Black December for Stocks & Mr. Market

Black December has come. How much have you lost in the stock market? At least 30% of my gain is lost and I am afraid we will see more blood next week. Why is the stock market suddenly becoming so bad? We all expect a happy rally in December each year but we are getting bad news everyday. However, the market downturn is not entirely unforeseeable. For the Hong Kong stock market, you must be well aware of the following negative developments in or before December:

• The Hang Seng Index has gone up by more than 10,000 points in one or two months and a correction is desperately needed. When we should see such correction, the market suddenly invented the "through-train" scheme to try to extend the life of the unsustainable speculation. I mean the so-called direct through-train plan that will allow our people in Mainland China to directly buy shares in Hong Kong by pouring billions and billions of Chinese Yuan into the HKSAR Stock Casino.
• I can't tell how many innocent speculators have unfortunately dived into the burning sea upon hearing such scheme. They thought that our Mainland neighbors would be happy to pay a premium of at least 50% high to get shares in our HK Stock Casino when they can in the first place buy similar stocks in Shenzhen and Shanghai. They also thought that the currency restrictions in our Mainland would be uplifted by a stroke of the pen. How wonderful! Too good to be true! That is why very soon after the spread of such news, officials in the Mainland put an end to the whole story. But for reasons unknown, such brilliant invention refuses to shut up and I still hear certain undying pursuit for such scheme.
• The market has been ignoring our Central Government's macro-economic control and both our Mr. Market and Mr. Speculator dare to challenge our Central Government's commitments to save the economy from overheating as half-hearted. Well, with the rapid raises in banking reserves and interest rates, are you still going to challenge our Central Government? Please learn your lesson: Never fight against our People's Bank or our Central Authority!
• To make things worse, our innocent Hong Kong islanders have elected our Ex-Chief Secretary to fill the legislative vacancy left by our respectable Mr. Ma Lik. I have nothing personal against the Pan-democratic Camp in Hong Kong but I have no doubt that such vote will not help to improve the economic conditions or the livelihood of most people in Hong Kong nor will it help to provide stability and prosperity for our HK Stock Casino. You need not agree with me but as a matter of fact, our stock market has been falling after she was elected in early December and will likely tumble further! By the way, have you heard about the tragic suicide of an 18 yr old boy who was driven to death by poverty and lack of social help in Hong Kong? What has your elected LegCo member(s) in the Pan-democratic Camp done to help so far?
• The most toxic invention for speculation is perhaps the killing illusion that our Hong Kong Stock Casino has "decoupled" or is able to "decouple" itself from our US market which is still severely troubled by housing and credit crisis. What a fanciful dream! What a great innovative idea! But by now you must wake up and learn that it is very true that when US has a sneeze, we will have a damn cold. You have chosen to ignore the illness even after its manifestation many months ago and you must pay for your "decoupling dream".

One last warning: there is no guarantee that the Fed will cut or substantially cut rates further in 2008 and there is no guarantee that the banks in Hong Kong will generously follow. Warren Buffett has said that he won't place any order because of an interest rate cut. Please remember this well.

Of course, I hope to see a good rally before Xmas but you must consider seriously to sell on rebound and save up for the rainy days in 2008. I am sure you will still have good buying opportunities next year.