May 25, 2015
Weekly Market Outlook
By Keith Schneider
The US equities (SPY) markets continued its upward drift this week while Asian markets roared. The Chinese stock market partied on like a group of stoners oblivious to the devastating loses by two Chinese billionaires that totaled over $25 billion and over $50 billion in total market capitalization. Li Hen who was the richest man in China and controlling shareholder of Hanergy Thin Film Power group lost $14 billion when his stock plunged nearly 50% in less than one second after he failed to appear at the firm’s annual meeting. Another associated company, Goldin Financial Holdings and its sister company Goldin Properties that provided financing to Li dropped 40% just as quick. The speed of the epic rise and fall of companies controlled by “rock star” Chinese entrepreneurs certainly highlights the bizarre nature of global finance and investing in China.
Rumors are that cooked books and insider transactions by Li drove the company to be worth over $40 billion or a rise of 600% in the last 6 months. He also became a short seller last week to raise cash when the manure hit the fan. This is classic manipulation. Parabolic stock price movement up on low volume and then no buyers on the way down. This classic pattern just never works out long term. It’s a classic study of bubbles. We hope that Yellen and central bankers are taking notice as the constant low volume rise of the equities markets is a market fueled by easy money.
Meanwhile our sentiment readings are showing extreme optimism.
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