Whilst wading through all the associated bibs and bobs that accumulate when you are away, this article popped into my feed this morning. For those too lazy to read it and I wouldn’t blame you it is a mild hysteria piece by Fairfax on the collapse of China’s state owned energy producers – PetroChina. Apparently, the collapse in value is so large (about $1.04T) that you could buy every listed company in Italy should you so desire and according to the chart below the wipeout is impressive when compared to standard units of value such as the net worth of the worlds 12 wealthiest people.
Much of the blame for the collapse is placed upon China’s drive to become clean and green using alternative energy technologies (something our politicians are too stupid to think about), the collapse in the price of oil and the coming rise of the electric car. However, to my way of thinking there are two things missing in the story. The first is that the bulk of the destruction in shareholder wealth occurred in the first month of trading – PetroChina has been a dog since it listed. So this is the death of a thousand cuts not a decapitation. This is that same old story of investors get sold a pup , investors hang on forever, stock dies a slow death and there is bitching and moaning. This is nothing new, the Western archetype for this was undoubtedly Enron. I am quite certain there are brokers telling local investors to hang that it will get better because good stocks always get better.
This slow demise can be seen in the chart below.
The second aspect that is neglected in the story is that this is China where everything is on a size and scale that often defies belief. In thinking about writing this piece I was actually wondering whether the scale of things in China actually defeats Western thinking – we are thinking at a different speed than is needed for dealing with China. Everything about China is massive as you would expect of an emerging superpower that is backed by an estimated 1.3B people. This point was also brought home to me when I caught up with a friend over the weekend and was discussing how Chinese tourists seem to have a love for shopping in London (particularity Burburry) and he said he wasn’t quite certain what to make of it. My response was simple – China is 17% of the worlds population so we had all better get used to it. And that includes journalists who need a new frame of reference when thinking about scale.
Whilst I was away I only occasionally stole a glance at the market. I long ago lost the need to be in constant contact with the market – gone are the days of religiously carrying a pager and trying to do stupid things such as trade the meltdown in the GBP from an airport lounge long before the days of the internet. I know that the market will be there when I get back and that not much will have changed in my absence and this is particularly true of the ASX. The times I did take a peak seems to coincide with a certain breathlessness that the market had actually gone up for more than two days in a row. So my expectation was that when I did look that there would be something dramatic to see.
According to the chart above all the S&P/ASX200 has managed to do is to climb back into the broad channel it was in before its latest little slip. This is not a negative thing but it is not the wildly positive move it has been made out to be. In addition to price you can see volume along the bottom of the chart. The blue line is the average weekly volume post the GFC, as you can see volume has been distinctly poor with there being far more periods of below average volume than above average volume. If we were in the US the blame for this would immediately be blamed the rise of ETF’s but in this case I dont think that argument applies because volume on STW – the prime local ETF has also been lacklustre. To my eye this is simply a market that is ordinary in that it lacks widespread investor support.
I find returning home from my regular jaunts to be a jarring experience. I can feel the gears of my life away grinding with those of my “regular” life. When this first began to happen I used to think it was simply a case of jet-lag or post holiday blues but over time I have come to view it more as a clash between what we should be doing and we we actually do.
I believe that humans were designed to wander and explore, evolution simply did not prepare us physically or emotionally for a sedentary life. When I am in a new city I prefer to walk, I am fortunate in that I tend to be able to find my way around anywhere and wandering doesn’t concern me. I am not perturbed by the feeling of being mildly lost. Walking is the mechanism by which we wandered all over the globe and aimless wandering is a wonderful old Victorian notion to cleanse the soul. It is also our default setting for locomotion and the world makes more sense when you walk through it as opposed to drive past it.
Unfortunately, society depends us being settled but at the same time it extracts a cost from us that we may largely be unaware of until we are placed in a position where we feel this odd feeling of disconnect, of not belonging. I think much psycho-babble is attached to this feeling of angst but I think it is as simple as we are all doing something we were not designed to do. Sitting still is not a basic human function yet it is something we are forced to do. Anytime we are forced to do something we dont want to do we feel a sense of displacement. Our subconscious feels a sense of confinement more acutely than does our conscious mind.
This juxtaposition in life’s true direction versus its enforced direction I think is at the heart of the discontent that many feel. Whilst we might think of this as a new problem it is actually quite old. Dante Alighieri in his The Divine Comedy makes mention of this.
Midway on our life’s journey, I found myself
In dark woods, the right road lost. To tell
About those woods is hard–so tangled and rough
When I first read this many decades ago I though he must have been referring to what affluent first worlders call a mid life crisis but now I take a different view. He is harking back to the notion that humans are wanderers and explorers and that we lose our direction. The journey whilst it has a metaphorical component is also physical – our movement through life is both temporal and physical. And it the physical we often deny.
This is why I think trading appeals to so many of us. It generates a sense of freedom – a notion that we can do it from anywhere at anytime. The engagement with the market is at our own timing and on our own terms. We can in essence wander in and out whenever we want. Our movement is not at the behest of someone else and it not set according to their timetable. The nomad in us is fulfilled as a trader.