Do we have an oil bubble?

[Supercilious]

Re: We have an oil bubble : the proof

More thoughts on the "bond yield conundrum" from Prof. Antal Fekete:
[...]

Lukester, are you trying to burry this thread in bonds ?

Wouldn't be simpler to open another thread dedicated to bonds? Here I'm trying to drill into the virtual oil fields using an ETN rig.

[Supercilious]

Re: We have an oil bubble : the proof

(Disclaimer: Please read carefully the iTulip disclaimer at the bottom of this web page. In addition to that, people with a below average sense of humor or who get easily offended by tong-in-cheek or surreal and absurd jokes, should not read this message. All persons, iTulip avatars and (financial) institutions mentioned in this post are .... poorly impersonated )

This is another installment dedicated to solving the global energy problems by increasing the production of synthetic virtual oil, extracted from the fields of hopes for safe high-return investment opportunities. Contrary to the physical(real) oil, these fields of hope have unlimited reserves. There is no such thing as Peak (Cheap) Suckers.

Here, on iTulip, the majority has strong belief in Peak (Cheap) Oil and anyone who dares to question the shaky No-OIL-Bubble theory may be immediately subjected to personal attacks, ... just because sometimes no solid counterarguments can be found by the majority (Fred still hasn't provided any relply for No-Oil-Bubble arguments 5 to 8)

I thought to employ some "lady doth" techniques for showing the unfair treatment I have received for trying to argue in favor of an oil bubble.

From being send to talk to the hand, showered with patronizing offers for education and enlightenment, subjected to persona attacks (there were insinuations I had an ax to grind, I'm a whining looser stuck with short positions or I'm an irresponsible ignorant who is ready to loose everything in reckless bets) ..you name it I got it.

Recently I may have been even subjected to an attempt of (thread) hostile takeover by bond pile driving, poorly performed by Lukester after he got the starting hint from Fred, but I'm not sure about that yet....

I don't know what to say. Usually, unwarranted acts of aggression/rejection are generated by a repressed insecurity. Was the treatment I have received, for expressing pro oil-bubble views, generated by a repressed insecurity in the validity of no-oil-bubble theory? I hope not.

But, why should I complain about my ordeal , when there is clear evidence, on this forum, of completely unfair, biased and malicious treatment of another person who expressed clear pro Oil-Bubble opinions. And I will demonstrate that with clear facts and precise numbers .

A tread made here on the News subforum is my proof:

Brilliant Charlatan: THE OIL CRASH OF 2008 COULD MAKE YOU RICH !

Please read for yourselves, at least the first post, because I'm going to demonstrate beyond any reasonable doubt why calling Mr. Nick Guarino a brilliant charlatan is utterly wrong.

Introduction. Any financial scam scam has three stages: confusion, misdirection and wealth transfer. Let's suppose there Mr. Guarino is trying to scam other people and let's analyze his internet ad through each of this three stages by examining pro and con arguments:

1. Confusion:
Any financial scam starts with subjecting the victim to a confusing attack of scary half-truths or rosy half-truths, unconnected facts and unsubstantiated rumors. This attack is performed to diminish (blind) his/hers correct perception of reality.

Pro- brilliant charlatan arguments:
Mr Guarino's ad is full with what would be typical for a confusion attack. Yes Mr Bernanke has a an obsessive compulsive money printing behavior,... yes Lehman, Merryl etc don't look particularly healthy,... yes the subprime mess sends FRM and FRE in uncharted government-rescue territory,... yes strange rumors are flying fast, ... but everything is perfectly packed to stun the reader by producing a financial panic attack.
Look at the oil bubble... I happen to agree that there is an oil bubble, but Mr. Guarino, without any proof, claims that there will be an oil crash and it will happen, for sure, in 2008. That is highly suspect of being a half-truth scamming atack.

Con-brilliant charlatan arguments:
Everybody is innocent until proven guilty. If due benefit of the doubt is granted, Mr. Guarino may be considered a well intended person, who simply is himself just another individual confused by the modern information age.

Look at Carl Steidtmann's arguments , who in 2007, was still denying the existence of a housing bubble. Granted his writing is more stylish and he has very aesthetic charts. But isn't he providing the same kind of illogical soup made of unconnected-misinterpreted facts? And no iTuliper called him a brilliant charlatan.

