Analysts, IFO’s favorite whipping boys, are saying market indexes plunged today because, “Commodities were largely driven by the events taking place in Greece today and the resulting euro weakness and dollar strength. Reports that the Greek PM would step down, in order to make way for a unity government, sent ripples through the markets, blah, blah, blah…”
But IFO thinks there’s another reason. For several months some of the more arcane commentators have been warning that China was heading for a bubble and subsequent collapse, just like the one we had in the US in housing. IFO thinks the big boys may be quietly dumping their Chinese stocks right now.
Today, Mish had a strong post on this.
Quoting from the WSJ, Wave of Unrest Rocks China, and a knowledgable colleague, he notes increasing protests in China, then adds a link to: The big fraud in Chinese stocks by Jim Jubak. In this article, Jubak analyses the coming collapse of a Chinese company known as Longtop.
Trading in Longtop “was halted in the stock on May 17,” Jubak said. “And it gets worse. Since March, more than two dozen companies based in China have disclosed auditor resignations or accounting problems,…”
Recall that, to this day, financial advisors (IFO’s other favorite whipping boys) strongly suggest that you “diversify” your investments and invest in emerging market stocks and other international stocks. Again, we say do your own due diligence. Don’t rely on anybody’s expertise. Remember that morality and accountability counts.
Kick the tires. Look at websites; go to headquarters and annual meetings, if possible; sample the products, scope out the places where the products are sold. Sure, look at SEC filings, but don’t even trust those all the way. If you see something you don’t like in an SEC filing, just drop the company on the spot.