International Law

Idiotic China Stock Market Blather

By Stan

I guess making fun of Wall Street is a relatively easy thing to do these days since the financial services sector has driven the world economy into a ditch. We’ve fallen, and it’s going to be difficult to get back up again.

Anyway, I think it’s still important to point out when the Wall St. mentality rears its ugly head.

Case in point, a post on Seeking Alpha, a stocks site that must have been red hot for the past couple of years and now is probably trying to find out how to deal with today’s new economic environment.

Well, this doesn’t look all that impressive:

[China's stock market] is now up 47% from its lows late last year.

As shown below, however, China’s Shanghai Composite still has a long, long way to go before it makes a dent in the losses it experienced in ‘07 and ‘08. As shown, even after its 47% run, the index needs to gain 142% to reach its old highs. From its peak, China is still down 59%. Conversely, the S&P 500 is down 46% from its peak and only needs to gain 84% to reach its old highs. Emerging markets like China have rallied significantly, but since its starting base was so low, its market is still in worse shape than the US.

OK, what are we (the layperson reader) supposed to take from this expert advice? The stock market here is good, or bad, or just fair and is improving? Either way, I’m not sure what the point is. And comparing the stock market here to the U.S. is really silly given the different forces at play in the two countries’ economies (and stock markets).

Here’s my big problem with this, though. Seemingly the ultimate goal here is for the stock market to reach “its old highs.” And there is a lot of room for improvement since its current value is still far off of those old highs. This is, and I regret my language, stupid commentary. The “old highs” were achieved in a bubble and had very little relation to reality — those values were ridiculously high and were bound to come down, global recession or not.

Anyone looking at what the high number was without taking a moment to look at the big picture and why those values were achieved in the first place, and then evaluating present performance based on those values as some sort of achievable goal — well, this is either very lazy commentary or knee-jerk idiocy. Either way, it does not make the financial services commentariat look all that useful.

It’s like shooting fish in a barrel.

© Stan for China Hearsay, 2009. | Permalink | No comment | Add to del.icio.us

Full post as published by China Hearsay on April 14, 2009 (boomark / email).