Tuesday, October 9, 2007

Chinese Bubble

It seems that most investors think that China is in a bubble and it's ready to pop soon. Maybe it is and then again maybe it's not. First off notice from Mid 01 till 05 the Chinese market went through a devastating bear market . The SSEC lost more than half it's value. From that point the market has blasted off to a little over 400% gain. Impressive to say the least. But not all that unusual. Many secular bull markets can tack on 2000% before they're done. Look at the Nasdaq from 1980 to 2000. It gained 2000%. Granted the Chinese market has made those gains rather rapidly. I frequently hear about Chinese public piling into the markets as a sign of the end. However it usually takes about a year and a half of this kind of public participation before the market tops. Keep in mind the total population of China. The number of retail investors is still rather small compared to that huge population. I think I would hold out the possibility that China is exploding economically and there may be considerable upside yet before the inevitable correction comes. Of course it will come. When it does it's going to be one heck of a buying opportunity.