China is the real Ponzi scheme

A follow-up to something I wrote in January. Over on The Big Picture, Andy Xie: China Has Become A Giant Ponzi Scheme.

Chinese asset markets have become a giant Ponzi scheme. The prices are supported by appreciation expectation. As more people and liquidity are sucked in, the resulting surging prices validate the expectation, which prompts more people to join the party. This sort of bubble ends when there isn’t enough liquidity to feed the beast.

The Chinese are still not buying goods and services from western countries. From what I've read they are are merely stockpiling raw materials. Stuff like iron ore and coal and oil. They are also piling into the Shanghai Stock Exchange.

How do you spell stock market bubble? S-H-A-N-G-H-A-I. China’s main share market is up 80% this year, and some IPOs have skyrocketed several times their offer price on the first day of trading. Sichuan Expressway soared 300%, repeat 300% on its opening day of trading on Monday July 27, and China State Construction Engineering Corporation surged 70% today, July 29, even as the Shanghai Stock Index plunged 5%. Of course that might just be due to a sell-off in most other stocks so people could climb onto the IPO bandwagon. Chinese investors routinely liquidate existing positions to pile into new issues.

China is Japan circa 1990, only very militaristic. The China bulls are delusional.