Look all over Internet, look in Bloomberg, and you would see many respectable analysts, discussing the increase in the price of oil and other commodities and giving the same type introduction in their writings. Peak Oil, inflation, the umptenth Nigerian attack, growing oil demand in developing countries, potential strike in Brazil, high hopes of hurricanes in the Gulf of Mexico and ... if Iran (thar great rolling-blackout of the oil bubble) is test launching another photshoped missile ... the circus is complete.

One can watch on TV the well known "Bald-Tila Tequila stock market hysterical show"... it's the same illogical soup of confusing misinformation, albeit far more subtle and effective that Mr Guarino's. Would anyone call the screaming market prophet a brilliant charlatan? I don't think so.

Do you remember all that confusing onslaught of enormities we were spoon fed by politicians and main stream media before the Iraq invasion? Granted, nobody can accuse GWB of being brilliant, but has anybody here called any members of the Bush administration or Novak or Miller, brilliant charlatans? I don't think so.

2. Misdirection:
After being disoriented through confusion, the victim has to be misdirected into adopting an attractive, but false salvation/solution provided by the con artist. (something like the CDO's being low risk and profitable etc.)

Pro- brilliant charlatan arguments:
Suggesting that reading his newsletter is an easy way to get rich, sounds like a typical scam. At least for me, when I read something like this:

There is a fantastic new way to trade oil. An ETF that trades on the American Stock Exchange. Symbol USO. You can also trade an option on this ETF. You strictly limit risk, to the low cost of your option. Yet you get up to 30 to 1 leverage.

...the needle of my scam-o-meter transforms in a small propeller.

Con- brilliant charlatan arguments:
Give him the benefit of a doubt. We live through some very strange times.
Do you think that real estate analysts were brilliant charlatans when some of them, even in 2007, were saying there is no housing bubble and home prices will go up again?
Do you call Cramer a brilliant charlatan because after the Bear Stearn "safe money" comments he still claims he has the recipe for being a succesull investor? Read for yourselves this web page and please explain how can one call Mr. Guarino a brilliant charlatan:

Exclusive insights and advice from me and other top investing pros. As a RealMoney subscriber, you'll get insights, recommendations and market analysis every day from me and a team of successful Wall Street pros like trader James "Rev Shark" DePorre, markets commentator Vince Farrell, options expert Steve Smith and more than 45 others. These are some of the best minds in the business.

(Mr Cramer also recommends investing in ETF's)

And of course there is the Iraq argument:- the Bush administration claimed there was no other chance than to attack Iraq because of: imminent WMD attack danger for USA, Sadam tried on to kiss Bin Laden, liberating the Iraqi people, the stability in ME is crucial for something, bringing democracy in Iraq and so on. Would anybody call them brilliant charlatans?

3. Wealth transfer:
All scams have just one objective: to transfer money form the victim to the crook. Yes it's that simple, but sometimes, the transfer is highly sophisticated, camouflaged and/or structured, being very difficult to figure out how exactly it is perpetrated or even it there is any wealth transfer at all. So let's look again at Mr. Guarino's internet ad:

Pro- brilliant charlatan arguments:
Here the situation is simple and straight forward. He asks $5000 for access to his questionable and obviously worthless market insights. That looks to me like a typical scam, albeit there is nothing brilliant there and in the current market conditions everything is possible as a game of blind chance.

Con- brilliant charlatan arguments:
Here I have the strongest evidence for my case. Forget about Iraq arguments (with those no-bid KBR contracts to deliver gasoline to US troops at $5/gal in 2003 made at taxpayer's expence). There is something better:

How can one call Guarino a brilliant charlatan for asking $5000 for his insights, when Cramer asks of 34.95/mo for basic subscription? For a higher grade account and after ordering various special reports, I think one could spend more than $5000 on enlightement privided by Cramer.

Can anybody claim Cramer's market insights to be more valuable than Guarino's? If yes, I would like to see the proof ...

And let's not forget that Cramer definitely makes more money form selling his market insights. I haven't read any of Guarino's subscription materials, but I bet they even have a higher entertainment value than Cramer's.

Of course a biased and malicious person could claim that Guarino is a charlatan because acts as if he had any valuable insights to provide you in exchange for your hard earned money.

That is a blatantly false logic! Why he should be considered a charlatan for taking money by selling something that doesn't exist, except in the mind of gullible investors?

