Yes, if you ask the Chinese who are putting their homes up as collateral to buy stocks. But what goes up does not always continue to go up. Growth in China has been phenomenal and stocks could continue up for a while, but there is a big chance the China stock market bubble will soon pop and send stocks plummeting back to earth. We saw it in the US with the dotcom bubble and the recent housing market bubble. At the time it seems like these investments can’t lose, but they all eventually do. Smart investors take advantage of these run ups then make sure they are clear when the bubble bursts. Now is the time to step away from the Chinese stock markets.

Now that we understand what is going on with the Chinese stock markets there are two ways to approach it. The conservative, smart investor would stay clear of China. Take any profits and move on. The risks of the China bubble bursting outweigh the rewards, especially considering safer investments in other countries. Being greedy and holding Chinese stocks or investing now in China can be disastrous and it’s better to walk away with money then to lose it by pushing the limit. I learned that lesson in Vegas!

However, if you simply must be a part of the Chinese bubble, do so conservatively with an eye on the exit. I would recommend using stops or playing very short term investments, jumping in and out by taking profits. You have a good chance of making some fast money but you also have a big chance of loosing money.

Market Flavor recommends looking at Europe. With Sarkozy now in charge in France, the French stock market looks good, as well as most other western European stock markets. But watch for the comeback of the US dollar. It shouldn’t happen until late 2007 at the earliest, but keep an eye on it.

Tags:   Buying Stock   China Stock Bubble   Economic Cycle   Investments in China   Stock Market Trend   Timing the Stock Market   When to Invest in Stocks  

Posted on May 7, 2007 1:01 PM | Digg | del.icio.us