Tuesday, 19 June 2007

Where's the Chinese bubble & when will it burst

"Sir" Dr. Marc Faber is probably right - I think he deserves the "SIR" that I've added. Despite what was said by Messrs. Alan Greenspan, Li Ka Shing and other eminent economists and politicians, the Chinese bubble appears to be here to stay.

Considering that the savings rate in China is still much higher than what they've put into the stock markets (if I remember "Sir" Marc correctly, it's in the 70 to 80 percent region), it isn't surprising that "Sir" Marc's opinion differs from that of Messrs Greenspan,, Li and the others. Mr. Li, the richest man in Hongkong said on TV that PEs of 50 to 60 times cannot conceivably be unsustainable in China. But does the conventional rules of economics apply to the new-China we're seeing today? We'll have to wait and see.

Great thinkers, the likes of Adam Smith and Milton Keynes, studied trends and theorized the rules of macro and micro economics. But how could they have foreseen that the critical masses of one billion plus people in China and India can radically change the ground rules of 20th Century economic theories? It's not unlike the chain reaction in an atom or hydrogen bomb, I thought!

Remember what happened when stock markets went through continual downside corrections when oil prices shot up after escalating conflicts in the Middle East in the past, and most recently 2006? Then there's this latest round of oil price increases caused by Iran's seemingly uncompromising stance (so far at least) in their pursuit of nuclear "advancement" which hardly dented the global stock markets.

The world is going through changes, and global economies are constantly in a state of flux. Should we adapt to this changing world and start questioning economic theories of the years or decades gone by? Or do we hang on to these theories to lead us to the light at the end of the tunnel?

There are plenty of learned people on earth who constantly analyze and hypothesize through the use of sophisticated mathematical models and equations. I'm quite sure they are doing a great job, and earning lots of money along the way. But how many of these are open minded enough to realign their mindsets the way "Sir" Dr. Marc Faber did?

Don't get me wrong. I'm not a die hard fan of "Sir" Marc. But, I do honestly feel that he makes sense a lot of times I get to see and hear him comment. No disrespect to Messrs Greenspan and Li, whom I'm also a BIG fan of, mainly because of their achievements, stature and influence on this globalized economy which we're all a part of.

"So keep rocking "Sir" Marc", I would say to the man if I get to meet him face to face one day.


Rodrigo said...

Oi, achei teu blog pelo google tá bem interessante gostei desse post. Quando der dá uma passada pelo meu blog, é sobre camisetas personalizadas, mostra passo a passo como criar uma camiseta personalizada bem maneira. Até mais.

Anonymous said...

Rodrigo, how about your rendition in English? Perhaps we can all appreciate what you're saying.