"The greatest mistake you can make in life is to be continually fearing you will make one" Elbert Hubbard

Here it comes... Bloodshed and fear have finally visited the "new leaders" of the world economy. I guess it might be the right time for me to claim that I did get it right after all, but on the other hand it is also unfortunate that many of the poor Chinese retail investors are learning in a very hard way that nothing ever goes up forever...

Greed can force people to do stupid things and the "this time will be different" speech is almost always a "sure thing" sell signal. But I wonder what will all the China bulls are going to say now? I guess we might just hear another reason why the Chinese stocks are so ridiculously cheap and why was PetroChina (PTR) worth more than GE and Exxon combined... One thing is a fact -Hang Seng has declined an astounding 11% in only two days and no one can say for sure just how much lower it could go...

I have been a China "Bear" since late October of 2007 and have endured some serious pain from Ultra Short China ETF (FXP) being one of the only few significant decliners in my SLO-1 fund. My rationale for being short China has been very simple-it has simply gone too far too fast.

"Most of us can read the writing on the wall; we just assume it's addressed to someone else"
Ivern Ball

It has been a only few days since the event that might go down in history as a day "when Federal Reserve has finally acknowledged the existence of the former "Greenspan or now Bernanke put". By cutting rates by 75BP Fed has in effect told the investing world- "we will do whatever it takes to prevent a severe decline in the financial markets..." Whether it was a wise move is still open for debate, but one thing is clear to me personally- nominal stock price levels will be defended at all costs even if it requires "inflating" away the "real" savings.

I guess I was right to predict last Monday night, that the group of Fed governors was quite "weak in the knees" and thus was very likely to intervene with some kind of remedy to prevent another decline in the stock indices. And sure enough just 12 hours after my post, they cut rates abruptly :) While one might say it was a lucky coincidence, I think it wasn't at all surprising. What's more, this move was very typical of what we came to expect from the US Fed over the last twenty years- in the battle of fear and greed- Fed will always err on the side of greed, because battling fear is easy and makes them look smart in the short term, while battling greed is something "that Federal Reserve can not control" and is almost certain to cause some serious political pressures...

"Millions saw the apple fall, and only Newton asked why."
Bernard Baruch

I remember taking a close look at AAPL back in October of 2007 as the stock was rapidly closing in on the magical $200 level... I liked the company products, business model, management and the only real negative noted was the hefty price... Here is a quote of my rationale from that post: "I think AAPL is a great company with unmatched products, shrewd management and loyal customers but, at the time of this writing at $171 a share, I personally do not believe that the risk/return tradeoff for this stock (not a company) is favorable. It is quite possible that given some luck and momentum, the market could carry AAPL another 5-10% higher, but at this price just as easily any negative news could easily lead to a gap down that could be quite severe"

Rereading my original thoughts on the subject it is hard not to notice that my rationale turned out to be on target (I am considering that may be I should doing this for living some day soon) and even "the original target" market cap of $120B is awfully close to Friday's price of $114B. I am not sure whether it was simply a lucky call, brilliant insight :) or merely a coincidence, but there where quite a few occasions in the last several weeks when "driven by populist pressure" (yes I even received some "hate" emails from Mac lovers) I considered jumping in and buying some shares on the way down. But every time I thought about finally pulling the trigger, my skeptical mind has intervened. And now here is the "why I didnt'" part...