Much has been said here about the relentless Chinese stock market bubble, where the Shanghai Composite closed just shy of fresh multi-year highs, and with a market cap of $10 trillion, or about 2.5x higher than where it was about one year ago, is well on its way to catching up to total US stock market capitalization ; in volume terms, China has already surpassed the US.
A few days ago, we showed why the market in China is sucking in millions in new, inexperienced traders every week when we showed the case of one middle-aged rural Chinese "trader" who explained that "it's easier to make money from stocks than farmwork ."
In short: a bubble which is sucking in millions by the week, and which will end not only in tears but likely in riots and civil disobedience when the tens of millions of inexperienced traders, farmers, housewives, and unemployed lose everything once the bubble burst as it always does.
Oh, and senior citizens.
In a amusing (if not so much for the participants) anecdote, the FP's Warner Brown decided to take the advice of Li Chaoli and participate in a stock-trading class.
21-year-old Chaoli arrived in Shanghai from Yunnan province less than a month ago and knowing nothing about stocks or finance, took a job promoting Homily Stone, a software package that promises to help investors achieve easy profits by choosing fast-rising stocks. “We also offer classes to teach stock
trading tips,” Li explained while trying to register the phone numbers of passersby on a notepad. “So it’s no problem if you don’t know much about stocks.” Everyone, she noted, is starting out the same way.
Brown went to one of the free lectures in an aging Shanghai office tower on a morning in mid-May, when nearly 500 pupils filed to hear a lecture from Chen Haisheng, one of Homily Stone’s purported in-house stock experts. "An entry fee of $320 lent an air of exclusivity, but the ubiquitous fee waivers that Li and other staff members handed to virtually everyone — this writer included — suggested that Homily Stone may have had another, bigger pot of money in its sights."
This is how China's army of nouveau traders is preparing for war with the upcoming market crash, but enjoying every day of the mania phase in the meantime:
As the morning session neared its close, Chen promised more detailed stock-picking tips to those who gained admission to an afternoon class by paying $490 for a trial of Homily Stone’s software. A hush fell over the room when Chen predicted the Shanghai Composite’s 2015 bull market could reach a high of nearly 5,700 — about 33 percent above its then-level of 4,300. And when he guaranteed a 300 percent return for people who buy the program and follow his methods with recommended “dragon head” — or hot — stocks, the room erupted in applause .