Shanghai flu is back

To a lesser extent than in February, this morning the Shanghai flu is back. Today, Bloomberg News reports, the Shanghai Composite Index plunged 6.8% after the Chinese government raised a stock trading tax there to cool economic growth. And U.S. futures are down in sympathy. TheStreet.com reports that S&P 500 futures were down 6.5 points at 1516 and were 3.5 points under fair value. Nasdaq futures were losing 8.3 points to 1898.25 and were 5.4 points below fair value.

The same pattern -- a decline in Shanghai leading the U.S. to tumble -- took place on February 27th. Then an 8.8% drop in the Shanghai index sparked a global decline, including a 416-point drop in the Dow in the worst day for U.S. stocks since the resumption of trading following the 9/11 attack in 2001.

As I posted over the weekend, the big problem we face is that our market is linked to Shanghai's -- which is heavily dependent on superstitious individual traders. I really don't think that we can do much about the Shanghai market but I wonder whether we can do more to delink our market from Shanghai's.

Otherwise, when a butterfly flaps its wings in Shanghai, it will unleash a hurricane in U.S. markets. And that will not be good for anyone.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.