The US equity markets aside, you would be hard pressed to find a stock index that is not up this year. Asian markets (Nikkei and Hang Seng) are up 14%, U.K.’s FTSE is up 6%, Germany’s DAX is up 24% and Russia’s RTS is up 27%.
We then hear anecdotal accounts of Chinese housewives speculating in the stock market on margin and Hong Kong’s Exchange CEO suggesting that investors should not worry or panic. The margin debt is through the roof, particularly in Asia, and as the chart above suggests, we are now experiencing “Panic Buying” on some of the indices. Just as we have experienced on Nasdaq in early 2000.
Bubble or not…….what is going on?
The only legitimate rally we have is in the Russian market. It was destroyed last year and as I have suggested so many times before, it is dirt cheap. As far as I am concerned it is the most undervalued market in the world.
All other rallies are incredibly speculative, driven by their respective central banks, QE, and competitive currency debasements. Will the rallies continue? Unlikely. When their respective tops are reached, most likely in a spectacular blow off fashion, most will follow the US to the downside (when the US bear market starts). And just as fast as they have came up. Beware.
