With news that consumer prices in China soared 6.9% in November, investors should take this as just another sign that the bubble that is the Chinese stock market is in "popping" mode. Investors shouldn't get fooled by analysts saying not to worry about what actually is happening in the economy because growth is so strong. Surging inflation is usually a good sign of what's in store for an economy. Emerging market investors should look at other markets like Israel for instance. I don't want to be a conspiracy theorist, but could it be that the big institutions continually say not to worry, because, with the Chinese stock market still being quite illiquid, they are trying to unload all their positions?
Peter Brimelow had a really interesting piece about the potential for a crash in China. He quotes former investment banker Mark Hutchinson:
"To see why a crash may be coming, it is worth examining the behavior of the China Investment Corporation, the $200 billion sovereign wealth fund set up by the Chinese government in September ... Six weeks ago, the power of sovereign wealth funds was celebrated and China Investment's moves into the market were awaited with bated breath.
Closing Bell: Can't go up every day (BAC, HE, HPW, COMS, BRCD, WMT, AMD)
Wal-Mart grows profit and cash flow in Q3, but comps still ailing
Chasing Value: Ten stocks for 2010 -- Part 2
