Shanghai Composite Cracks 52-week low

As we predicted might happen, the Shanghai Composite Index dropped below its 52-week low before recovering to close up 1.5%. This doesn't bode well for the Chinese economy as we approach the Summer Olympics, the supposed 'Crown Jewel' of 2008, the Year of the Rat.

On March 7th, in response to the Oracle of Omaha's utterance of the word 'recession', we wrote: "So, Warren Buffet's use of the 'R' word on CNBC could still reverberate much, much more, perhaps around the Globe, maybe even, oh.. Asia?!"

http://psychologyofthecall.blogspot.com/2008/03/munch-fear-screaming-out-loud-in-equity.html

We asserted many times over the last 6 weeks that the Chinese economy is in decline. The inability of the individual Chinese investor to sell short Chinese stocks, coupled with the growing swell of anti-Chinese government sentiment around the world is pressuring Chinese markets into retreat. Again we reiterate our short recommendations on FXI and BIDU and implore you to pay careful attention to this dynamic and dangerous combination of financial and geo-political events.