China

I've had a couple of thoughts rattling around in my head lately about the current irrationality in the stock market.

The U.S. stock market seems to be on a rocket trajectory upward. No matter the news, stocks just continue to go up. Many are speculating that this rocket is propelled by Chinese fuel. As proof, it's offered that while the U.S. market does well, the international markets are leaving U.S. in the dust. The thinking goes that with the Chinese growing at well over 10% per year, they're a fueling and international stock market bubble.

I really believe there is much validity in this argument. And the downside is that the Chinese government is trying (without success thus far) to slow things down. A sky-rocketing Chinese economy is fueling excesses in their economy, most notably inflation and a stock market that makes ours look like it's flat. It appears that Chinese central bankers are continuing to try to slow things down with higher interest rates.

Suppose they're successful?

It would seem to me that the end of this particular stock market party will occur when the Chinese economy slows. And if it slows down significantly, look to the U.S. stock market to begin a bear phase .... perhaps a long one. Isn't it interesting that if all this is true, the U.S. has now gone from the preeminent world economy to a passenger in the backseat of a Geely?

Update: Evidence:

"China is on its way to becoming the superpower of the 21st century, and will play the same role that Britain and the US did in the 19th and 20th centuries," stock-market guru Jim Rogers is convinced. To profit from China's ascent, you should invest in commodities, he says, but he tends to advise against buying Chinese equities during the bubble periods.