You just can't beat an efficient market. There, stock prices reflect all the knowledge and expectations of millions and millions of investors. The calculus by which information constructs valuations is instantaneous -- it has always already happened. So, in an efficient market, you'll never find a bargain stock, nor an overvalued piece of fluff.
Luckily, we have the other kind of market.
China.com) is one of a number of stocks that made their bones on China's bid to enter the
World Trade Organization
. Already somewhat of a highflier, it exploded up 117% in the two days after the U.S. and China cut a trade deal last month. Information out, valuation up. It was all beautifully efficient.
Not so Monday's action. In its first day of trading since the now-infamous Seattle WTO conference ended in cacophony, and with the fate of its U.S. trade deal now on markedly less sure footing, Chinadotcom rose 10 1/16, or 8.4%, to close at 129 7/8, a new all-time high.
That looks a lot more like complacency than efficiency. And it's not just the Net sector, whose stocks have a habit of following their own patterns of momentum.
, a Hong Kong-based construction and investment company, closed Monday down fractionally at 11 3/8 -- a stratospheric price compared to the penny-stock level it had traded at prior to the China fever that hit the market in November.
"The financial market senses that trading with China and an internationalist trade posture are so integral to the continued ascendancy of the financial market that politicians will do the right thing, whether now or later," says Charles Gabriel, political analyst at
. "I don't sense any anguish."
Gabriel's sensors are functioning properly. Market observers aren't expecting any significant fallout from the collapsed WTO talks. On Wall Street, as in Washington, you'll find a sense of near-inexorability about the ratification of the Sino-U.S. trade agreement, which early next year will go before the Republican-led
House of Representatives
"It's too big to fail," says Steve Roach, chief economist at
Morgan Stanley Dean Witter
, of the trade deal. "It's in our best interest as a nation, as well as China's, to move ahead."
Some economists just plain don't see the parallel between Seattle and China. "Seattle focused on the WTO and why it as an organization was harmful and a failure," says David Malpass, chief international economist at
. "That doesn't have much to do with why China should get normal trade relations."
That depends on your perspective. The
interest in protecting U.S. labor markets made it one of Seattle's most vocal and well-funded dissenting voices. It has made no secret of its plans to leverage the momentum of the Seattle protests. And its president, John Sweeney, has made no secret of his dismay with the Sino-U.S. trade accord.
"The fevered rush to admit China to the WTO is a grave mistake," he said in a release following the agreement last month. "It is disgustingly hypocritical of the
White House to invoke the need to 'put a human face on the global economy' while prostrating itself in pursuit of a trade deal with a rogue nation that decorates itself with human-rights abuses as if they were medals of honor."
Yet even economists mindful of Seattle's political repercussions aren't worrying much about Congress.
"I guess I share that lack of concern," says Josh Feinman, chief economist at
Deutsche Asset Management Americas
. "I think the constituencies are there for it, with the exception of the political problem it causes for
. But, at the end of the day, labor will support Gore, because they don't have anywhere else to go."
And Congress will grant China permanent normal trade relations status.
Maybe, and maybe not. A lot of the tenor of these discussions has to do with time frame, and it's hard to argue that things don't look good for globalization in the long term. Like water, capital has the dogged ability to erode obstacles as it seeks its own level.
"It's not a done deal," Roach concedes. "Nor will there be the instant gratification of our exports exploding automatically. It's a process, and the best thing I can say about the WTO from our point of view is that it gives us the opportunity to participate in what will be the greatest economic development story of the 21st century."
That can be very exciting stuff for investors in China plays, though many won't have that luxury of appreciating the process of it all if their portfolios start to wilt on the first sign of real difficulty in the globalization process. But for now, any sense that Washington will try to resist the interests of the financial community remains very muted. "There's an unwritten rule," Gabriel says, "that politicians serve the constituents who watch these wonderfully ascending NAVs. They're sensitive to that, and more likely to watch
There's another unwritten rule: Nothing breeds crises like complacency.