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A little groundless speculation

Over the last few months, I've noticed that a lot -- a LOT -- of the stock-touting spam I've been getting has been for Chinese companies.

Then, this week, a meltdown of the Chinese stock market triggers a "correction" of US markets.

I have absolutely no interest and very little knowledge of how such matters work, and I'd hate to make a correlation/causation error, but this seems to be a bit of a coincidence...


Comments (9)

Not likely to be related. S... (Below threshold)
Faith+1:

Not likely to be related. Spam does originate a lot from China and there seems to be a scam a week so pretty much any type of news item can be correlated to spam from China.

I would like to add (conspi... (Below threshold)
ijosha:

I would like to add (conspiracy theorist will love this) that there was a major market computer malfunction right at the time that the Chinese downturn was occuring, keeping the market in the dark for a surprising long period (was it 2 hours or so?), which some are saying is why the market over-reacted when the "lights were turned back on".

I read that 96% of all emai... (Below threshold)
Heralder:

I read that 96% of all email sent in 2006 was spam.

Capitalism is relatively ne... (Below threshold)

Capitalism is relatively new to the formerly Maoist Communist giant. No doubt a large number of unethical companies and stocks exist in China.

On the other hand when China tries to clamp down on financial scam crooks with tough sentences or even the death penalty, then China faces human rights complaints from the Western world community.

There was a hit n' runner w... (Below threshold)

There was a hit n' runner who claimed the minor correction was the harbinger of the coming recession..wonder where he is now...

Not related at all.<p... (Below threshold)

Not related at all.

The Chinese correction is the tip of the iceberg. If you thought US financial institutions were burdened by bad debt in the late '80s-early '90s, or Japanese banks were up until, well, now, just wait until you get a load of the bad commercial debt bomb waiting to explode in China!

Most of these bad loans have been made to government-or-military-owned-or-controlled companies, based on fraudulent data, and are utterly worthless. Sooner or later, the bills come due.

The Chinese market is probably due for a 50% correction based on the bogus loans alone.

The money went to officials of the Chinese government and military and/or their friends, relatives, and cronies. It's been a bank robber's holiday in China for years, and the banks are just now starting to shiver from it. An earthquake is pending.

The only real solution is regime change. That won't make the stolen funds reappear, of course, but it would help stop the bleeding, which continues apace.

It's been a bank robber'... (Below threshold)

It's been a bank robber's holiday in China for years, and the banks are just now starting to shiver from it. An earthquake is pending.

There's truth to that but it's also the case that a lot of these decrepit state-run firms employ a lot of people. The government is afraid that cleaning house of these firms will cause social dislocation and unrest.

The only real solution is regime change.

China doesn't do regime changes very well. 5 million Chinese died in the civil war that led to the Communists taking power after WWII.

What they need now is incremental reform to close down the inefficient state-run enterprises, increase legal protections for shareholders and increased regulatory oversight. Then, they need to clean up their banking system mess the way the Japanese did over the last decade.

While I'm a short-term pessimist on both the China and US economies, long-term I am optimistic. Both countries are gifted with an entrepreneurial class of hard-working people who are capable of overcoming the drag imposed on them by corrupt politicians who regularly pursue economically destructive practices for political purposes (i.e., to keep themselves in power at the expense of the rest of us).


Pump and dump, baby!... (Below threshold)

Pump and dump, baby!

Larkin ~ I don't disagree i... (Below threshold)

Larkin ~ I don't disagree in principle, but I believe it would be almost impossible for the Chinese to engineer any sort of "soft landing" along the lines of our own S&L bailout, or even the palliative measures begrudgingly undertaken by the Japanese, who have attempted to allow their banks to "grow out of" the problems.

An economy with large numbers of essentially non-productive "workers" simply isn't viable for long. The employees of Potemkin enterprises need to be redeployed according to true market requirements. Economic disruption will mean political disruption, so I doubt the Chinese will address the problem directly, but it cannot be postponed indefinitely. The relocations will occur; the only question is when, and how violently.

The villains here are the managers and directors who misdirected the capital borrowed. In our country, it would mean serious prison time. In China, under the communist regime, it means a shrug of the shoulders and a new scheme.




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