WHY WE LOVE TO TRADE CHINESE STOCKS

Today's chart shows why we love to trade Chinese stocks.

The smart investor's job is simple: Find incredible compounding vehicles like Johnson & Johnson, buy them at the right price, and hold for years. The smart trader, however, has different job: Find assets that boom and bust like crazy.

As today's chart shows, China belongs in the "likes to boom and bust" column. Below is the past year's trading in Baidu, the No. 1 search engine in China. You could call it the "Google of China." The stock is up nearly 250% in the past year.

We're fair China hands here at DailyWealth. We called the 2007 boom... then flip-flopped and called the 2007 bust with commentary on China's big airline stock, China Southern. We also called the recent Hong Kong boom, which produced huge gains.

Much like biotech and small mining stocks, Chinese stocks tend to draw huge amounts of public interest. Hundreds of millions of consumers entering the global economy is a big story. This story creates enormous uptrends in the best Chinese companies, like Baidu. It also creates situations of excessive optimism and overvaluations, like Baidu. We can't tell you when the next bust will come, but it will come. It will be bad... and then it will be time to buy again.