The Punishment of Impulsion: Funds Will Become the Hand That Destroys the Market
2007/8/27 20:45:41
Last weekend, this ID said to first listen to that extremely cheesy song "The Punishment of Impulsion." So then, this recent round of market action, having developed to this point, has increasingly challenged certain bottom lines.
The current problem was already stated very clearly this afternoon — funds, leveraging their so-called legitimate status, are creating a bubble market. Exceeding GDP is entering bubble territory — this ID has already stated this repeatedly and very clearly before. So how will this bubble ultimately be burst?
Obviously, under current conditions, the bubble cannot burst on its own. The positive capital feedback loop that funds currently maintain can keep the bubble going for quite a long time without bursting.
Obviously, in China's current environment, the only thing that can burst the bubble is policy. And recently, the silence from the policy side has been extraordinarily quiet compared to the market's extraordinary moves. There are only two possible explanations: First, policy makers don't see the current market as having major problems. Second, it's the calm before the storm.
Policy is inherently unpredictable. The consecutive two days of regulatory intervention last week at least indicate that the policy side is not as optimistic as the capital side.
After the market exceeded GDP, this ID clearly stated: no more buying of any stocks — only holding — while diverting possible capital to other areas. The primary reason is that the way this bubble market bursts involves non-systematic risks that are beyond anyone's control.
Today, this ID happened to notice that some people who have been bearish since the 1000-point era are showing signs of softening their stance. This gives this ID a particularly bad feeling. When even the die-hard bears start turning bullish, risk is indeed accumulating just as all risk does.
It can be said with certainty that without policy intervention to burst it, everything will continue as the funds have planned. But impulsion will always be punished. Whether the punishment comes tomorrow, the day after, or N days from now — only heaven knows.
But if a market develops to where only punishment can bring it to a stop, it's like a car that's lost control — what will happen is anyone's guess.
Some die-hard bears turning bullish has given this ID a rather bad feeling. A single falling leaf heralds autumn — and autumn is probably not far off.