Sunday, September 23, 2007

Big round china bubble and more

For those contemplating to put in more money or start investing in China funds, please read up on the following link.
http://www.webb-site.com/articles/incredibubble.htm


"This time is different." How many times have you heard that? As an investor, you should be aware that those are the four most dangerous words.
Walk away and ignore it every time you hear this. This time is never different, at least not in the context of economic and stock market cycles.
Asset bubbles and debt crises are as old as international lending. But I don't think we are going to have to wait too long for the next one.
The bull market of the past few years are driven mainly by excess liquidity. Yes, rich-country interest rates are still stunningly low, even allowing for global disinflation. Craving higher returns, global-portfolio funds are increasingly washing up on the shores of distant emerging markets. With growing world demand once again soaking up emerging-market exports, and with low interest rates making debt finance easy, debtor countries have the best of both worlds. But it is not going to last.
Investors ought to realize that last year's 30-40% average return on emerging-market equities was an aberration. Such explosive returns will not be repeated on a yearly basis. As all prices get higher, squeezing out similar returns will only get exponentially tougher.

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