You're right, Greenspan might not get it right. This is a personal view in any case.
For the record, I'm from China so I take a very keen interest in their market. Naturally I know many relatives and friends who can and do invest in the local market.
The exuberance over there mirrors what Hong Kong, for example, looked like in 1995 and 1996. 'blue chip' companies are trading at ridiculous multiples (we're talking 50+) and continue to power on, nearly unscathed by news of credit crunch.
If we believe this will happen long-term, either PRC deregulates much faster than what we expect and all sectors start achieving earnings in the next couple of years that reflect their multiples.
Alternatively, we could throw 'fundamentals' out of the door and accept that what applies for the western markets do not apply in PRC. Japan, Hong Kong and Taiwan looked like this back then. In the end, western valuations prevailed.
The other day there was a newspaper article here that talked about a gentleman, named Ma, who invested all his savings into this one company and made some returns of many multiples. When questioned by journalists why he's still holding on, he replied China won't crash until the Olympics because the Government won't let them. It will crash after the Olympics, and so I will sell all my shares after the Olympics. I can safely vouch that this is the sentiment all over - whether it's friends or relatives in PRC, Hong Kong or Taiwan. One must wonder, if these guys really do get it right and sell out right after the Olympics, who's on the other side buying at such high multiples?
MMX Price at posting:
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