isn’t over, IMO.
This may all be true, but in 35 years they've gone from mucking around in fields reading Mao's little red book to building ultra-modern cities.
I have no idea what machinations are going on with their money supply, but over the past four decades the Chinese have created real wealth that is easily observable.
I have no idea if there will be a hard reset for the Chinese. But should they repudiate their debt, they will have a solid infrastructure and lots of hard assets from which to rebuild.
I'm not endorsing their fascist/capitalist system, but there is no doubt that the market-based portion of their system has generated enormous wealth.
It's Obama's fault!
28x is 1.69x of 16.6x. They’re multiples, you don’t add them.
No question, you are correct. They are FANTASTIC builders.
My point is, they have built far more than they need. I think, this is what happens when you can have central government control deciding when and where to build things. Heck, the "free market" overbuilds too... Our system is not immune to the problem. I just suspect they have over-done it by a MUCH larger factor.
That's for sure. I saw something on the telly about their ghost cities. Bizarre.
On top of this, they are VERY NEW to the concept of stock markets, and stock ownership. They are just now learning lessons that have been proven over and over in the western world.
I see them making the same kinds of speculative mistakes that we have made... just, on a GRANDER scale.
I have flown over and driven through such cities... they are very bizarre...
Let it fall, and fall and fall. Could be a good time for a revolution.
There was a thread awhile ago that said China has used more concrete in the past three(?) years than the USA used in the entire 21st century! Of course the discussion soon lead to ghost cities, new buildings falling down, etc.
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