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Bernanke Asset Bubble About to Start... In China

By Dr. Steve Sjuggerud
Monday, October 27, 2014

The seeds of the "Bernanke Asset Bubble" were planted when stock prices and real estate prices were crashing in 2008...
The U.S. government stepped in with a massive stimulus program in 2008 during the crisis... which caused stock prices and real estate prices to soar higher. They are still soaring to this day.
I remind you of this little bit of history because we're seeing a similar situation set up in China today...
Last month, for example, house prices in China fell in 69 out of 70 cities. China's government will certainly want to address this... It wants to keep its citizen's happy (and obedient)... so it wants to reverse this trend of lower house prices. But how?
By following Ben Bernanke's lead...
In order to stop stock prices and real estate prices from falling, Bernanke (the Chairman of U.S. Federal Reserve at the time), cut interest rates to zero and put in widespread, unorthodox stimulus programs. Now, stock prices and real estate prices are up dramatically.
With stock prices in China down more than 60% from their highs, and real estate prices falling in nearly all cities, you can bet the Chinese government will be stepping in...
China's government has been stepping in – in a big way – in both property and in the stock market...
China's government is forcing property prices higher by removing many restrictions on buying properties, making it easier for people to get a mortgage, and lowering the required down payments.
It's working already... According to Barclays Bank, just last week, sales in 32 cities rose to their highest levels this year.
In order to push stock prices higher, China's government has gone on a media blitz.
Bloomberg news reported:
The official Xinhua News Agency [run by the Chinese government] published at least eight articles this week advocating equity investing, after similar stories appeared in the People's Daily newspaper and on state-run television last month, part of what Everbright Securities Co. says is an increased government push to bolster the market. Authorities have also cut trading fees, made it cheaper to open new accounts, and organized investor presentations by the biggest listed banks in the past two weeks.

In short, China is actively trying to get the Chinese people interested in Chinese stocks.
China is trying to widen the market for its stocks, too...
China is actively figuring out how to make it easier for new companies to list on its exchange. And most importantly...
New regulations are about to come into effect that make it easier for foreign investors to buy Chinese "A" shares (just like we saw on August 25, 2006). It's called the Shanghai-Hong Kong Connect. It will allow foreigners to buy local Chinese stocks through Hong Kong, and it will allow local Chinese investors to buy certain Hong Kong stocks.
China's government is not being subtle here...
It wants real estate prices higher, and stock prices higher.
The U.S. government did its best to prop up the financial markets in 2008/2009. And look what happened – we've had the greatest stock market boom in America in my investing lifetime. (To me, it has been bigger than the dot-com boom because it has lasted so long and most sectors have participated.)
That's exactly what the Chinese government is doing today. When you look at the big picture, you see a government committed to pushing its local stock market higher – just like the U.S. government did in 2008/2009.
China is just now kicking off its own version of the Bernanke Asset Bubble. It wants stock prices and real estate prices higher, and it's going to force them higher.
They're serving it up... You should be taking advantage of it...
Buy China – particularly local Chinese stocks – now.
Good investing,

Further Reading:

Steve also thinks another cheap, beaten-down sector is a great opportunity today. "We have everything we look for in an investment," he writes. "It's finally time to buy commodities. Do it with a tight stop-loss... But do it." Find out why here.
And China isn't the only stock market primed for big gains. Steve recently told readers why it's still a great time to invest in U.S. stocks. "The way I see it, this moment – right now – is the absolute perfect moment to be in as an investor," he writes. "Conditions in America are perfect." Get the full story right here.

Market Notes

W.R. Berkley (WRB)... insurance
Travelers (TRV)... insurance
Booz Allen Hamilton (BAH)... "offense" contractor
Union Pacific (UNP)... railroads
CSX (CSX)... railroads
3M (MMM)... manufacturing
Home Depot (HD)... home improvement
Lowe's (LOW)... home improvement
Automatic Data Processing (ADP)... payroll processing
Apple (AAPL)... consumer-products giant  
Facebook (FB)... social media
Nike (NKE)... athletic apparel
Altria (MO)... cigarettes
CVS Health (CVS)... drugstores
United Health Group (UNH)... health care
Celgene (CELG)... biotech                                
Amgen (AMGN)... biotech

IBM (IBM)... Big Cheap Tech
Amazon (AMZN)... market darling
Vale (VALE)... iron-ore stock
Barrick Gold (ABX)... gold stock
Kinross Gold (KGC)... gold stock
Yamana Gold (AUY)... gold stock

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