the chinese stockmarket bubble.

Seen the parabolic Shanghai Composite Index lately ?
Look out below...

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'Bull In A China Stock.'
www.elliottwave.com
2/7/07

The year is 2005.
The Chinese economy has expanded by nearly 9% annually for the past
eight consecutive years. Every major news source from here to Hong
Kong confirms China as the coming world economic power AS every
major Fat Cat Corporation from Google to General Motors hitches its
wagon to the Red-Eye Express.

Meanwhile, China's main stock index -- the Shanghai Composite -- is
about as popular as the Bubonic plague. The index places third-
WORST-performer among the 78 global benchmarks tracked by Bloomberg
after losing over half its value since 2001 -- an avalanche unabated
by the listing of 1300 previously state-owned companies, most of
which remain mired in scandal, secrecy, setbacks, and
stagnant/shrinking earnings.

Now, before you go and let bygones be bygones, let's fast forward to
the year 2007. The Chinese economy has expanded by an average 9%
annually. Every major news source from here to Hong Kong confirms
China as "The next economic superpower." As for the Fat Cats --
well, they're racking up more frequent flier miles to the Far East
than Brangelina.

Meanwhile, the Shanghai Composite has soared over 200% to an all-
time record high. Mutual fund managers, manicurists, and mothers-to-
be stand in line to get a piece of the red-chip pie while day
traders stay at home watching "Stock Market Today" in between
Googlechats with their brokers.

The majority of companies listed on the exchange remain mired in
scandal, secrecy, setbacks, and stagnant/shrinking earnings.

To make a long story short: The same fundamentals that prevailed
when China's stock market was being fitted for a coffin REMAIN
unchanged as the market is now fitted for a financial crown.

Eskimos have 23 words for "love."

Economic leaders in China have one word for the condition whereby
investors take out loans on their cars, homes, and credit cards to
buy shares in a market in which 70% of the companies do not live up
to Western standards in terms of returns or profits: "Mania."

In late January, Cheng Siwei, vice chairman of the National People's
Congress took the growing chorus of warnings against "blind
optimism" in China's stock market to this deafening pitch:

"There is a bubble going on. Every investor thinks they can win, but
many will end up losing. But that is their risk and their choice."

On January 31, the Shanghai Composite Index suffered its biggest one-
day drop since the measure was introduced AFTER lawmakers said
China's shares were "overvalued."

In our experience, a market that has nothing to be afraid of doesn't
fall to pieces after someone compares it to puffed-up blowfish.

Yet, the stock price recovered, as did the public's faith in the
upside potential of the market: In 2006, 2.7 million investment
accounts were registered in China -- three times the number in 2005.
Reports of a "rational bubble" reign supreme, "the overall pattern
of the bull market" remains intact, and DVD salesmen in Shanghai
slip stock tips in their box sets.

Sound familiar?

When a nation's financial leaders grow more fearful as its financial
public grows more fearless, the larger trend has reached a point of
no return.

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