Chinese Shares Go Atomic – A Nation on the Pills (FXI)

We admit it – we had our concerns.

We weren’t totally sure if it was worthwhile saying anything. We didn’t want to offend anyone’s sensibilities. That’s all.

But… the time has come. One can remain silent for only so long. When there’s a problem of this nature and this magnitude, it’s in everyone’s interest to be aware.

We’re talking about China.

We can’t be sure, but it looks an awful lot like that entire nation just started popping amphetamines.

One look at the FXI chart and you’ll also be wondering – what sort of narcotic-popping investor set produces a paste-up that looks like this?!

NYSE-FXI-CHART

Everyone was getting along so nicely, minding their own business, when all of the sudden Sugar Man stumbled into downtown Shanghai and started getting everyone sweetened up.

The market and FXI got high by some 25% in a month (in blue), and if it wasn’t for a Relative Strength Index reading close to 90 late last week (red circle), we’d have thunk this baby was on her way to an overdose.

As it is, we’ll likely get some sideways to lower action for the next few weeks at least as the drying out begins. But the lift is not over here – not by a longshot.

SEARCHING-FOR-SUGARMAN

What drove the Chinese market higher is a fascinating subject unto itself, and if we had a full day to trip it out with you, we might give it a whirl.

Alas, we don’t, so a quick breakdown of the amphetaminic reality follows here –

First, there are causes that explain the most recent surge in Chinese shares, most pointedly a loosening of the rules that allow Hong Kong brokerages and mutual funds to directly access shares in Shanghai and Shenzhen.

Others stress the country’s trust firms, who’ve migrated en masse toward equity investments after recently instituted regulations on lending to smaller companies and individuals proved too onerous.

But what is FXI reality… ?

But we look elsewhere to get our ‘reality bearings’, and they inform us as follows –

  1. Let’s not be fooled – this is plainly the work of the authorities in Beijing, whose grip on the economy and desire to ‘create wealth’ (as if this could actually be done) are as misguided as any enlightened and progressive economist’s from the west.

  1. The ungodly wave of liquidity that they (and other) central planners unleashed into the global financial system over the last decade is now simply finding its way, salmon-like, back to its ancestral home – and into the hands of those same financiers who originally designed the strategy and set the footings for unlimited quantities of money to pump their respective stock markets higher.

  1. The margin opportunity that has been afforded to Chinese investors, that allows them to leverage their purchases in the most ribald manner is now producing this strange ‘fruit’, as the chart below demonstrates.

MARGINAL-RETURNS

BNP Paribas indicates that a full 20% of all turnover on the Chinese equity market is margin-driven. Estimates are that the total value of all margin purchases still on the books from last summer is in the vicinity of RMB 1 trillion – or roughly 1% of China’s GDP!

  1. And to cap it off, investors are no longer restricted to just a single trading account for accessing China’s A-share market. They’re allowed to have up to 20! And that, too, is shocking.

It’s also part of the plan. Because central bankers east and west understand perfectly well that a soaring stock market is the causa optima for consumers to get out there and spend their money in a feel-good manner. And that’s what keeps the engine running, right?

Coming Soon to a Theater Near You!

We bring you all of the above to indicate that China is a buy – though we’d certainly wait until the most recent fever wore off a little.  But we also point it out to inform you that this is the shape of things to come the world over.

The economic life of the planet is cooling – as it does at least once every century. The Kondratieff Wave Theory long ago expounded upon this. And as that becomes clear to elites, they have but one method of both retaining their positions and making one last grab for wealth and security – and that is via the stock market.

So it stands to reason that their efforts to juice the market higher are founded upon a fear that any upset in the economic status quo could very quickly lead to anarchy… a political state that puts everything they currently possess into jeopardy.

And anyone who doubts the conscious, meticulous preparations now being made by the world’s super-rich to protect themselves should have a look here, here, here or here. All four articles detail the private hideaways now being procured by the elite in remote corners of the earth, each outfitted with elaborate security systems and stockpiled with necessities to endure the coming ‘revolution’.

What do we simple folk do?

In the meantime, our goal is to be along the ride with them in their quest for wealth and security for as long as the game is viable.

We also plan to exit with our winnings before the music stops.

And until that day arrives, we advise all our millions of monthly readers to stay tuned to Normandy for the absolute best and up-to-date money-making ideas on the internet. And keep abreast of the best ‘survival’ ideas, too – right here! – all the way through the revolution.

And now, how to trade FXI’s bubble!

The big winner when the U.S. market turns to pills and starts to mimic China’s latest moves will be the financials. And we’re therefore aiming our guns at this speculative short term CALL purchase…

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We’re looking at the ultra leveraged Direxion Daily Financial Bull 3x Shares ETF (NYSE:FAS). We like the October expiry.

Wall Street Elite recommends you consider a speculative purchase of the FAS October 150 CALL, now selling for $5.00 even.

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We’re looking at the ultra leveraged Direxion Daily Financial Bull 3x Shares ETF (NYSE:FAS). We like the October expiry.

Wall Street Elite recommends you consider a speculative purchase of the FAS October 150 CALL, now selling for $5.00 even.

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With kind regards,

Hugh L. O’Haynew

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