Could the phenomenal growth train get derailed?
I remember my colleague Clive Granger telling me over a year ago about the conversations he had with people when traveling China. Everyone he spoke with seemed to believe that (1) the Chinese stock market was at that time experiencing a bubble that was going to burst, and (2) the crash would not come until after the 2008 Olympics. Clive expressed amusement that no one seemed to have worked backwards from this presumed equilibrium– if you know the market is going to crash in August 2008, anybody with any sense would sell in July. And if there’s heavy selling volume in July, the market’s heading down, not up at that point, so the logical thing to do is to get out in June. But if the crash is going to begin in June, then what you should really do is….
I was reminded of Clive’s remarks when I saw CR’s graph of the 50% plunge in the Shanghai Composite since late last year.
So why didn’t you tell us this story a year ago, you ask? Sorry– it slipped my mind until just now.
Not to worry, though. Yesterday the CSI 300 surged back up over 5%. And besides, the Olympic Games are still a couple of months away.
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