China's Bubble About to Burst?

Even before Sir Isaac Newton pronounced the Law of Gravity, most of us non-scientific mortals understood that an object, having been launched into space, will fall unless some force continues propelling it upward. Chinese stocks, having been thrust upwards by some powerful force - dare we call it mania? - will thusly fall someday to earth. Has that time now arrived? Is China's bubble about to burst?

This Bloomberg article weighs the opinions, starting with this: (Note: "opinions" not evidence.)

It’s no longer a question of whether China’s stock-market rally is a bubble, but when the bubble will burst.

Ah, si signor. You're pretty sure about that, eh? But what about this?

“The idea that this is going to suddenly peak and burst, and you’re going to have this sort of cataclysmic crash, and it’s all going to be over -- that’s way too pessimistic,” Carr said in an interview on Bloomberg Television in London. “What you’re going to see is a correction in some of the really highly-valued areas.”

Thus opines Miranda Carr (again, opine = giving an opinion), to be immediately parried by Pau Morilla-Giner, the chief investment officer at London & Capital Group Ltd.:

“It smells like a bubble, it looks like a bubble, and it walks like a bubble,” Morilla-Giner said in an interview on Bloomberg Television in London. “Steer clear, that is the trade.”

So what's a fella to do? Well, had you read these opinions earlier last week, you might have simply waited these folks out until Friday, when, lo and behold:

Shanghai and Shenzhen benchmarks fall into correction territory, ending down 6.4% and 5.9%, respectively 

That fall was just for Friday.

The Shanghai Composite finished down 6.4% at 4478.36 and lost 13.3% for the week...The smaller Shenzhen benchmark also fell into correction territory Friday, finishing down 5.9% at 2742.18. The benchmark is now down 12.7% from its record close of 3140.66 on June 12.

So were the naysayers right. Is it a bubble bursting? Were you wise to steer clear of China?

Ah, but don't forget, there's always the hope of central bank intervention; or should we call it "interference"? And why not expect it. It's just what central banks - all of them now - do these days.

Some analysts now think Beijing is more likely to step in with further stimulus, helping prop up the markets.

If your idea of speculation - it surely can't be considered investing - includes China's fun house exchanges, you're in the right place. Keep at it. You'll surely succeed in seeking and finding enough entertainment to provide the amusement your otherwise limp, boring days and nights currently lack. On the other hand, if life finds you engaged in more interesting pursuits, leave China to the thrill-seekers and stick with your ideally balanced investment portfolio, ex-China.

Good luck!