[quote=Jazzman]Firstly, can you trust the data? Secondly, they have a huge advantage is seeing the US bubble unfold, and thirdly state capitalism will have a firmer grip on things.[/quote]
That’s actually more dangerous. I refer to the belief that the state capitalism will have everything under control…just like the belief that Lehman will not bankrupt. The huge advantage that the Chinese have is their income is rising fast. So a different yardstick should be used to judge whether it is over-priced or not over there. Similar to price-to-income, price-to-rental is also not comparable because the landlord has very little holding costs (with zero property tax and very low maintenance fees due to cheap labors). So it is only reasonable to have higher multiples comparing to US…but the question is how much. My personal belief is that it has gone over the rational limit over the last two to three years but it was actually pretty reasonable before then.
Also seeing the US bubble unfold is not as big a advantage as you would think, people always discount things that do not happen around them. That’s the greatest insight that Mark Zuckerberg had: “a squirrel dying in your front yard may be more relevant to your interests right now than people dying in Africa.” Otherwise, how do you get so much nonsense in social media? Do I have to know that you walked your dog?
