Search results matching tags 'China' and 'Richard Schwartz'

BUY CHINESE SOLAR

RichardSchwartz — Tue, 14 Apr 2009 13:20:00 GMT

GLOBAL VIEW. China’s Growing SOLAR Niche. China’s domestic-investor only stock market, the Shanghai Stock Exchange Composite continues to rise. Looks like Chinese investors are setting themselves up for more trouble after the Shanghai exchange rose some 514% from mid 2005 to October 2007, then fell -73% through October 2008. But before that next collapse happens, I see Chinese solar stocks as good buys here. Let’s review the larger picture first, then I’ll talk China and renewable energy.

Asia Bottomed Five Months Back? Remember ASIA in general hit its last bear market lows back last year. China, Hong Kong, India, Japan, Korea, Indonesia, Malaysia and the Philippines all last hit lows last October, along with some Latin American developing markets like Brazil and Chile. That’s six months ago thus way past the normal three weeks to three months counterswing rally time frame. So is Asia in a new mini bull market? Other regions of the world, meaning the US and CANADA and most all of EUROPE continued lower until just last month. So by my Principle of Relative Strength, which recommends always (almost) focusing on those countries, markets, individual stocks showing relative strength or outperformance, Asia in general is the area for us to concentrate our attention on today. I previously wrote last Wednesday and Thursday how well known Bob Prechter, Jr. and his Elliott Wave International advisory service says parts of Asia are now in a big bear market RALLY phase in the cycle. Like an A wave back up which can be powerful, long lasting and sizable. And I also pointed out how “hot” and well known, Swiss investor Marc Faber is now saying buy Asia on any “setbacks” (there hasn’t really been any). And I ended last Wednesday’s report with a buy recommendation on India, offering up as one way to trade or invest, the India Fund (symbol IFN) which closed Wednesday at 18.25. IFN closed yesterday at 20.69. So in general Asia is where the best action is now. Plus regular readers will remember even before that, back on February 10^th, I recommended investing in Chinese agricultural and offered up a list of stocks which you could choose from (I bought one of the 13 stocks listed; did you buy any?). Plus a few days prior to that, I went to great effort and posted the whole 100 stocks separated by industry sector on the USX China Index for you to print out, keep and go shopping from.

China In A Sweet Spot. That’s because the Chinese government, with it’s unique, command-style quasi-free marketplace, blending capitalism and government management still has great and speedy influence. They can rapidly decide on a, any, direction for the country and quickly move down that path. Not like us here in America with our democracy. We take lots of time getting any bills passed (but when we do agree on a new law, we get better if not implementation). Of course, China still has to fight its widespread corruption and pay offs at every step forward so their implementation is harder. Still, perception is everything in the short term in the stock market so implementation problems aren’t a concern over the near term. And near term the Chinese government has just changed the laws to encourage solar (and other renewable energy like wind energy use). Back on March 26^th China “introduced a subsidy for solar projects of more than 50 kilowatts that could pave the way for increased sales of rooftop systems.” One analyst projected that this change could increase solar demand this year by 58 megawatts and 232 megawatts annually by 2012. This announcement moved Chinese solar stocks up the most ever in one day and the rally in Chinese solar is now in its third week and still looks solid. One London analyst said after the announcement that: “China has the potential to double the solar market, soak up the excess capacity that’s out there, and get manufacturers back on their expansion plans.” Another report said: “China is closing older coal-fired plants and implementing clean energy to fuel economic growth.” The government itself said its going to implement its “solar roofs program” to accelerate the application of solar energy. Schwartz View: Good for you China! Just lead by example, that’s the way to do it. Don’t worry about what other countries are doing. (What we should do here in America too regarding renewable energy.) A more recent announcement says China is writing a new renewable energy law and on that news solar and wind stocks jumped again. The essence is that China wants to increase renewable energy usage to 10% of total energy consumption by 2010 (from 7.5% in 2005). Go China Go!

BUY CHINESE SOLAR. Net, net, I recommend buying Chinese solar!

