One of the notable differences between the US market bubble and that of the Nikkei in the 80s, is that the Nikkei basically had just one peak. Whereas we had separate real estate and stock market peaks, Japan basically had just one.
Doug Short is fond of point this difference out when he draws up his bubble vs. bubble charts.The separation in time of our bubbles is a key reason why our history looks different than Japan’s.
It’s with this in mind, that it’s worth paying attention to the behaviour of the Shanghai markets these days.
Last night stocks soared following a report that there would be no new property taxes for three years.
This is easily expected behaviour: It seems most days the market moves based on the latest murmurings about real estate.
When leaders signal looseness, stocks go up. When they signal tightness, stocks go down — the bottom line though is that the two markets are tightly linked, a la Japan.
Of course, one key difference is that Shanghai is well of its medium and short-term highs, which, at least in terms of the shape of the market it, separates it from Japan for now.