Higher Bond Values = Temporarily Lower Stock Market

When the value of government bonds go up, the stock market gets hurt. It is a wound, but it is temporary. That is what is happening right now with the US and Canadian stock markets. The government recently raised the interest rate for government bonds, which means that some investors take their money out of the stock market and buy government bonds instead.

Give it 2 or 3 weeks however and the stock market, I have noticed, will typically recover. Why? Because investors are still making money from their jobs and they want to put their money into stocks (not everyone likes bonds for various reasons) so it is just a matter of time before the market recovers.

It is a temporary shock to the stock market...

But it is USEFUL.

The temporarily lower stock market might cause various stocks to become 2 to 3% cheaper, which effectively means they're on sale. You wait until the stocks appear to have reached the bottom, likely a week or two after the initial sell off, then you buy.

Then you wait another 2-3 weeks later and your stocks have shot up in value by 2 to 3% already.

Just temporary. Nothing to worry about. Check the TSX index in 3 or 4 weeks from now, roughly around October 22nd or 29th, and you will see I am right. Might be a full recovery, or a partial recovery, but guaranteed they will be back up again unless there has been some huge disaster (highly unlikely) in the markets caused by something else.

Eg. I am foreseeing the Chinese stock market to get hard by the Evergrande decline in value unless it gets some kind of bailout from the Chinese government. That house of cards is going to come tumbling down eventually because Evergrande has basically been running a ponzi scheme with Chinese investor money and real estate.

UPDATE OCTOBER 14TH

Evergrande has dropped in value 11.1% since the last time I checked on October 1st. I expect it to keep going down in value. Notice the 52 week low of 0.0001 USD??? I expect it to reach that or lower again.

Evergrande is just the tip of the iceberg when it comes to Chinese companies running real estate ponzi schemes. They take money from investors to build condos and office buildings, but so few people end up living or working in the buildings that in order to make their companies look better than they really are they cheat on the finances and use money from new investors to pay off the old investors, and fudge the records to make their balance sheets look better than they really are. And Evergrande is a HUGE company. It is the 2nd largest property developer in China by sales... But their assets are only worth $306 billion USD, but their debts are over $300 billion... so the stocks are really worth almost nothing.

This is why people really should do their research to determine a company's assets vs debts.

And to make matters worse, Evergrande is hurting China's bond market and its stock market. Speculation abounds that China's stock and bond markets are due for a rough ride.

Plus China is currently planning to invade/conquer Taiwan, which could spell disaster for the global computer chip industry, which could see foreign investment in China collapse.

When Chinese investors start talking nervously about "World War Three" you should definitely worry. An invasion of Taiwan would effect American tech stocks, car manufacturers and more. The USA and their NATO allies will want to secure their access to computer chip manufacturing, otherwise their economies could also collapse. Taiwan makes approximately 65% of the world's computer chips. The global economy depends on those chips. It would be an economic disaster for many companies, including companies in Russia, India, the USA and others who have nuclear weapons who will be very upset if the global production of computer chips is hurt and the global economy collapses.

Hopefully China will come to its senses and realize that invading Taiwan would be economic and military suicide.