Bubble in China Stock Market Grows As Blackstone Share Price Shrinks

The Economist includes a handy bubble reference chart. It shows how similar were the Japanese stock market bubble of ’89 and the US bubble of ’29 – a point made in a previous book by your editor (along with Addison Wiggin).

In the six years preceding the top, both markets rose about 300%. Subsequently, prices were cut in half…or worse.

The Economist includes a chart of the Shanghai stock exchange, circa 2007, for comparison. What we notice is that prices in China have not reached the levels seen in the other notorious bubbles. On the other hand, the rise in Chinese share prices is much steeper. It has all happened in the last 18 months. The Economist assures us that this bubble is not ready to pop – because the bubble itself is not mature. We’re not so sure. Generally, the steeper the increase in prices, the faster the subsequent decline. Easy come, easy go.

But analysts have never been more bullish on China, says today’s International Herald Tribune. “We’re still in the middle of the bull market and the uptrend is irreversible,” says Zhang Shibao, perhaps exaggerating.

Blackstone founders wouldn’t sell their company cheap, we guessed at the time it went public. If they were selling at all, it was because they thought the masses would pay more for the shares than they were really worth. Of course, it is too early to tell how well buyers will eventually fare, and the worldwide credit bubble hasn’t even begun to deflate, but yesterday Blackstone shares fell below the IPO price.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Bill Bonner

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