Let's go back to the subject of banks offeirng ETN's for virtual oil (commodities) and see again what our German friends are doing:

The ETNs issued by Deutsche Bank use a simple mechanism to assure close tracking of the index. They pledge to redeem ETN shares at the calculated market value, thus preventing indexing drift. The bank doesn't actually have to buy the underlying futures, but instead "acts as if it had." The guarantee of the bond and the guarantee that it reflects the futures are backed by Deutsche Bank.

Would anyone here dare to call the bright financial minds from DB charlatans for selling something they don't have? I wouldn't think so ...

If we take a closer look at how exactly the ETN math works, it gets even better than this. Part II of this post will provide clear arguments and numbers that would demonstrate beyond any reasonable doubt that Mr. Guarino is not a brilliant charlatan, as some people iTulipers believe.

But more on that tomorrow. Until then, people who are interested in defending Mr. Guarino's reputation can get more familiar with what ETN's are by reading an official DB prospect for oil ETN's:

How to create $2 billion worth of virtual oil and sell it to successful investors...

[BlackVoid]

Re: We have an oil bubble : the proof

Stick around for a year or two and we will see who was right. :rolleyes:
The last oil bears strangely disappeared from this forum....

Your kind has been arguing the oil bubble for years and will have the opportunity to preach it for much longer still.

I will make a bold prediction. Oil will pass $200 next year, and $300 in 2010.

Current depletion rate is 8% per year. New projects barely compensate for this in 2008. 2009 will see a moderate decline, 2010 a stronger decline. Already this year, oil exports are falling at a rate of 4% (compared to just 2% last year). There is no other way for oil prices to go but UP.
There is only one condition for this to happen: the world economy should not collapse before 2011. If it does, then the oil price will fall.

Peak Oil is the elephant in the room. Ignore at your own risk.

[FRED]

Re: We have an oil bubble : the proof

We flogged this topic to a conclusion long ago. Oil is not a bubble just as gold and commodities are not a bubble. Rapid price increases since 2004 are a factor of decreasing supply of commodities relative to rising demand, and of the diminishing value of the money that they are priced in. There is speculation in all commodities but the impact on prices is marginal and temporary. Oil is a special case because it tends to drive the costs of all other commodities, as they require oil to be produced.

You received a my responses to this thread here, here, and here where I directed you to the previous discussions we have had on the topic where we reached these conclusions so that after reading them if you still had further questions we can address them.

You decided to re-open the topic before reading the many long discussions we've already had here to reach those conclusions. Considering that you have decided to ignore our previous discussions and have demanded that our members re-hash them for your personal benefit, the treatment you have received here has been kind and patient, albeit at times colorful as is the style of some of our members.

I do not doubt that you are earnest in attempting to get to the bottom of the oil price issue. You have made interesting points and express yourself very well. So I ask the other members here: Do you feel that any of the points that $#* has brought up have not been covered in previous discussions and are they sufficiently compelling to justify re-opening the discussion? Is there a chance that we can convince ourselves that oil is in fact the target of asset price inflation?

[Supercilious]

Re: We have an oil bubble : the proof

Post Edit comments: The following has been written by Fred, directly into my message. I'm trying to reedit the message in order to make things more intelligible and I solemnly swear, on the red flag, that I will never make any jokes about sensitive subjects we shouldn't talk here ... and possible repercussions for talking about sensitive subjects we shouldn't talk here.....

5. No new source of credit has been created to finance oil purchases (No oil CDOs)
ETN's - Actually one may argue that the oil indexed ETF share are the real Oil CDO's while the ETNs are in fact some funky form of structured credit default swaps (CDS) based on those Oil ETN's or sometimes based jsut on thin air (virtual oil) since there are some ETN's which have no index conenction with a an ETF.

Here is a very good explanation of CDOs and what went wrong. Please correlate this to ETNs and oil, please. I don't see similarity.

6. No government deregulation (No change in government regulatory environment fueled the oil bubble; policy has been a constant)
I disagree here. IMHO Enron (2000) and Swaps (20060 loopholes) are exactly that. After reading carefully Greenberger's testimony before the Senate how can someone say that?
How come that Goldman Sachs, or JP Morgan are considered "comemrcial hedgers" ( I haven't seen yet a GS refinery, JPM gas station, or a Lehman oil rig or a Merryl pipeline) exempt from any position limits and regulatory disclosures?
How come that a trader in Texas is subjected to CFTC regulations when making a transaction on Nymex, but the same trader if places his orders on Nymex through ICE or Dubai his transaction is not anymor esubject to the same CFTC regulations.

