Many say that China will be to the 21st Century what the US was to the 20th. It's very possible, but with the Chinese stock market down over 70% from its highs, they are currently where the US was in late 1929. This week I had this (very pessimistic) email from a fellow investor who is investigating a very exciting renewable energy play.
Recent worldwide events seem to have hit nowhere harder than in China. The people I have been speaking to report massive redundancies. Many companies are laying off 50% of their staff. The Chinese middle class has been practically wiped out financially, as EVERYBODY was up to their eyeballs invested in stocks, often with leverage. EVERYBODY I speak to and ALL of their friends/relatives have lost ALL their savings in the recent crash of the Shanghai market. Some people are committing suicide. Taxi drivers, the good old reliable unofficial economic barometer, are constantly moaning about lack of business. This is a sign of economic downturn and is deflationary. I cannot believe that people are still talking about the Chinese economy growing albeit at a reduced rate. The Chinese economy will soon shrink.
Prices here in Shanghai for everything have been in the stratosphere: property, dining, entertainment, clothing. These will come crashing down as the middle classes, who have lost their money in the stock market, stop spending. China will be hit 10 times as hard by the coming depression than the US and Europe.
It's a very pessimistic picture. In fact he sounded both despondent and depressed. But isn't that the 'point of maximum financial opportunity'?
In short, I think we could be getting set for a tradable bounce into the spring, before Mr Bear sharpens his claws again. But, beware, attempting to trade such a bounce is not investing, but speculating – so only use money you can afford to lose.
-Sandeep Jain
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