Slight Hiccup or... Sign of Things to Come?

re: January 4, 2013- The worst start of trading in Chinese history.


by Teresa Kuhn, JD, RFC, CSA
Living Wealthy Financial
Host, Living Wealthy Radio

While it wasn't entirely unexpected, (at least to those of us who've been paying attention), the meltdown of China's stock market on the first of post-holiday trading triggered massive sell-offs in the United States and Europe and caused more than a few folks to clench their teeth.

China's new "safety" mechanism, which had just gone into effect that day, halts trading of index futures, options, and stocks for 15 minutes whenever there is a move of 5% in the CSI 300.

As Zero Hedge reported, "Following the initial halt in CSI-300 Futures at the 5% limit down level, the afternoon session opened to more carnage and amid the worst 'first day of the year' in at least 15 years, Chinese stocks collapsed further to a 7% crash. At 1334 local time, stock trading was halted for the rest of the day across all exchanges (at least two hours early)."

While there was an immediate impact on the rest of the world, the plunge’s initial effects are somewhat muted due to the fact that China tightly controls and limits foreign investment in mainland stocks.  Foreign investors own less than 1% of Chinese mainland stocks.

The lion's share of  losses from the January 4th meltdown were felt by less than 14% of the Chinese population who are active investors.  

But before you breathe a sigh of relief and head back out to do some more risky business, consider this:

In the age of globalization, world economies are so intertwined that someone in China can cough and everyone on Wall Street runs to get a flu shot.  

There is absolutely no way that this won’t ultimately affect every person who has exposure in the stock market.  After all, Chinese investors have lost more about $3.4 trillion in equity value from the markets mid-June peak until the July 7 close.  And the slide looks like to continue as the bubble stretches until it can stretch no more.  

3.4 trillion in personal wealth can't just vanish without causing a ripple effect across the globe, especially since Chinese consumption has been  a driving force in so many economies, particularly the anemic US economy.

ZIRP and the Zen of Chinese Economic Maintenance

A central factor triggering the Chinese meltdown was their central bank's insistence on following a Zero Interest Rate Policy (ZIRP) which created a frenzy of borrowing.   Cutting rates to rock bottom had the understandable consequence of driving people who were desperate to grow their wealth into the market.  In other words, it just didn't pay to save...at all.

If any of the above sounds familiar to you... it should.  It's exactly the same thing that has been going on in the United States for years.  Savers have been crushed, debtors rewarded, and the whole system has become highly fragile and suspect.

I am not alone in thinking that having your precious cash on Wall Street right now, especially if you are at or near retirement, is like playing hot potato with a loaded grenade.   Sooner or later, the grenade is going to explode and leave a big hole where your money used to be.

Can you get SANE GAINS and still keep your nest egg safe?

I'm a big believer in legitimate investing, and I encourage my clients to seek out ways to increase their wealth that don't involve hard core gambling on overvalued stocks.

The first thing I tell them to do, though, is get themselves a Bank On Yourself policy to help manage their cash flow and provide safe, steady, and risk-free gains. Bank On Yourself (R) is a proven and safe cash management strategy that uses a versatile kind of life insurance to accomplish financial goals.

BOY can be used to finance large purchases such as income producing properties, houses, cars, businesses or to pay for vacations, medical emergencies, educational expenses, or other big ticket items.  With Bank On Yourself as your financial linchpin, you will have the cash you need to control your own financial destiny without having to rely on banks or expose yourself to risk on Wall Street.

If you can afford to lose your money,  then you probably won't benefit from learning more about Bank On Yourself.   But, if you are like most people and are concerned that losing even one dollar of your cash could spell trouble in retirement, you should call our office now at

(800) 382-0830.

I will be happy to send you a packet explaining all the details about the amazing financial tool that is Bank On Yourself.

Or, visit my main site at http://livingwealthyfinancial.com/ for more information.