A global Enron? Not possible.

7. No new tax incentives (No new tax laws lowering capital gains taxes on oil investing ala 1986 tax relief act)
Isn't the Sullivan & Cromwell loophole a great tax incentive for investign in ETN's? And if not why?

Yes, but not sufficient to create an asset price inflation on the scale of NASDAQ 1996 - 2000 or housing 2002 to 2005.

8 Lack of enforcement of securities law or other market regulations (No instances of market regulators looking the other way while laws are broken)
Ok on this one I have to be softer because after the recent news about regulation of the expired CDO fest, it's pretty hard to argue that the regulatory bodies are not looking the other way when they are not asleep at their desks. So I'll point only to Grenberger's testimony again

Considering that you have decided to ignore our previous discussions and have demanded that our members re-hash them for your personal benefit, the treatment you have received here has been kind and patient, albeit at times colorful as is the style of some of our members.

Fred I have no hard feelings and I hope I have enough humor to take more friendly challenges only as they should be taken. I'm not upset or resentful at all. I was only trying to reply to the the friendly and colorful welcome using a tongue-in-cheek style ... just to add one more spot of color to the crowd

Congress has been all over the "speculators" issue, vilifying oil companies, hedge funds, investment banks, anyone but the primary cause: the weak dollar. Far from looking the other way, the government has oil under a microscope.

Oil is not and can never be an the target of an asset price inflation no matter how fast and high the price goes: Oil is a commodity and as CharlesMungerFan, GRG, and others have explained there can be no bubble in a commodity when the spot price is nearly the same as the futures price unless the commodity is physically hoarded.

That said, when Peak Cheap Oil arrives, producers will hoard in the ground and consumers in storage. That might contribute to a rapid increase in price that one may choose to call a bubble, but as the cause of the hoarding is irreversible – global depletion – it's a "bubble" that will fluctuate with high volatility but never pop and revert to a mean oil price.

[GRG55]

(Disclaimer: Please read carefully the iTulip disclaimer at the bottom of this web page. In addition to that, people with a below average sense of humor or who get easily offended by tong-in-cheek or surreal and absurd jokes, should not read this message. All persons, iTulip avatars and (financial) institutions mentioned in this post are .... poorly impersonated )...

...Here, on iTulip, the majority has strong belief in Peak (Cheap) Oil and anyone who dares to question the shaky No-OIL-Bubble theory may be immediately subjected to personal attacks, ... just because sometimes no solid counterarguments can be found by the majority (Fred still hasn't provided any relply for No-Oil-Bubble arguments 5 to 8)

I thought to employ some "lady doth" techniques for showing the unfair treatment I have received for trying to argue in favor of an oil bubble...

1. I doubt you can show one shred of definitive evidence that the majority of iTulipers have a strong belief in Peak Cheap Oil. Every time the topic comes up it generates an extraordinary amount of spirited debate. If the majority here were all on the same side of the boat that wouldn't happen. In fact the vast majority of iTuliper subscribers are largely silent on the forums, no matter what the topic.
2. I am sorry you feel abused and patronized, and subject to personal attack and unfair treatment. Let's pray it doesn't deteriorate further to the death threat stage... :rolleyes:
3. From what I can discern the presence of ETNs is proof positive in your mind that something nefarious is going on. You may be correct. Then again you may not be correct. The presence of a derivative instrument does not, in my mind, immediately prove that there's an organized effort to manipulate crude oil.
4. I'm not so old that I have forgotten the details of the run-up, hysterical top, and subsequent collapse of the last oil bubble. I had a front row seat through the whole sordid affair. I've been heavily long oil since 1stQ 1999, and I've been listening to people bombard me with "oil bubble" arguments since oil crossed above $30.00. I used to work with people like that [I am not a professional investor and do not work in the financial sector].
5. It's not clear to me if you believe that oil is currently in a bubble, or if you think oil is in the incipient stage of a bubble-under-construction...still inflating before the inevitable "pop". The only reason I ask is because I remain completely unconvinced that oil is in a bubble today [but that's just my opinion, and I am old enough to enjoy the luxury of not giving a damn if anybody agrees with me ]. However, I am not prepared to completely discount the possibility of a real oil bubble forming at some point in the future [here's where EJ and I may disagree]. Some of the things you point out are, IMO, potentially important indicators of a bubble.
6. As I posted once before, time will tell if oil is in a bubble. If it is then, by definition, it has to "pop". I expect oil and other commodities to become steadily more volatile as time passes. On every drop the oil bubble advocates will declare victory, on every rise the peak oil cohort will respond; and every day, no matter which direction the move, the shills that call themselves financial journalists will invent some explanation for the faithful to worship. That's life...:p