SOME CHINESE SOLAR STOCKS

Mkt Analyst Next

Symbol Company Name Price Cap Ratings EPS Business Line

STP Suntech Power Holdings 14.49 2170m 7-12-11 5/21/09 China’s largest solar manufacturer

YGE Yingli Green Energy 7.67 964m 7-6-2 5/15/09 PV modules and PV systems

LDK LDK Solar Company 8.04 928m 1-8-5 5/12/09 Multicrystalline solar wafers

JASO JA Solar Holdings 3.58 589m 6-7-4 5/11/09 Solar cells

TSL Trina Solar Ltd 13.21 388m 3-6-4 6/5/09 Solar-power products

SOLF Solarfun Power Holdings 4.73 252m 0-3-5 5/21/09 PV modules

Disclaimer! I own a small amount of Yingli Green Energy but can and do change positions without notice.

For a FREE week's sample of my complete daily letter, please email me at RichardStk@aol.com

Chinese Strategy Looks Good

RichardSchwartz — Tue, 17 Feb 2009 14:38:00 GMT

GLOBAL VIEW. What Is China’s Strategy? Without having to worry about their banks, because China never got involved buying securitized, US subprime mortgages and other debt backed instruments, China’s now at a great advantage. Sure China is slumping fast economically like everyone else, their manufacturing industry shrinking rapidly, but China still has much greater leeway than other countries in lots of ways. First, luckily, because China has no developed bond market and is just starting to open up their financial markets, China missed the debt feast most other banks enjoyed. And are now regurgitating. So now it turns out, that’s a big, big plus. Also China still has its ‘Command Capitalism’ in place, meaning that when government decides on a path, boom, the country can start right off on it. No arguing back and forth like in big democracies like the United States and India. Next, China’s leaders are well educated, many with useful engineering backgrounds and have proven themselves. Finally, China is in a great spot financially. So what is China doing strategically, meaning their plans of long term significance?

Strategically, I’ve written previously how China is moving quickly to help their farms and farmers every which way because the farms were the first part of the Chinese economy to move to quasi free marketplace operations. After this move proved very successful, China then tried the same in manufacturing. Which, obviously, turned out to be a great and grand success. But now that Chinese manufacturing is downsizing rapidly, China has to keep the millions of Chinese workers forced back to the farms happy. Thus I see this government boost as making Chinese agriculture one of the few good buys around today as their farms consolidate, become larger and thus more efficient and productive, and have thus previously recommended Chinese agriculture strongly and offered up a list of stocks to consider buying.

Stockpiling Minerals & Mineral Producing Companies Too. Another, a second, strategic or long range move China has implemented is to stock up on raw minerals while their prices are down and also to take equity positions where allowed by other governments in mining companies themselves. The reason being that when China starts really growing again they are going to need adequate raw materials. China found this out quickly as it became the world’s manufacturing colossus. Even today with their new infrastructure program already in force, China needs cement, iron ore, steel, etc. So consider some recent Chinese moves:

· State-owned Zhongjin, China’s 3^rd largest zinc producer, bought a 50.1% stake in Australian zinc miner Perilya Ltd.

· State-owned Jinchuan Group, Asia’s largest nickel producer, bought 18% of Albidon Ltd, a Perth, Australia based nickel producer and has a deal to take 100% of the nickel from Albidon mines in Zambia.

· China’s 3^rd largest steelmaker bought a 50% interest in Australia’s Centrex Metals Ltd.

· Chinese interests bought a 40% stake in Australia’s Mount Gibson Iron.

· China’s 2^nd largest steelmaker upped its stake in Australian Gindalbie Metals from 12% to 36%.

· Aluminum Corp of China (ACH) has just increased it’s stake in Rio Tinto Plc.

· China’s Tongling Nonferrous Metals Group just bought 13% of Canada Zinc Metals.

· China Mining Resources said it would up its stake in Canada’s Quadra Mining from 4% to 19.9%.

Schwartz View: My point being watch what China’s doing. You might want to even sign up for FREE www.moneymorning.com as this service tracks closely what’s happening in China, the news clips above coming from a recent article. Again, while other countries play defense, having no real answer to their economic slumps besides cutting interest rates and implementing various stimulus plans, China is on offense, planning for where they want to be when this economic slump is over. So, again, if you want to put your toe back in the water on general market weakness, I would do so in China. You should have a ready resource right in front of you to do so, as along with the list of Chinese ag stocks I ran here, I also detailed by category & sub category the USX China Index and published it here for you on February 5^th.

