China looks like it is heading for its version of the 1929 stock market crash

Tequilla · July 2015

A few random thoughts:

1) As the article mentioned, the magnitude of the crash is dependent upon how it impacts the banking sector. If the banking sector goes to hell in a hand basket, that's where you see general public panic. Always important to remember that markets are rationale except when they aren't.

2) In bull to heavy bull markets, there is an established trend that in order to chase the profits required by investors, banks double down on lending funds and generally lend too much at too low of rates to unqualified investors. Until the general population/market looks at banking stocks more consistently with bonds instead of equities, you will continue to see a conflict of interest in the banking sector.

3) We will find out now how much of an impact China really has on the global equity markets. The big question to me with China has always been what are they exporting besides cheap goods? And moreover, are the cheap goods that they are exporting incapable of being produced in other countries? Sure, there's substantial imports that they take in. My gut tells me that the global impact will be less than what some would expect. In fact, I do think that the reason that Greece has received more attention than the China situation is driven by the implications of not only the EU breaking up (very real threat) and that Greece is just the tip of the iceberg when it comes to crippling European debt (Spain, Italy, and I believe France are all in terrible spots right now as well). Problems in established markets will always trump problems in emerging markets.