Look at Carl Steidtmann's arguments , who in 2007, was still denying the existence of a housing bubble. Granted his writing is more stylish and he has very aesthetic charts. But isn't he providing the same kind of illogical soup made of unconnected-misinterpreted facts? And no iTuliper called him a brilliant charlatan.

The actual phrase "brilliant charlatan" may not have been used by anybody around these parts because none of us think him "brilliant". And he makes a damn poor "charlatan" too.

When I first discovered iTulip I spent quite a few months [as a non-subscriber] exploring the rich archive of material that was available free of charge. You might consider doing something similar. You might start by going back and reading this thread regarding Carl Steidtmann, and a few others just like him.

Respectfully;
GRG55

[c1ue]

Re: We have an oil bubble : the proof

I've not said oil prices are a bubble, but just because there is no bubble does not mean mispricing is not occurring - either in price magnitude or timing.

I will make a bold prediction. Oil will pass $200 next year, and $300 in 2010.

Hmm, so if 28 gallons of gasoline are obtainable per barrel of oil, and China presently subsidizes around 30% of the actual price (actually somewhat more since there are costs associated with refining, transportation, retail, etc.), then assuming this 30% represents an across the board oil-based energy subsidy and also stipulating China's oil usage is roughly 6.5M barrels/day of which roughly 3.2M are imported:

Amount China pays for its imported oil subsidy
$100/barrel = $35.0B
$145/barrel = $50.8B
$200/barrel = $70.0B
$300/barrel = $105.0B

Sure, the RMB is increasing value vs. the dollar - at a 6.5% appreciation in the past 4 months = 20% appreciation in 1 year.

$105B * .6 = $63B = almost double what China is paying for this subsidy now, even with RMB appreciation of 40% over 2 years (in 2010).

And of course this expense is on top of the $245B import cost (-40%) = $147B of 'today's dollars'.

So $300/barrel oil means China has to pay $210B per year in 'today's dollars', and gasoline still would be $5.50/gallon?

And they can afford that? And the rest of the world won't be affected as well?

The only reason I don't take your easy money bet is that we could have a nice hyperinflation, in which case oil would be $300/barrel or more, but the price for the rest of the world remains similar.

Of course, in that case I think we all lose.

[GRG55]

Re: We have an oil bubble : the proof

I've not said oil prices are a bubble, but just because there is no bubble does not mean mispricing is not occurring - either in price magnitude or timing.



Hmm, so if 28 gallons of gasoline are obtainable per barrel of oil, and China presently subsidizes around 30% of the actual price (actually somewhat more since there are costs associated with refining, transportation, retail, etc.), then assuming this 30% represents an across the board oil-based energy subsidy and also stipulating China's oil usage is roughly 6.5M barrels/day of which roughly 3.2M are imported:

Amount China pays for its imported oil subsidy
$100/barrel = $35.0B
$145/barrel = $50.8B
$200/barrel = $70.0B
$300/barrel = $105.0B

Sure, the RMB is increasing value vs. the dollar - at a 6.5% appreciation in the past 4 months = 20% appreciation in 1 year.

$105B * .6 = $63B = almost double what China is paying for this subsidy now, even with RMB appreciation of 40% over 2 years (in 2010).

And of course this expense is on top of the $245B import cost (-40%) = $147B of 'today's dollars'.

So $300/barrel oil means China has to pay $210B per year in 'today's dollars', and gasoline still would be $5.50/gallon?

And they can afford that? And the rest of the world won't be affected as well?

The only reason I don't take your easy money bet is that we could have a nice hyperinflation, in which case oil would be $300/barrel or more, but the price for the rest of the world remains similar.

Of course, in that case I think we all lose.

C1ue: If we were to set the clock back 8 or 9 years and examine the then price of oil, China's consumption of oil at that time, and China's level of subsidies at that time, would you not have been just as sceptical of any forecast accurately predicting the US$ nominal level of Chinese subsidies today?

[c1ue]

Re: We have an oil bubble : the proof

GRG:

No, because extrapolating the numbers backwards - you have some very small values compared to the amount of trade (and trade growth) occurring.

