Millions of investors around the world are watching China's stock markets with bated breath, given that the Shanghai and Shenzhen bourses have lost more than $3 trillion in market capitalization between them over the past three weeks – a real money amount that's greater than Brazil's annual output or Spain's entire stock market, according to Bloomberg.
Bluntly speaking, they're hoping the "bubble" won't pop.
Well, you and I both know that "hope" is not a viable investment strategy. In reality, a Chinese market correction is exactly what's needed and what every savvy investor knows has to happen, even if they don't "want" to see it.
Once you understand why, you won't want to miss out on what happens next.
Here's what most investors are missing and how to get a piece of the Red Dragon.
Extraordinary Volatility… and Uncommon Profit Potential
Legions of "experts" are falling all over themselves recently to pronounce China's imminent collapse. Never mind that most of them have never set foot in country, but it's hard not to pay attention.
More than 40% of Chinese stocks were halted last Wednesday, meaning trading was suspended for more than 1,200 of 2,808 listed issues, according to Cninfo.com.
Comparisons between what's happening there now and what happened here in 1929 just before the Great Depression raged across the Internet, even though Chinese markets seem to be gaining at least some semblance of stability.
… The Parallels with 1929 Are Uncanny – The Daily Telegraph
… Has China's Bubble Popped? – Forbes
… Forget about Greece, China Is Cause to Freak Out – MarketWatch
Things are so bad that even Chinese regulators are reporting that this is the largest wave of trading halts in the history of that country's equity markets. Given that China's bureaucrats are notorious for publishing only sunshine accounts of what's happening there, that's a serious development.
Yet, it's not the end of the financial universe. In fact, China's markets have a long history of growth and contraction.
From 1990 to 1992 they rose 629% and fell off 71% before a brilliant U-turn and another run up of 97% into early 1993. Then they took off on a brilliant run that saw the Shanghai index peak eight years later in June 2001 after it'd tacked on additional gains of 156% – staggering growth considering the gains it was already building off of.
The next run up will be, too.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.