The Bull in the China Shop

“New accounts at brokers are being opened at a rate of more than 200,000 a day, touching a high of more than 310,000 on April 24th. The total so far this year is more than 8 million, which is around ten times as many as in the whole of 2005, when the market began to emerge from a four-year slump.”

from “It’s like a casino set up by the Communist Party”
FT.com’s blog Alphaville*

“If the bubble were to pop, it could have a bigger impact on social stability than any previous downturn in the stockmarket’s 16-year history. There are now more than 91 million accounts held by individuals at brokers or in mutual funds. Estimates for the number of investors vary widely. At the height of the last market boom, in 2001, there were 60 million accounts but perhaps fewer than 10 million investors. There are certainly many millions more now."

from “The people's republic in the grip of popular capitalism”
The Economist**

Investment Strategy Implications

If words don’t move you, perhaps the two charts above might. The first one is the Shanghai market over the past two years. The second is the NASDAQ over a comparable two year period at the height of the tech bubble. Guess which one has risen at a faster rate? (Hint: It ain’t the NASDAQ.)


*http://ftalphaville.ft.com/blog/2007/04/30/4202/its-like-a-casino-set-up-by-the-communist-party/

**http://www.economist.com/world/asia/displaystory.cfm?story_id=9084756