More Silly Stockmarket Pundits.
Quoting from the FT,
“China’s stock market, one of the world’s best-performing bourses, plunged nearly 9 percent on Tuesday as profit-taking by local funds snowballed before a parliament session beginning next week.
The market’s biggest drop in a decade did not appear to be triggered by concrete news, traders said. But institutions scrambled to lock in large gains made early this month, and some funds sold to raise money to pay dividends in March.
The tumble, which came a day after the main index jumped to an all-time high, bringing its gains for this year to 14 percent after a 130 percent rise last year, suggested investors had become extremely jittery with many shares so highly valued.
“This kind of terrifying fall means the market has become abnormal,” said analyst Chen Huiqin at Huatai Securities, adding that shares could take a while to stabilise even if negative rumours proved false.”
Lessons:
1. Market “professionals” have as much idea of what is about to happen as you or I do, in the short term.
2. “Shit just happens.” This is probably the thing about the stockmarket that most people find hardest to accept. Nassim Taleb’s book, “Fooled by Randomness” (US
3. People are batshit crazy. Case in point: A 130% rise in the Chinese stockmarket was so ‘normal’ that it was hardly worth commenting on last year. On the other hand, a mere 8% fall gets widespread media coverage spouting this kind of language:
“This kind of terrifying fall means the market has become abnormal” (Chen Huiqin, Huatai Securities)
Get a grip, Mr Huiqin. 8% is small beans. Your market was abnormal months ago, perhaps even years ago, and you apparently didn’t notice then, so you’re hardly likely to be any better at abnormality-spotting now. And besides, look at famous US crashes - 30-50% drops. That’s more like what I’d call a terrifying fall for anyone relying on the market value of their assets. 8% is merely an exhilerating ride on a harmless rollercoaster.
Mu.
Posted: February 28th, 2007 under Finance & Economics.
Related articles
- Comments and Pessimism (January 3rd, 2009)
- Response to Obblogatory… (January 2nd, 2009)
- Taiwan’s economy… (December 7th, 2008)
- Economy, Property, Freedom, Weather (November 29th, 2008)
- China Post struggles against reality. (November 23rd, 2008)