For the first time, a mainland Chinese company has defaulted on its bonds. Shocklingly, it is a high-flier solar panel maker that trades in the US market - Suntech Power. Its stock shot up in a classic parabolic FOMO pattern (FOMO = Fear Of Missing Out), and has now fallen like a broken windmill blade below the parabolic liftoff. The irony is that Chinese solar makers have used easy credit to scale up, and throwing the solar cell market into a huge glut, crushing Western manufacturers; and now it is coming back to bite the Dragon by its own tail.
Sure, it could be a one-off, but Chnia's corporate bond market is much larger (adjusted for GDP) than the US equivalent and is highly misallocated due to easy credit and political malinvestment. While unconnected to the Euro crisis, coming so swiftly after Cyprus, it may be another harbinger that the wheels may be slowing coming off the global credit train.
Stay long stocks guys.
Dow Jones headed for 18,000
Posted by: M. McCarter | Wednesday, March 20, 2013 at 11:20 AM
Everyone needs to check out the current Rydex Nova/Ursa ratio.
Indexes are at record high yet this ratio is saying no one believes this rally. We are in a classic wall of worry virtually guaranteeing we are going MUCH higher from here.
Even Prechter cant be dumb enough to ignore what the off the charts bullish Nova/Ursa ratio is saying here, or can he?
Posted by: M. McCarter | Wednesday, March 20, 2013 at 11:28 AM
Sentiment was pretty bearish in 2007, but we crashed anyway
Posted by: TERA_BAAP | Wednesday, March 20, 2013 at 07:30 PM
Not true.
Posted by: M. McCarter | Thursday, March 21, 2013 at 09:05 AM