Daily Investment Interpretations

August 12, 2009

2009-8-12:  The indices rebounded today. The NASDAQ Composite rose 28.99 points (1.47%) to close at 1,998.72, the Dow expanded 120.16 points (1.3%) to close at 9,361.61 and the S&P 500 added 11.46 points (1.15%) to end at 1,005.81. Oil closed up at $70.67 a barrel, while gold increased $% to $948. The VIX dropped 0.54 to 25.45. 
    Fund managers are back to buying the dips. 
    Here are two articles, pro and con, regarding whether or not the Chinese stock market is reaching bubble proportions. The 'pro-bubble' view, and Blowing bubble (video). Looking at this myself and using FXI as a stand-in for the Chinese stock market, FXI bottomed at about 20 on October 27, 2008. From there. it has slightly more than doubled to 41.54 as of today's close. This puts it, after correcting for dividends, about where it was at the peak in July, 2007. From there, after dipping in August, 2007, it soared to a "blow-off" top of about 70 on October 31, 2007, working its way down to 20 a year later. In other words, where the U. S. markets dropped by about 50% to their March, 2009, lows, the Chinese markets fell roughly 70% from their October, 2007, peaks... a factor of more than 3:1. By October, 2009, the Chinese GDP will have risen by about 20% from its October, 2007 level, so there's headroom for a modest increase in the Chinese indices before reaching the same effective level they attained in 2007. Still, you can see a case for a Chinese bubble.