Lesson Learned From China: Buy and Hope to Hold

Last week I mentioned that China was down a lot and I questioned whether it might make sense to dip a toe back in.

After a couple more down days, it has had a couple of very big up days. The move is being attributed to a decrease in a tax that was recently increased to stem stock market speculation.

The government's involvement on both sides belies the relative newness of stock market investing for the country. It seems to me that with newness comes the potential for mistakes. Mistakes of this sort don't necessarily make China any more or less an attractive destination but I do believe creates a visibility for bigger booms and busts to continue into the future.

This all might flow into an idea I have expressed before that maybe buy and hold should be replaced with buy and hope to hold. If you bought just about any Chinese stock in 2004 or 2005, you have made a lot of money. If you still have that same stock you are probably down quite a ways from its peak. Perhaps this is a lesson for the future. There is nothing wrong with taking a little off the table in a stock (or narrow based fund) if it doubles much faster than the market.

Comments

[city]

David, seriously What would you call what Fed Ben did last 4 months ? Free market adjustment instead of panic intervention?

Come on guys; Why everything Chinese government did is always considered second rated?

What a pity you guys do not have the guts and insight to see this on going Credit crisis is the the direct result of your governemnt's policies during the last 15 years!!!

[semuren]

city, I think this is just the same post you wrote on another China related article. But you do make a very good point. While I am no fan of the CCP/PRC party-state, and tend to think of the Chinese markets (A and B shares) as a fixed game for inside players, the Fed's recent actions dug away the high moral ground of the US markets. They still might be the biggest and most liquid markets in the world but the privatize profits, socialized losses, moral hazard be damned Fed actions have brought about a convergence between the two styles of market regulations.

[thechinastory.org]

To the author. How would you know when to take the money off the table? If you take too early then you will have missed the long bull between 2005 in 2007. If you're lucky enough to have held between this period then that it is very likely you have held onto the dip in 2007-2008.

[RogerNusbaum]

I have been writing about being in china since 2004, i wrote about selling in spring 07, this article is obviously about being close to going back in.