Looking back - the US trade deficit with China in 2000 was $83B.

No problem spending $10B if it means more money down the road.

The same trade deficit in 2007 was $256B while China oil import deficit was likely around $76B - still sustainable. (Assumed $65/barrel average)

It is safe to say that at $300/barrel, the US trade deficit with China will be smaller than China's oil import deficit. Much smaller.

Even at $200/barrel the same situation will probably occur - but due to the relative currency effects as much as energy cost.

So what ends up happening? All of China's profit from outsourced manufacturing is eaten by oil producing nations.

So why bother with the subsidy then if no one inside China gets any benefit from it?

That's why I suspect a play against the oil subsidies in Asia - think Soros breaking the BofE and the pound.

[jk]

Re: We have an oil bubble : the proof

GRG:

So what ends up happening? All of China's profit from outsourced manufacturing is eaten by oil producing nations.

So why bother with the subsidy then if no one inside China gets any benefit from it?

because it keeps a lot of chinese employed and off the streets.

That's why I suspect a play against the oil subsidies in Asia - think Soros breaking the BofE and the pound.

the subsidies will have to be phased out in order to promote more efficiency in the asian economies. next, and even more explosive, issue: food prices.

[c1ue]

Re: We have an oil bubble : the proof

JK,

The problem China has it that things must continually get better.

The majority of the laborers there are suffering under the assumption that life will get better if they scrimp and bust their butts now.

Should oil prices continue to go up and drag food prices with them, while simultaneously hurting world demand, I guarantee that life is going to get worse.

Having a crappy job is not itself the end of the world so long as you have a realistic hope of life getting better. Remove the hope, and you get 'real' Communists. Viva la revolucion!

[jtabeb]

Re: We have an oil bubble : the proof

So I ask the other members here: Do you feel that any of the points that $#* has brought up have not been covered in previous discussions and are they sufficiently compelling to justify re-opening the discussion? Is there a chance that we can convince ourselves that oil is in fact the target of asset price inflation?

With all due respect FRED (an I mean that, whole heartedly), "10 reasons why oil is not a bubble" is not looking so sure based on a number of counter-arguments to the 10 points you raised. I don't think that addressing the validity of those points is a re-hash at all. In fact, the validity of those points has HUGE implications for everyone's invesment game plan, and I think that we would all welcome a thourough vetting of all counter-points to solidify the correctness of the conclusion.

Short version, I have questions that remain unanswered, this discussion is valueable.

For what it's worth.

[FRED]

Re: We have an oil bubble : the proof

With all due respect FRED (an I mean that, whole heartedly), "10 reasons why oil is not a bubble" is not looking so sure based on a number of counter-arguments to the 10 points you raised. I don't think that addressing the validity of those points is a re-hash at all. In fact, the validity of those points has HUGE implications for everyone's invesment game plan, and I think that we would all welcome a thourough vetting of all counter-points to solidify the correctness of the conclusion.

Short version, I have questions that remain unanswered, this discussion is valueable.

For what it's worth.

Excellent, as long as everyone is getting something out of it. Will address the questions shortly.

[metalman]

Re: We have an oil bubble : the proof

Excellent, as long as everyone is getting something out of it. Will address the questions shortly.

thread is misnamed. no 'proof' of an oil bubble is offered but some evidence.

how about a precedence order of qualifications?

out of 10 i'd put reversion to the mean as #1 and gov't stimulus at #8.

mean to revert to...



no mean to revert to...

[GRG55]

Re: We have an oil bubble : the proof

JK,

The problem China has it that things must continually get better.

The majority of the laborers there are suffering under the assumption that life will get better if they scrimp and bust their butts now.

Should oil prices continue to go up and drag food prices with them, while simultaneously hurting world demand, I guarantee that life is going to get worse.

Having a crappy job is not itself the end of the world so long as you have a realistic hope of life getting better. Remove the hope, and you get 'real' Communists. Viva la revolucion!

I don't imagine the speculative losses in the Shanghai stock market are making things any easier for the authorities? Even though the actual number of private Chinese playing the market may have been small, there's probably a psychological implication to a collapsing stock market even for those who never actually had any money in it. That happened in 2005/6 in the Arab Gulf when the markets all tanked after a speculative blow off. [But it didn't last long because the real estate market made up for it all...sound familiar?]