Monday, January 18, 2016

The Impact Of China’s Slower Growth On Global Financial Assets

The Impact Of China’s Slower Growth On Global Financial Assets
Connecting The Dots

Many current market pundits claim that the present reaction to slower Chinese Growth is overblown because there are minimal direct connections between the Chinese Financial System and the Triad [North America, Europe, and Japan] since Chinese banks lend almost exclusively to Chinese firms. Further there is minimal exposure by US firms or banks with the at-risk State-owned Chinese enterprises. Therefore as long as US growth remains steady US markets will be OK.

From their perspective the dramatic recent drops in the US, Japanese and European stock markets in concert with the sharp drop in Chinese markets as well as in oil prices is empathetic and not substantive except in the rare situation such as Yahoo due to their large ownership in Alibaba, the Chinese Amazon. If one accepts this viewpoint US, European and Japanese investors should look at the recent drops as only market corrections and not as something systemic that could impact the global financial system and portfolio values longer-term. 

However, accepting this facile explanation at face value would be a mistake similar to accepting Wall Street’s view that the sub-prime market crisis was manageable because over the long-term US housing prices tended to rise.

Saturday, January 2, 2016

The Enduring Relevance of “Manias, Panics, and Crashes”

Dear Bubblers, 

The following Preview of The New Edition of the KAM Paradigm should be illuminating for all of us. 

Best, Bill Rapp

The Enduring Relevance of Manias, Panics, and Crashes

The seventh edition of Manias, Panics, and Crashes has recently been published by Palgrave Macmillan. Charles Kindleberger of MIT wrote the first edition, which appeared in 1978, and followed it with three more editions. Robert Aliber of the Booth School of Business at the University of Chicago took over the editing and rewriting of the fifth edition, which came out in 2005. (Aliber is also the author of another well-known book on international finance, The New International Money Game.) The continuing popularity of Manias, Panics and Crashes shows that financial crises continue to be a matter of widespread concern.