2015-08-26

'We May See A Lot Of Dead Unicorns' (video), China, and the Fed

"You only find out who is swimming naked when the tide goes out"--Warren Buffett
UPDATE August 26, 2015:  The Emperor Wears No Clothes--China stocks fall again despite interest rate cut--
"Chinese equities have lost half their value since mid-June, as margin traders closed out bullish bets and concern deepened that valuations are unjustified by the weak economic outlook ... “The prevailing sentiment is still that investors want to cash out, whatever the government does,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “Confidence is already damaged. Doubts over the effectiveness of policies are getting bigger. The market will remain under selling pressure for a while.” The People’s Bank of China said it will cut the one-year lending rate by 25 basis points to 4.6 percent and lower the required reserve ratio by 50 basis points for all banks. The move, which follows the biggest devaluation of the yuan in two decades earlier this month, comes amid signs of decelerating growth for the world’s second-biggest economy. A rate cut failed to boost the market for a second straight time as stocks ended lower after the last reduction in June." source: Bloomberg Business (emphasis added)

Unicorns, China, and the Fed--Where do we go from here?

Unicorns: Marc Benioff says "We may see a lot of dead unicorns."--Unicorns May Struggle in Tougher Market--Salesforce.com CEO Marc Benioff discusses the selloff in the stock market and his concerns about technology and Web-based companies that have raised money at valuations exceeding $1 billion, called unicorns. He speaks with Bloomberg's Emily Chang, August 24, 2015, in the video above.

China: The Shanghai Composite Index has lost 22 percent in four days--steepest retreat since 1996--to 2,964.967 on Tuesday. DeMark Says Chinese Stocks Are at Make-or-Break Inflection Point - Bloomberg Business: "Tom DeMark, who predicted this month’s selloff in Chinese stocks, said the Shanghai Composite Index may extend its decline by 13 percent should it stay below a critical technical level on Wednesday. A failure to close above 3,200, or almost 8 percent higher than the Tuesday’s level, may open the way for a move to 2,590, which would be the lowest since November, according to DeMark, founder of DeMark Analytics. An advance above that level, however, would signal the stock rout which has wiped out more than $4 trillion in market value, may be over, he said. “We are teetering on the edge,” DeMark, 68, who has spent more than 40 years developing indicators to identify market turning points, said by phone from Scottsdale, Arizona." 

The Fed: China may be the "bunker buster" to the US Federal Reserve's plans to raise interest rates in September. Citi: The Fed Will Still Hike in September, But There's One Big Wild Card Ahead - Bloomberg Business: "Fed Vice Chair Stanley Fischer's appearance at the forthcoming Jackson Hole economic policy symposium [Aug. 27-29, 2015] is the 'key wild card' ... If he shows signs of worrying that the transitory downward pressures (commodity and energy prices and the appreciating dollar) ... THAT would be a big event ... [suggesting] reduced confidence in reaching the Fed inflation target in the medium term."



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