Friday, October 26, 2007

5-Wave Spice Parabolic Chicken

The Shanghai index bounced moderately Friday.

I'll be talking a lot about Shanghai. It has emerged as the mother of all bull markets, eclipsing every bubblicious-move world markets have ever witnessed; in terms of how far-how fast.

How far? Here are some interesting facts reported today in a Forbes.com article:

The Shanghai index rose 500% in a little more than 2 years. Remember the pullback in February when that index smacked-down 10% in a day, sending the rest of the world into brief hysteria? Shanghai is double that level now.

How does it compare to other historical moonshots?

The Japan Nikkei rose under 300% over a longer period of time, before giving it up for good; so far.

From the '98 lows to the faithful high in March 2000, the Nasdaq Composite rose 240%.

And that Obscene Serene rise in the Dow during the Roaring Twenties? Up under 300% over a span of 5 years.

According to the Wall Street Journal, average first-day returns for Chinese IPOs in 2007 have been 192%. Think about that for a moment.

The Shanghai Composite index's price-to-earnings ratio of 68-times-trailing-12-month earnings is virtually identical to the Nasdaq early 2000 but slightly below the Nikkei's P/E peak of 73.

Obviously, this is the mother of all emerging markets (did I say that already?). You would be in the minority to claim that mainland China will not surpass every other major economy in the years to come, including US and A. Even Jim Rogers is willing to ride out a 30-40% correction. In his view it would constitute a natural correction within a much larger trend.

I don't mind 30-40% drops - as long as I'm short. Anyway, just salivating here at the moment. Maybe next week I'll enter the dragon.

I did short SLB and GRP in the Oil Service group today. That sector broke down pretty hard last week and the bounce has been peeked, even though crude oil stormed to higher highs this week. I'm benching Schlumberger on the 50-day moving average and Grant Prideco on the 200 (which it broke yesterday following earnings). As far as the rest, I haven't changed anything since cutting back the index shorts the other day. Prolly laying low there until Fed Wednesday.

Good weekend.

No comments: