When people were talking about U.S. was going to gain back its strength in the first half of Septembers, now two of the biggest five investment banks on the Wall Street are disappearing. It's like a drama in the past few months, while it's interesting to watch from an outsider's perspective.
Henry Paulson, the Finance Secretary, said American should remain confident in American financial system. However, just saying so will not help. Henry Paulson refused to use the Federal money to help with the liquidity of Lehman Brothers, after he led the U.S. government to take over the Fannie Mae and Freddie Mac.
However, this show will never happen in China. Chinese government owns all major banks and brokerages. If one goes for bankruptcy, the others will be hugely impacted as well. The government has to transfer money from left hand to right hand to make up the loss. It's a good thing for small investors, but not healthy for the total market, since all general investors are overconfident on the government's capability.It is also the reason for Chinese market's isolation from other markets.
Today, the central bank of China cut the rate, though it didn't save the Chinese market from tumbling. This is a good thing. Now Chinese should realize that the local market is closely connected to the global market, and a single government can't control the world market. Now they need to learn how to play the game.
Let's continue watching the show, and there's several stocks on my watch list.