Category Archives: markets

The PRC’s Markets

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Beijing thought they could “rescue” the PRC’s stock market. Recall that those markets had tanked collapsed last month, with no bottom in sight. Then the government stepped in:

There is the buying program financed by the central bank. A state pension fund has gone into equities for the first time. Beijing mandated that anyone holding 5% of a company can’t sell for six months. And brokerage firms, directed by regulators, are sitting on a boatload of shares as inventory, notes Erwin Sanft of Macquarie.

There’s also the government rule that stocks aren’t allowed to fall more than 10% in a day—at that threshold, trading in the stock must halt. This, of course, only adds sell-off pressure to the next day…. There are additional overt government interferences, but you get the idea. Associated with this, the markets stopped falling and rose quite a bit. And there’s the PRC buying for its government accounts shares of Chinese blue chip companies, ostensibly to prop up those share prices.

Monday, all that propping up came to a screeching halt. Those markets fell, in that single day, 8.5%, and the representative indices stand at just 5% above the pre-intervention low of three weeks ago.

All of that fall represents investors—at least the ordinary citizenry and those investors not directly under government control—leaving the PRC’s markets. At this pace, the only players left will be the government and its agencies and government run “private” institutions. And the government’s blue chip stock holdings.

That’s a centrally planned economy by another name.

Democrats and Regulation

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Uber is successful in competing with the established taxi industry, and New York City Mayer Bill de Blasio (D) is all upset about it. He wants to freeze Uber’s (and other ad hoc rides-for-hire companies’) growth until he can figure out how to regulate them:

[W]e support a short pause in the rapid increase of for-hire vehicles to make sure that the future growth of this industry lives up to the policies and principles we set out as a city.

“Short pause.” Sure. He supported his argument in that piece by citing other jurisdictions where Uber had resisted…being over-regulated.

Hillary Clinton is his BFF on this:

while the “gig economy” may be “exciting” and “unleashing innovation,” “it is also raising hard questions about workplace protections and what a good job will look like in the future.”

Because. Just because. It exists; it has to be regulated.

Democrats abhor anything that’s not under their regulation, not under their control. Americans just are too stupid to see to their own affairs without Know Betters instructing us. And our Know Betters are the only ones qualified to define “what a good job will look like in the future.”

Update: de Blasio seems to have recognized the error of his ways. For now.  Clinton has not.

Artificial Demand

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Nearly two weeks ago, with Chinese stocks tumbling, Beijing let loose its strongest effort yet to boost the market, including extracting a pledge from 21 brokers to buy shares as long as the Shanghai Composite Index was below 4500.

With its push, the government halted the plunge and engineered a modest rebound.

What happens when that artificial demand goes away? Or its effects peter out?

Hmm….

Another Misunderstanding

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Paul De Grauwe, John Paulson Professor in European Political Economy at the London School of Economics and Political Science, was quoted in Thursday’s Wall Street Journal as saying

They in fact triggered the banking crisis. They’ve failed in their duty to ensure financial stability.

De Grauwe was asserting that the ECB’s decision to not increase the amount the central bank already had loaned to Greek banks for liquidity purposes was a mistake.

This criticism is nonsense. The ECB triggered no crisis; the Greek crisis already was in full swing, and had been for a number of years and two bailouts wasted by Greek profligacy. The ECB simply said, rightly, that enough was enough. Far from “ensuring financial stability,” the ECB protected their constituent members by ceasing to pour more of their money into a bottomless dry well. Financial stability was, and is, solely in Greek hands to achieve.

OPM is not methadone for the addicted. It’s a hand up for those trying to recover from bad luck and those willing to learn from their mistakes and do better.

Regulatory Control and the Left

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The Treasury Secretary’s Lawyer (who else?), Antonio Weiss, has a piece on The Wall Street Journal defending the Regulatory State’s control over our financial markets.

He opened it with a strawman.

Some say regulation has killed it, and the answer is to roll back financial reform.

A carefully unnamed “some” in his strawman. He’ll have to play with his dolly without this writer. There is, too, his false assumption in that claim: rolling back financial reform assumes there’s been reform to roll back. There certainly has been a potful of added regulation to our financial markets, all spurred by the Democrats’ Dodd-Frank bill. The bill that created a wholly unaccountable—not even through Congress’ control of purse strings—panel, the CFPB, that decides how financial institutions must behave, even to the point of deciding what business counts as a financial institution that must accept the panel’s decrees.

There’s no reform there. Only the deformation of our free market economy.

And there’s this bit:

The marketplace is rapidly evolving. We must address future challenges without rekindling crises of the past.

Because, gotta have a regulation. After all,

However, market participants report difficulty in executing large orders across various asset classes. And there are concerns over whether the growing ownership of corporate bonds by mutual funds could overwhelm market capacity if there were a sudden wave of redemptions. Moreover, the “flash rally” last Oct 15 in US Treasurys, our deepest and most liquid market, saw yields drop dramatically and snap back within minutes, with no clear catalyst.

Can’t let a free market, a market uncontrolled by Know Betters, find its own solutions to the market niche of asset-class-spanning orders, a niche that couldn’t exist before technology (with the Know Betters have demonstrated they have no capability of managing—see the IRS’ computer “upgrade,” or the security of American’s personal records in the not-so-safekeeping of the OPM) made such a thing possible, much less useful. Can’t let those evil mutual funds—Big Wall Street Business, don’t you know—manage their own finances. No, our Know Betters, who have shown they can’t manage a government budget have to do that. Can’t have an error in software go unpunished by Know Better Regulation rather than leaving it to actual experts and businessmen whose interests lie in prompt correction of such glitches.

The Left, the party of Hillary Clinton, Barack Obama, Woodrow Wilson, and Herb Croly, just can’t conceive of Americans getting by without a Federal Regulation to tell us what to do. No matter how foolish the Left’s Regulation.