Hold on tight…this is one helluva ride!
Wow! Maybe it really is a new era. The world has never seen anything like it…at least not on this scale.
Like everyone else, we are standing back in shock and awe. How much farther can this go? How much longer can it go on? That is, we wonder – how new is this new era?
We’re talking about the Great Big Bucking Bubble, of course.
Get this: on Memorial Day alone, 455,111 new brokerage accounts were opened in China. That’s as if every man, woman and child in the city of Luxembourg had opened an account, and it’s happening every day.
This puts the number of investment accounts in the People’s Republic at over 100 million. Naturally, the market reflects all this new buying pressure from The People. Stocks in Shanghai have doubled since the spring of 2005…and doubled again. Just look at the chart. Prices have gone parabolic – rising almost straight up. It’s the Peoples’ Own Bull Market…when the people are enjoying their own precious moment of happy delirium.
“It is glorious to get rich,” said Deng Tsaio Ping. And now, millions of Chinese are getting gloriously rich.
We wonder if ‘easy come, easy go’ is an expression in Mandarin. If not, someone might want to translate it. As far as we know, no market has ever gone up so steeply without going down just as steeply later on.
But, hey…dear reader…this is a new era. Anything can happen.
Meanwhile, the Chinese authorities are getting worried. They may not have seen bubbles up close, but they’ve read about them. So, they’ve tried warnings…increasing reserve requirements…tightening credit. Last week, the Education Ministry came out and told students to forget the stock market and stick to their books. Apparently, a lot of college students are standing in line to open investment accounts, next to the widows and orphans. They’re neglecting their studies, say the authorities.
But who can blame them? Speculating on stocks, especially in a bubble, is so much easier than differential calculus. It is also much more profitable. Why go to the trouble to become an electrical engineer, earning US$5,000 a year, when you can borrow, invest in stocks, and earn millions?
But the Education Ministry should relax. We have a feeling that all these green, young investors are about to get a valuable lesson.
Markets and Money