The STA’s annual summer party was a real treat with the awarding of Diplomas to this year’s successful students followed by a presentation by an eminent speaker, then drinks and lots of nice nibbles for all later. An excellent turnout was achieved, due in no small part to the speaker whose video of a previous talk proved last year’s most-watched on the STA website www.sta-uk.org
Fellow and founder member of the STA he quipped that many years ago he would kick off with: ‘Fellow nerds, purveyors of witchcraft…’ but now feels this is unnecessary as ‘academics have capitulated to technical analysis’.
Entitled ‘A Classic Crash with Chinese Characteristics’ he describes what happened recently on the Shanghai and Shenzhen stock markets as ‘the mother of all bubbles’, something he should know about as he started working in the City in 1972 as the secondary banking crisis hit.
‘A bubble is something a fund manager gets fired for’ (if s/he missed it) and is a socio-cultural phenomenon. There are few hard and fast rules for spotting the top/bottom though we can feel intuitively when one is building. He adds, ‘anything that’s exponential is always dangerous’ and urges us to watch for maximum deviation from the 200 day moving average.
Triggers for a bubble to burst include interest rate hikes, changes to rules for margin accounts, settlement failures, and fraud. Not one to mince his words he believes that in 2015 three quarters of Chinese hedge funds were ‘bent’.
Quizzed by a member as to where the next bubble would appear he likened it to chasing tornadoes. Believing that the Chinese authorities ‘have a great capacity to muddle through’ he warily suggests classic cars and modern art as candidates for a pop in prices. To this we would add residential property in those same two Chinese cities and attach the latest survey on the subject from Knight Frank. Anyone fancy Aberdeen?