The China Syndrome
Remember the movie “The China Syndrome”? In it Jack Lemmon plays a nuclear technician who teams up with 2 reporters played by Michael Douglas and Jane Fonda to expose the immediate risk that the nuclear reactor Jack Lemmon’s character worked at was close to a failure that would result in the radioactive material reaching critical mass and causing mass destruction.
Something similar is happening in the microcap markets today and Serious Speculators are keeping a watchful eye on the situation. Chinese related stock are going crazy. It seems like all a company has to do is issue a China related press release and the stock takes off. In just the past week we have seen CHMD, MYST, CYTV and SEED take off and these are just a few. SCON is another example of a stock gone wild over their Chinese connection.
This China Syndrome is a double edged sword. On the positive side, this creates incredible opportunity for traders. Strong and predictable volatility is like manna from Heaven for stock traders and investors alike. Traders can ride the momentum up and down if they are highly skilled. For the more traditional investor, it can provide a great opportunity to grab a little profit by selling into a rising market. Companies that develop business opportunities within the Chinese community can enjoy the benefits of an expanded and supportive shareholder base. Of course, along with opportunity comes some new risks and Serious Speculators always like to look at both sides of any coin.
Serious Speculators who have been in the market since the late 1990’s can surely remember the e-commerce stock frenzy. All a company had to do was announce it was adding e-commerce to their business model and they could pretty much count on a nice surge in activity and stock price. Then, like today, opportunists saw the opportunity and before we knew it, the market was inundated with press releases about companies adding e-commerce sites. There was a feeding frenzy in stocks to be sure. Naturally, Serious Speculators remained calm and distinguished between the stocks to day trade on momentum and the stocks which were actually making an intelligent move consistent with their business plan.
Let’s face it, China has become a huge economic power and its presence in terms of all markets from the NYSE down to the pink sheets will be felt for the foreseeable future. Along with energy and wireless technologies, China deals are hot hot hot and that too isn’t going to change any time soon. Still within this rapidly emerging market comes the risk inherent in any hot market. Opportunists have settled into this venue and are working daily to create new “opportunities” which look and sound great but aren’t. We will see more press releases announcing deals with Chinese companies. We will see more Chinese companies going public and the Chinese deals now in play will continue to enjoy the attention of the speculative market place. As a result, the choosing the right Chinese related stock can supercharge your portfolio but invest when you should trade and your could see your investment dwindle faster than a protest rally in Tiananmen Square.
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