I do not expect many people to learn a lesson from what happened today in Hong Kong’s stock market. While the hype fades in this corner of the market, it will surely resurface in another corner. Perhaps in the US, where fraudulent trading has been running wild in the past years with authorities not interested in taking any action because a raging bull market is all politicians have left to justify “the economy is strong”.
What happened in the Hong Kong market today was an end written since the very beginning:
- 25th July: CHINA HAS BEEN THE FIRST ONE TO ABANDON THE QE ABERRATION, WHO IS GOING TO BE NEXT?
- 2nd September: THE TWO KEY PRINCIPLES UPON WHICH CHINA IS REBOOTING ITS ECONOMY (AND THAT THE WEST DOESN’T UNDERSTAND)
- 25th September: A BIG BANK IS ON LIFE SUPPORT, CHINA KNOWS IT AND IS PREPARING TO WITHSTAND THE SHOCK – IS THIS BULLISH?
- 2nd October: AT THIS RATE CHINESE STOCKS WILL HIT ALL TIME HIGHS IN 3 WEEKS – WHAT’S REALLY HAPPENING THERE?
However, stocks kept going up; that is all that mattered, with nobody caring WHY they were going up that much that fast. So I was wrong while everyone else was right. This is how it is nowadays until things break and those who did not get out on time are left holding the bag. Are all those people who enticed crowds of gullible investors to jump headfirst and blindfolded into a market they had no clue about going to take any responsibility? Of course not, they will be moving on, hyping the next “trade”, and in a society with strong attention and memory issues, they will carry on doing what they are doing.
A while ago, I wrote a provocative article to highlight how insane things were becoming (THE SEC IS NOW THE GATEKEEPER OF AN ASYLUM WITH A NUCLEAR REACTOR AT ITS CENTER), but personally, I would have never expected they could worsen even more. Take what happened with SMCI yesterday as an example:
- Shortly after the market opened, the company issues this press release: Supermicro Solidifies Position as a Leader in Complete Rack Scale Liquid Cooling Solutions — Currently Shipping Over 100,000 GPUs Per Quarter
- Algorithms, which love this sort of stuff, quickly started to build long positions into the stock that ended up closing up 16% for the day.
In a normal world where people still use their brains to make decisions rationally, you cannot see these sorts of reactions. Why? This company not only is significantly delaying its 10-K filing until the end of November when they (hope) to submit it (the latest 8-K) but is even under DOJ investigation for fraudulent accounting already (Justice Department Probes Server Maker Super Micro Computer). Consequently, in no scenario would a rational investor believe any bullish press release issued by such a company.
However, we are living through the golden age for frauds, above and beyond what we saw in 1929, 2000, or 2008, where markets are driven by dumb algorithms, manipulative trading, and passive investors that just buy anything that goes up and sell anything that goes down. Companies clearly learned very well how to play this game, issuing timely headlines and holding back any important news that won’t put their shares under a favorable spotlight. MSM are playing ball with it rather than calling them out, acting as a megaphone on their behalf because, after all, the very same companies are those that pay for advertising and keeping the lights on in their TV studios. There are even obvious instances when MSM are complicit in market manipulation practices, but hey! This is the golden age for frauds, so do not expect the SEC to go after them.
Governments, from their side, are even throwing gasoline on the speculative euphoria, recklessly faking economic data reports to portray “everything is awesome” in the economy when it isn’t (THE PROOF THAT THE US BLS IS MAKING UP NUMBERS OUT OF THIN AIR). As the old saying goes: “Repeat a lie long enough and people will start believing that’s the truth”. This is what’s happening right now; however, people living in the real world are struggling more and more to make ends meet because of out-of-control inflation (that is far from being tamed) that is effectively a legalized pickpocketing of their hard-earned money to put it in the pockets of the 10% that holds 85% of the stocks. I truly wonder when people are going to start becoming tired of this, but, until “stimmies” keep coming, they don’t bother as much as they should so the “Financial Markets Singularity” will keep standing (FINANCIAL MARKETS REACHED A “SINGULARITY” NO ONE WANTS TO DEAL WITH).
All this is not going to end well FOR SURE, but remember life goes on, and if you are diligent, there will be opportunities in the future if you manage to put yourself in a position to take advantage of them (THE FORGOTTEN LESSON FROM EVERY CRASH SINCE 1929: BE A BUYER WHEN THERE IS NO HOPE LEFT IN MARKETS). Before that, the best thing you can do is put yourself at a safe distance from frauds because falling for them is going to certainly jeopardize your future finances when you realize that all that’s shining now isn’t gold like paper gains aren’t real money. The best way not to become a bag holder is ultimately not to hold that bag at all (in particular when you aren’t sure what’s inside it).
I would like to conclude with a big THANK YOU to all of you dear readers who have been supporting me so far in this incredible fight against frauds and the widespread financial ignorance and dishonesty permeating society nowadays.