We had a very interesting piece of information cross our desk the other day.
The folks who run our fine publishing institution sent it down with a few shaddies of chilled escargot and some iced Dom just before the week closed out, adding that we’d better have peek at it before heading off to the links for our weekly round of hookers and beer.
‘Hookers’, of course, because we can’t drive the damn ball more than 100 yards without it swerving like a Gamakatsu Octopus rig.
The Dance of the Eight-Legged Mandarin Sea Monster
The bit of news that was passed along can be found here, and for those in need of a quick synopsis, it goes like this –
Chinese authorities have over the last few weeks essentially curbed all speculation on the Chinese market by shutting down trade in stock-related futures.
And it was no small accomplishment. The Chinese futures markets are the two largest such bourses on the planet. Via a raise in margin requirements, initiating select investigations into short sellers and by tightening position limits, the People’s Republic has without any pomp or ceremony summarily reduced trading volumes on both exchanges by 99%.
Essentially, we’re witnessing the truth of the Chinese market and the lengths to which that government will travel to ensure that nothing bad ever happens there – ever!
And for those who think us cynical – who genuinely believe in the capitalist nature of the so-called Chinese ‘capitalist revolution’ – consider the following –
Last week, the Communist Party of China also decreed that next month’s economic data will be favorable. That’s right. And they issued instructions to media outlets to say as much. This was part of their dispatch (as quoted in the Financial Times of London):
“The focus for the month of September will be strengthening economic propaganda and . . . promoting the discourse on China’s bright economic
future and the superiority of China’s system…”
The country’s official Xinhua News Agency also recently posted notices to staff regarding the need to “stabilise expectations and inspire confidence…please plan related reporting”.
Chinese authorities went so far as to jail one reporter who didn’t follow the party line and had him confess to causing ‘panic and disorder’ in markets over the summer.
The Shanghai index lost 40% of its value between April and July.
You see the power one loose-cannon reporter can have in that country?
So, after essentially chilling the media establishment and futures market in a matter of weeks, the Chinese authorities are now ready to re-goose their market with sunny reportage and a fresh dose of soma-stimulus.
And will they succeed?
Oh, yes, friends, succeed indeed, they will. Because the People’s Republic is prepared to steal, lie, threaten, coerce, stimulate, incarcerate and kill the entire planet for the good of mankind. And everyone knows that a rising stock market is an essential aspect of that good.
America is China is America
Don’t get smug, brother. And don’t you think for one martian-rectal-probe minute that here in the U.S. things are any different. Our markets have never been more rigged than they are today, via the tweaking and outright interventions of central bankers, policy-makers and their bureaucratic henchmen. And it’s a trend that will not change until all confidence in the game and its rules have been abandoned. And that may not come for a while.
In the meantime, expect the NYSE to move any direction but straight down. Too many people are still far too invested in the current nonsense for authorities to let that happen.
Before we issue a trade…
The foregoing information should be kept close to your hearts, friends. The way we figure, the system is locked in place for one more year minimum. That is, we foresee the establishment doing absolutely everything it can until at least September, 2016 to ensure
against any sort of market calamity. After that things will get interesting. We’ll explain our reasoning in upcoming letters, and, of course, we’ll set our trades accordingly.
But before we get to this week’s offering, we want to backtrack a bit and remind you all that year-end is fast approaching, and with just over one quarter of trading remaining, we’re issuing our annual call for predictions on indexes, asset classes, individual stocks, bitcoins, presidential candidates, college football kings and whatever-the-hell-else you decide to throw in the bag.
We missed requesting your numbers during our hiatus back in July, so now’s your chance. Step up to the plate, and let us have it.
And while we’re at it, here are a few of our own –
Considering this latest mess in equities we’re going to rein in our targets and suggest that there will be a bull move into year’s end, but that it will barely regain the former highs. Look for the Dow to break again above 18,000, but not by much.
Precious metals are the tundra of the investment world today – barren, cold and uninviting. That should continue. GLD at 95 by New Year’s Day.
Likewise for the silly little sister, with less chilly results. Silver at $12.85.
The poster child of this steroidal market will lead the forces of bull-whackedness higher and strike $108 as the clock strikes twelve.
Oil’s a tough call, and the truth is we have very little sense of what might happen. So we’ll just say nothing. Oil at $50 when Auld Lang Syne is sung.
Dollar’s a buy. Look at DXY 100 going into the New Year.
Irrelevant. Barack Obama will be the President of the United States going into 2017 and beyond. You heard it here first. We’ll explain shortly. Stay tuned.
This Week’s Trade
We’re looking at the Far East again with another China trade, precisely because we love the elevated volatility in the options there.
Have a look at the iShares China Large-Cap ETF (NYSE:FXI) for the last six months —
We have a market on ice, moving sideways on thin volume because the ‘People’ have spoken. There will be no retest of the lows.
Wall Street Elite recommends you consider the sale of three (3) FXI October 35 PUTs, now trading at $0.60 for a total credit of $1.80.
With kind regards,
Hugh L. O’Haynew