* As soon as I wrote that along with China’s domestic-investor only stock markets, the Shanghai and Shenzhen Stock Exchange Composite Indexes going up this year, the USX China Index (symbol HXC) and the iShares FTSE/Xinhua China 25 Index Fund (symbol FXI), an ETF, were following suit and rising, that link ended. Schwartz View: Ok, I was surprised they were moving together anyway. Going forward, still scale in to China, just take it a little slower.

Is This Your Portfolio?

RichardSchwartz — Fri, 27 Jun 2008 15:14:00 GMT

WHERE YOU SHOULD STAND TODAY. The Ideal Portfolio (another Schwartz View).

Yep, let me offer up one man’s view of what the ideal portfolio should be today and why:

· Very minimal exposure to the stock market! This major, modern day margin call on institutional investors is causing havoc. I’ve likened this margin call to the one which wiped out many individual investors quickly back after the 1929 stock market crash, only this time around its institutional investors getting slaughtered and thus the process of meeting their margin calls is being stretched out. All are deleveraging their portfolios big time and since the securitized investments killing them are so opaque and illiquid, it’s a terrible, long, drawn out process.

· Where you do have exposure, have some in the Energy Service sector. Business is going to remain strong and money is going to funnel into this sector as long as oil stays up there, even if oil tanks 50%. The world is in now in a new competitive battle to secure our energy futures. Thus companies which help countries like Brazil find and produce oil should do well.

· Where you can, hedge your long stock exposure. One does this by having some inverse mutual funds and/or ETFs (exchange traded funds). Happily today, investors have access to this modern day invention of being able to go short (bet on declines) with inverse investments. You just buy a fund or ETF which goes up as the market goes down. I would recommend having small inverse positions, especially in financials. This allows you to ride through a day like yesterday knowing that a part of your portfolio is rising while your long positions are falling. The next day you check your portfolio’s value and see how you did. That’s what I do each morning. Say the stock market fell -3.00%, like yesterday, & your account lost just -0.20% like my ProFunds managed account did you might figure your hedge is just right. Just tinker with the hedge until you get it right.

· Hold NO BONDS. I’ve been recommending this for some time now. Yes, we may get a deflationary collapse at the end of this 25 year “too much of everything” Kondratieff disinflationary economic backdrop we’ve been in since former Fed chairman Paul Volker broke the back of runaway inflation in the early 1980s. But the world is now experiencing our first return to higher inflation jolt. Thus we’ve started a new bear market in bonds. I can’t help but remember when I first became a stockbroker with Merrill Lynch back in the late 1970s, the client who say she would never, ever buy a bond again, after losing money on bonds going back two or three decades. Well, we’ve had a 25 year bull market in bonds and its over or close. Thus, my recommendation is no bonds. (Except some very short term laddered US Treasuries for income.)

· Hold a little Gold. Yes, some will keep warning of a deflationary collapse ahead, when the economy really tanks and thus say gold will collapse as well. But gold is in a long term uptrend, a bull market, and no one knows quite how it will react in various market and economic scenarios. Buy SPDR Gold Trust (symbol GLD) as opposed to the miners themselves, thus eliminating one unneeded uncertainty. FYI, I’ve seen gold rise and gold sector funds fall, so watch yourselves.

· Hold a little foreign currencies. Again, in today’s modern day investment world, the individual investor can easily bet on foreign currencies … by buying their ETFs or tracking stocks. I’ve been recommending & still am, buying Swiss francs & Japanese yen, symbols FXF and FXY. Both are Big Picture superstar guru Jim Rogers’ picks and are in long term bull markets and dipping now so it’s a good spot to buy in on weakness. Today let me add the Chinese renminbi, symbol CNY, to the buy list since there is a exchange-traded note in existence. Not a fast mover but it’s also in a long term bull market and probably is now one of the most reliable bull markets going.

