The Mainland Chinese stock market is booming, and this makes me nervous. I've spoken to colleagues who cannot visit China without being asked by everyone from taxi drivers up which stocks they should invest in. Stories abound of students investing their university fees in equities in the hope of making a quick profit. Retired people investing all their retirement savings. As a rule of thumb, when everyone else to too eager to invest and doesn't seem to understand the risks involved, the market is suffering from a bubble.... and it's time to sell before the coming correction.
But maybe there is still hope. Even a bubble may ultimately be good for China's economic development. Daniel Gross argues that past bubbles have been good for the US (see here). I hope the same can be argued for China.... but I'm still very skeptical.