Thursday, July 09, 2015

When is a market not a market?

The stock market in China is experiencing wild swings.  In recent weeks its stocks have gone down a lot.  A lot of people, including the government, are panicking.  In reality, the stocks are generally still higher than a year ago.  When the stocks were doubling in value, nobody complained.  Yet when the stocks simply return to what they were worth a few months ago, people demand that the government step in to keep the stocks rising.  

Amazingly, the government does.  Now you are not allowed to sell.  Only to buy.  And more than half of the stocks have even been taken away from the market so no one can buy or sell them.  

People have always been saying that trading stocks in China is like betting in a casino.  In a casino, you know that the odds are against you.  However, the odds are up front for all to see.  And you know the rules when you place the bets.  In the Chinese stock market, the rules can and do change after you place your bets.  That is the really scary part.  

It is amazing that some people still ask us to trust in China’s laws.  

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