China: Is This Classic Post-Bubble Price Action?

After the spectacular mean reversion of the last 6 months the near-term top in the Shanghai appears to be classic post-bubble price action. Are we staring at years of sideways to down action?

The history of bubbles would lead you to believe so:

Comments

[luv2makemonies:]

China has 1 billion plus consumers with cash to buy goods to support its economy, unlike the US they are not up to their eyeballs in debt and toxic loans. Also we owed them more than a trillion dollars, should they call the loan we would be in real trouble... lets cross our fingers and hope China continue to do well in their economy for our sake.

Nov 05 04:28 PM

[untrusting ...:]

True, but how much can the average Chinese consumer purchase with an average per capital income of something like $6K? One has to guess that most of that per capita income would barely provide for subsistence living. Saw the statistics on China per capita breakdown and it was something like 3/4 of the entire population is $6K or less in annual income. The other 1/4 is of course doing better but much of that was at about the $20K annual level.


On Nov 05 04:28 PM luv2makemonies wrote:

> China has 1 billion plus consumers with cash to buy goods to support
> its economy, unlike the US they are not up to their eyeballs in debt
> and toxic loans. Also we owed them more than a trillion dollars,
> should they call the loan we would be in real trouble... lets cross
> our fingers and hope China continue to do well in their economy for
> our sake.

Nov 05 05:11 PM

[LR European:]

That is precisely what is exciting about China's prospects. As the 3/4 of the population is lifted out of extreme poverty they start to be able to afford the non-essentials. Growth from zero to 1 is an infinite percentage move!

The recent data on car sales and white good sales in China bears out this dynamic.


On Nov 05 05:11 PM untrusting investor wrote:

> True, but how much can the average Chinese consumer purchase with
> an average per capital income of something like $6K? One has to guess
> that most of that per capita income would barely provide for subsistence
> living. Saw the statistics on China per capita breakdown and it was
> something like 3/4 of the entire population is $6K or less in annual
> income. The other 1/4 is of course doing better but much of that
> was at about the $20K annual level.

Nov 06 09:56 AM

[Alphameister:]

Jeff Nielson has a much better take on China's markets. If China is experiencing a bubble, it has the resources to make it a much bigger bubble, along with an almost unlimited capacity for catch-up growth (as noted above by LR European).

Nov 06 12:43 PM