Shanghai 2007 vs. Nasdaq 2000 -- Deja Vu?

Upon seeing China's Shanghai Composite break through 5,000 recently, we were reminded of another index that went through 5,000 after quite a bit of a run back in 2000.

Below is a price chart of the Nasdaq and the Shanghai Composite since 1995. As shown, 5,000 only lasted two days for the Nasdaq before the index declined all the way down to 1,114 by 10/9/02. Looking back, it's amazing how steep the ascent for the Nasdaq was, and the Shanghai's ascent has been even steeper! After today, the Shanghai Composite has now been above 5,000 for two days as well. Let's hope China's markets can hold up a little better than the Nasdaq did.

click to enlarge

Comments

[BillCust:]

This is more tricky than you say! Let's say you have a time machine back to Dec 1999. The new year's gala's on big time and Nasdaq was at its peak. But the current peak is 7,000, not 5,000.

For some reason history changed and the Chinese went to buy tech stocks instead of bonds, adding to the chaos bubble. What will you do? Sell everything cuz in your "universe" it was supposed to be 5,000 going down to 1,500?

But then you realize this is a parallel universe. The psych limit is 10,000 and you may well get burned if it does go there before turning to say, 1,500, like your original universe?

Real supply and demand is of course, dictated by Real economics, I agree. But kindly take a look at Chinese history back 3,000 years and see if you can find excesses, tragedy, accomplishments, or unusual activities that are NOT universe-boggling when they occured in China.

2007 Aug 28 10:44 AM