Selected excerpts from a Page One article in yesterday’s WSJ, China’s Stock Surge Raises
Fundamental Questions, by James Areddy:

“Stock markets in China are dominated by as many as 50 million individual investors, who are responsible for about 70% of the trading … On a recent night in Hangzhou, about 2,000 Chinese paid $800 apiece to see American investing guru Jim Rogers dispense advice. [a quick $1.6 million (gross) for Jimmy] … One investor paid $53,000 the next night to talk stocks in a private dinner with Mr. Rogers [+$53,000, nice work if you can get it] …

In the 1980s, Japan and Taiwan had two of the hottest economies and markets anywhere. A potent brew of conditions combined to supercharge the stock market in Japan and Taiwan: rising land values, strong corporate profits and currencies, low interest rates, high savings rates and limited investment alternatives — factors all seen in China today. In 1990, the markets cracked. Taiwan’s market dropped 79% in half a year. Japan entered a prolonged slump, with the Nikkei Stock Average bottoming out 13 years later at just a fifth of its peak value.

Chinese shares’ price-to-earnings ratio is 69 times last year’s earnings on the Shanghai market … price-to-earnings ratios peaked at 71 in Japan, 100 in Taiwan and 123 on the Nasdaq before those markets crashed, suggesting China is getting closer to the precrash peaks seen elsewhere.

… only about 22% of Chinese financial assets are in securities, far less than the U.S.’s 52% level … Profits of listed companies grew 74% in the first half of this year. But that number offers cold comfort, since some 38% of total net income was from companies’ own investments in the booming stock market, not from their operations. [circularity?]”