Market Turbulence – What’s going on in 2011 and what’s going to be in 2012?

Let’s first take a look at the U.S. S&P500 performance, there are three dramatic plunges after July and then it picked up quickly to similar level in the last year 2010.
Then take a look at the Chinese market by looking into the Shanghai and Shenzhen Index performance.

Even though Chinese economy still seems stellar (8.5% GDP increase in last year) among the pessimistic economies in the whole world, the stock market performance is very disappointing. There are lots of issues in China:

Growing cost of raw materials, rocking labor cost, serious inflation, and low demand from foreign countries like the U.S. and Euro zone put many small manufacturers in China to a devastated situation, what’s more, these business badly needing liquid capitalization market to help survive or develop do not have any access to the bank loan. The Chinese Central Bank printed lots of money (4 trillion CNY) went to big banks, who then lent to real estate projects that are involved by almost every large enterprise in China. People are speculating crazily on real estate, pushing the price higher and higher. Local government always has close relationship with state-owned banks, forming collaboration groups to deprive farmers of their lands and then sell high to real estate developer. Lots of low-quality, unwell-designed buildings were constructed in short time, and then scraped and start over again… repetitive construction wasted resources and destroyed the environment, while at the same time, displayed a fake growing GDP result. The outcome is that a few people who are in better social status like being high level office or business people grasped huge money, putting most normal Chinese people into poverty.

This is not a sustainable economy growing pattern.

I concerned about the current situation in China. However, I am still very optimistic about the future of China in the long term. The reasons are as the following:

First, the Chinese communist party is very powerful and capable to interrupt the economy successfully, which has been testified several times. As long as the dictator-like Communist party maintains the peace and stableness of this huge-population country, the hard-working Chinese people will keep working diligently, creating value for not only ourselves, but to the whole world.

Second, nobody can inhibit the trend of globalization by internet and powerful, immense social media. Chinese people emphasize good education to our children and encourage hard-working as important merits. Such a group of people will invade into every corner of the world, grabbing fortune from those that are less intelligent and lazy in the U.S. Europe…at the same time, these elite Chinese offspring won’t forget to make our own country to be more rich and powerful too.

The future would be very different. As a Chinese, I only can work and study hard to get myself well prepared for any good investing opportunity and contribute myself when time comes.

Never forget, fortune is in the brain not other places, economy is built up on confidence not on other.

European market by seeing the STOXX performance:

Hongkong market by looking into Hangseng index:

The U.S. government mainly did one thing: printing money which might lead to inflation, however, after the 2008 financial crisis, economy went through a painful unleveraged period, which might lead to deflation. The two mixing power prevent the U.S. from double-dip.

Euro Issues

Euro’s sovereign debt issue caused by Greece, Spain and Portuguese, but affected the whole Euro economy, particularly to Germany. I don’t quite understand why Euro can’t abandon those lazy components like Greece to maintain the health of the whole Euro body?!

India BSE

Chinese Currency CNY stably went down from 6.8 to 6.3 now.

Japanese currency is also going up:

Euro currency appreciated in the beginning period of last year, then entered into a fluctuation period because of uncertainty about the Euro Debt issue, starting from September, 2011, it was almost steadily depreciate relative to dollars.

Price of gold in all the history, in last 10 years, and in last one year. I can see the price of gold hit the once hit the peak to more than $500 per ounce in 1980, then entered into low stage for almost 20 years. One reason behind is that in 1980, the productivity of gold increased because of supply-demand conflict. Now the productivity of gold picked up again, accompanying with which, the status of dollar strengthened again, so currently the response from the market is that price of gold and silver both started to drop down.

 

Price of silver in all the history, in last 10 years and in the last one year:

 

Dollars’s weak situation has be recovered because the serious European issue, making the risk-aversion investors incline to transfer their assets into dollars instead of holding Euro.

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