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The capital flows out of China continue. It is like a financial diaspora of wealth moving to new parts of the globe in search of safety that was not expected just two years ago. The number are big and have an impact on the rest of the world. The real estate gains in some the leading cities around the world are driven by Chinese investors. Now, it makes sense to diversify out side a home country, but let's remember that China has been one of the fastest growing area in the world. The opportunities in China are still vast. There is more going on than diversification; however, the explanation is rather simple. All things equal, wealth hates uncertainty. It can hedge volatility, but hates uncertainty. In particular, wealth hates anything that changes the rules of the game because then you cannot make the appropriate long-term inter-generational planning that can sustain past successes. Everyone can endure some uncertainty, but when uncertainty affects your ability to liquefy assets, yo...

When discussing efficient markets, the one thing that we know is true is that prices will adjust quickly to new information. Markets may make mistakes but they will occur quickly. There an be under and over-reaction but there is still reaction to new information. This immediate reaction is one of the reasons that policy-makers are often so careful about what they say and do. A wrong move and the markets will send a signal immediately. That kind of feedback is not always what policy-makers want to hear and the reaction may have follow-through. The information accumulated will have an impact on longer-term prices. The markets are sending signals to China policy-makers and it is saying that there are issues with current policies. China signals and response - Circuit breakers - First in and then thrown out. Investor market reaction is further exiting from stocks on this uncertainty. Circuit breakers are supposed to give investors time to assess market conditions, but that does not mean in...