Old Fart Bubble thoughts...no, not gas, China. :)

O

oldschool

Since we've got some old farts, I think this thread might be interesting.

If you're an old fart and have seen bubbles come and go, what would you say is one thing (out of many perhaps) that would make you think a bubble is close to bursting?

I am specifically talking about China right now. Their mkts seem extended - but who the heck knows where it stops or why? I'm no genius. I'm not saying that China is close to crashing. I personally see the mkts higher before any big correction/crash - assuming the mkt stays exponential. I think at a minimum, we can all agree that it's extended.

So, fwiw, here's mine.

"When the blackjack dealer tells you there's free money in the mkts, look out, we're close to the top."

Near the end of 1999, I went to Vegas for some R&R. While playing blackjack, the dealer says something like, "you want to know how make some real money and much easier?" Curious, I said sure, tell me. He says, "Buy an internet stock, any internet stock. The internet is going to change the world and the time is NOW!" The mkt crashed in less than 6 months.

J. Livingston used "dentists" (my memory sucks, is that right?) as an example in his classic book, for me it was a blackjack dealer, but the concept's the same. When an avg. joe who would normally never talk about stocks tells you there's free money...hmmm
 
Quote from oldschool:

Since we've got some old farts, I think this thread might be interesting.

If you're an old fart and have seen bubbles come and go, what would you say is one thing (out of many perhaps) that would make you think a bubble is close to bursting?

I am specifically talking about China right now. Their mkts seem extended - but who the heck knows where it stops or why? I'm no genius. I'm not saying that China is close to crashing. I personally see the mkts higher before any big correction/crash - assuming the mkt stays exponential. I think at a minimum, we can all agree that it's extended.

So, fwiw, here's mine.

"When the blackjack dealer tells you there's free money in the mkts, look out, we're close to the top."

Near the end of 1999, I went to Vegas for some R&R. While playing blackjack, the dealer says something like, "you want to know how make some real money and much easier?" Curious, I said sure, tell me. He says, "Buy an internet stock, any internet stock. The internet is going to change the world and the time is NOW!" The mkt crashed in less than 6 months.

J. Livingston used "dentists" (my memory sucks, is that right?) as an example in his classic book, for me it was a blackjack dealer, but the concept's the same. When an avg. joe who would normally never talk about stocks tells you there's free money...hmmm
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Not really an old fart just yet, but I'm trying.

It is a foregone conclusion that China is 'bubbly', but the real question is - where are we in the bubble?

Is this 1997 or 1999 all over again?

FWIW, I think that mom and pop have largely left themselves out of the china bubble due to its perception of 'riskiness'. Even the FXI ETF has only been around since late 2004. Vanguard still doesn't have a china based fund. While there certainly is no shortage of mutual funds for entry into china now, I think that plenty of folks have watched this run up with disbelief and are waiting for the inevitable retracement to get in.

I can't say that I might not join them in adding to my position!

It is interesting that India is a similar economy to china, but note that you don't have an ETF & have only a handful of mutual funds and closed end funds to invest there.

Wait until next year, when mom and pop take a look at the amazing 100% returns from china this year and start making some silly argument about how China is going to explode after the olympics, etc... and then wait for the inevitable.

That's my scenario. I may or may not be correct.
 
It's gotta be very near the top, since just a few months ago they were opening up something like A MILLION RETAIL ACCOUNTA PER DAY... so there can't be that much money left from the public to prop the markets up... which means from here, if you can sit through the pain, it's got to be a long term short...
 
Quote from NYOBScalper:

It's gotta be very near the top, since just a few months ago they were opening up something like A MILLION RETAIL ACCOUNTA PER DAY... so there can't be that much money left from the public to prop the markets up... which means from here, if you can sit through the pain, it's got to be a long term short...
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Estimate of 1.3 billion Chinese. That would mean there are 1,300 days, or 3.5 years, before all Chinese people have trading accounts.
 
Although I am not old enough, I did go thru late 1990s.

In late 1990s, internet liberate individual investors from traditional brokage firms. That means you have a bunch of newbies in the market.

Now in China, everybody get the first taste of capitalism and it is the same way. Bunch of newbie in the market.

In late 1990s, internet growth is real. The market is ahead of itself.

Now, China growth is real and once again, the market will get ahead of itself. Strangely, the P/E ratio is still lower than late 1990s US stock.

Forget about fundamental, this is a pure supply and demand game. Once everyone in China that can invest in the stock market has done so. That's the end period. Just like in 2000-2001, people will panic and the market will crash horriblely.

So, let the guessing start as to when the capital will dry up...:)

Ask yourself, if you re-live late 1990s and you know it is a bubble. How would you play it?
 
We're in the middle of the parabola stage of a bubble, usually when the moves are the largest, but also when the reversals are the sharpest.

One thing people have to recognize is that the internet bubble had stages where some sectors were more in favor than others as the bubble went on, and remember, that near the end of the bubble in early 2000, the strength expanded into semiconductors and biotechs.

When you see the strength in China expand beyond Hong Kong to parabolic moves in Taiwan, Singapore, Korea, etc, you know the end is near. Right now, those other markets are strong, and entering the parabola stage which China is already in. Once that parabola stage goes on for a little while, I think that's when the end is near.
 
A bubble is when people from all flelds leave their jobs to make a living speculating in a market e.g. Daytrading 1999, housing in US. The markets are just not that easy except for a brief period near the top.
 
Quote from kiwi_trader:

But only a tiny fraction have the money to participate in this particular gamble.
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They just need to use their newly issued credit cards. I'm sure Capital One would be willing.
 
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