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Hope is such a, well, hopeful word. Pandora was grateful for it. When she opened up that box and let loose all the evils of the world - at least hope found its way out too.
But in the world of investment, hope can become an evil in itself. That's what happened in the late 1990s, investors all hoped dotcoms were going to start raking in the bucks - and when those hopes were dashed - dotcoms crashed.
In the world of investment, hope has another word. It's also called p/e ratio, and is used to measure the relationship between a company's profits and valuation. If this ratio is high, then it means shareholders are hoping the company is set for strong growth.
It's all quite significant, because right now there is an awful lot of hope invested in the world's largest company - at least largest by market valuation.
This week, PetroChina listed on the Shanghai stock exchange. So what? The company was already listed in Hong Kong and New York, what difference does another listing make you might ask?
Well, normally it makes little difference, but this time, the difference is worth around $650 billion dollars, That's enough to catapult the company from being worth a little less than Exxon Mobil, to having a larger valuation than Exxon Mobil and General Electric combined. It becomes the world's number one company by market valuation.
It's also enough to give the company a p/e ratio of 50, compared to a p/e of about 13 for Exxon Mobil.
Or to put it another way, given that the Chinese firm's p/e is three times higher than Exxon Mobil's, which is worth around $485 billion, then it has got around $733 billion of above-average hope invested in it.
Last year, PetroChina had around 20.15 billion barrels in oil and gas reserves. Compare this with Exxon Mobil's 22.1 billion of reserves at the end of last year.
But even before the listing of PetroChina on the Shanghai exchange many were saying it was too expensive. In fact recently, the wise man himself, Warren Buffett sold his 1.3 per cent stake in the business and at the time warned that many Chinese companies were overvalued.
Many argue that PetroChina' potential growth is not that much different from other oil companies - that in the case of oil business, China's growth is manifesting itself in the form of a higher oil price and all the big oil companies should benefit from that.
It appears, that once again it's the fact that Chinese investors have limited places to put their money which has boosted the PetroChina share price (the share price trebled this morning in China).
And yet in Hong Kong, yesterday also saw big falls on the Hang Seng - down 2.8 per cent. There was more than one reason for the fall, and of course worries over the continuing effect of the credit crunch on banks didn't help, but, the main reason given for the Hang Seng run was the announcement by China that it was to delay plans to allow Chinese citizens to invest in companies listed in Hong Kong.
It was strange really. The Chinese government talked about needing more time to study the risk for Chinese citizens in investing into Hong Kong-listed companies and to improve the knowledge of its citizens of this market-place. And yet, while it prevaricates, worrying about the risk its citizens will be opened to if they invest further afield, the Chinese themselves are taking horrendous risks by buying shares in companies like PetroChina with absolutely astronomical p/e ratios.
Imagine risk taking is a box. Then it is as if China's government has two boxes. There's the one based in Shanghai that contains far, far too much hope, and there's the one for Hong Kong that has a good healthy dollop of realism thrown in. Pandora never had so much choice.
Has the word bubble become the most overused word in the media business pages of late? It seems difficult to pick up a business newspaper without finding some prediction or another than this market, or that sector is about to crash.
The truth is, however, today we are seeing an unprecedented number of sectors and markets seeing valuations and growth like never before. Of course, it might simply be that the rise in globalisation, the phenomenal growth seen in China and India, and the power of modern technology means that suddenly the rules have changed; that business and the economy can take the hype.
Others argue bubbles are a good thing. Daniel Gross, author of the book "Pop! Why bubbles are great for the economy", argues that the US economy has thrived in part because of bubbles exaggerating the potential for exciting new technology, then crashing and creating cheap capacity. For example, Google was able to buy a network of servers big enough to feed the US market, on the cheap. Or, further back in time, Dun and Bradstreet was able to benefit from a bubble in the creation of a US-wide network in telegraph wires; this market crashed, but the end result was low cost communication. Later that century business benefited when an over supply of railroads led to cheap transport, and trade across the states then boomed.
Above all, it seems sometimes business needs a clan out. The UK, in the years of the post Thatcher revolution, was lean and fit enough to take on the world. Today, maybe 15 years of uninterrupted growth has created an economy that has grown too fat.
Some bubbles are, of course, just plain silly - South Sea, and Dutch tulips, for example. But others simply occur because an inherently good development is just happening too fast. When the crash takes place it’s nasty, but after the fall out dissipates, the result is a leap forward.
Maybe though, the real crisis does not relate to a bubble at all.
Few would claim the US auto industry is a bubble, but it’s in dire straits. Chrysler is being sold to private equity outfit Capital Management for minus $600 million or so. At least that's the price when you examine the small print. So, if Chrysler is effectively worth less than nothing, maybe the same could be said of GM and Ford.
If the US auto industry collapsed, the fall-out would be far and wide indeed.
China, is the economic wall made of air? http://www.find.co.uk/news/155383005
Is the pain in Spain set to flood the drain? http://www.find.co.uk/news/155383009
Consumer electronics: 2009 could be B day
http://www.find.co.uk/news/155383013
House prices: UK still leads the pack for overvaluation http://www.find.co.uk/news/155383017
Can stock market run continue? http://www.find.co.uk/news/155383022
Inflation: maybe the real danger lies with the bubbly in a bottle http://www.find.co.uk/news/155383027
Well, is it a correction or a bubble? Maybe it was both.
In China we are seeing a correction. The economy has grown at an unprecedented rate, assuming Uncle Sam's protectionists don't get in the way, this is set to continue - albeit at a less exponential rate. This week's falls were little more than an adjustment as markets discount some of the overexcitement.
But the Chinese stock market is a minnow.
Is it really rational for the giant markets of the US, UK and Japan to react the way they did, just because China saw a correction?
The danger is this: in the west we are witnessing something far worse, the beginning of a bursting of a very unpleasant bubble indeed.
It was created as central banks across the globe reacted to the troubles of irrational exuberant '90s buying, of fear created by 9/11, and the paranoia caused by the financial scandals that brought down Enron and Worldcom, by pumping money into the world, and by slashing the rate of interest.
And thanks to China, the Internet, and all the other forces of globalisation creating a deflationary environment, we were lulled into a false sense of security. Growth followed expansionary monetary policy as surely as day follows night, but inflation stayed coiled up in its prison, under the watchful eyes of wardens Eddie George and Alan Greenspan, and then Mervyn King and Ben Bernanke.
But if the economy is a vessel brimming over with liquid iron pyrites, and globalisation stops it from leaking out at the obvious point, it has to give somewhere else.
The danger is that's what we started to witness. Could it be, that is when the great asset bubble of the noughties finally began to burst.
We sit on a pension time bomb, ticking ever louder in our ears like an iPod playing the tune of no hope.
To counteract this impending disaster, we need to download the saving song. But then it's been consumption, and the reckless buying of US and UK citizens and governments, while the relatively high rate of interest kept the dollar and pound too high and created massive balance of trade deficits, that has propped up the global economy in recent years.
Can we really solve the deeper underlying problem without house prices crashes, equity prices falling, and a major global slowdown following in their wake?
The way the trade winds carry http://blog.find.co.uk/2007/02/the_way_the_trade_wins_carry.html
Bursting bubble, or just a correction? - full article http://www.find.co.uk/investments/share_dealing/news/148332824