· Hold a little agricultural commodity position. The middle class global world has grown tremendously, yay!, and thus the general commodity bull market has now spread out to foodstuffs. A larger global middle class, means more and better food is needed, especially increased protein. Food commodities are up so only buy on pullbacks here if you don’t own any now. My picks have been and remain symbols RJA and DBA. Again buy the commodities themselves as much as possible and not the companies which produce such although ETFs like MOO have been doing well to this point. Today, let me add iPath Livestock ETN (symbol COW) to the buy list if I haven’t already, a livestock play. Looks like with corn prices so high, cattle is being killed off (thus one can still get steak and hamburger at $1.99 a pound) because it costs too much to feed ‘em. But that will change too and red meat prices will skyrocket.

· Finally, hold small positions in lots of alternative, clean green energy stocks. I see new fortunes being made by those riding the wave of the US and globe getting off oil. The best way I’ve found to buy these is to keep the shopping list of alternate, clean green stocks I’ve compiled and posted for you back on June 6^th in this space handy. (If you don’t have it email me and I’ll send you a copy.) Buy a bunch of these stocks on weakness. I bought one for myself yesterday.

Disclaimer! I hold or plan on holding many of the ideas recommended above.

Ho Hum, Another Bear Market Summer Day

RichardSchwartz — Fri, 20 Jun 2008 14:08:00 GMT

UPDATE ON THE STOCK MARKET. Witten Friday, June 20th, 2008: 6:30 a.m.

Looked to me like yesterday’s stock market rally was a knee-jerk reaction to China announcing it was going to raise oil prices by 17%. Crude dove on the news while stocks jumped. But if one thinks it through, is China raising oil prices really such good news? The bullish knee-jerk was that higher prices for gasoline in China will mean lower overall oil demand from China and that will reduce oil prices globally. As we’ve been hearing a lot lately that it’s government subsidized gas prices in China, India and many other developing countries that isn’t allowing crude demand destruction to occur and thus lower global crude prices. I mean Americans drove 30 billion fewer miles from November through April and that hasn’t lowered prices. The bullish train of thought continues that if the world gets lower oil prices, everything will improve. But, with further thought, if gasoline prices go up in China, won’t that cause demands from Chinese workers for higher wages? I mean the very last thing that the current communist Chinese leadership wants is any revolution from the Chinese people. Already, super big picture investor and Chinese advocate Jim Rogers says its inevitable that China’s government will go capitalistic over time, what with the Chinese people getting a taste of free markets for the last decade or so and realizing that free markets are the pathway to future wealth. Remember: “To be rich is glorious,” is the Chinese people’s new mantra. Hm? … and won’t higher Chinese wages mean higher Chinese export prices, thus higher import prices for us here in the US since we import tons and tons of stuff from China? And thus higher consumer goods prices intensifying the already ongoing and tightening squeeze on US consumers? We’ve had stagnant wages for many, many years with no light at the end of that tunnel and now we’re seeing higher prices for just about everything; food, fuel, health care, taxes, etc. Guess the still entrenched bulls figure lower crude will lead to lower gasoline, diesel, heating oil, and food too, eventually. And since the trend is the thing in the stock market, meaning the markets start discounting immediately upon seeing a new trend emerge, stocks rose yesterday. Still, is a gas hike in China really going to bring down global energy prices? I mean China already raised gas prices late last year and that didn’t bring prices lower. And we now live in a very globally competitive world as all countries and regions want to secure their energy and other needed mineral futures. And food futures too now after the recent global rice shortage has exposed the fallacy that it’s ok to depend on other countries for food staples. Anyway, the first thought was that lower oil is good for stocks and thus the stock market got stronger as the afternoon proceeded, led by lower energy beneficiaries such as the Dow Transports. But while I turned bullish on the Transports back in late March, after technically it broke three fan lines and formed a Head & Shoulders Bottom, I’m now bearish on the group after the two-month dead cat rally ended and the transports formed a bearish, rarely seen Broadening Top, an indication of loss of intelligent sponsorship and leadership. Thus I would certainly use yesterday’s nice bounce back in the trannies to get out if you haven’t already. And, for aggressive traders, if you can find a way to short the transports, I’d do so in a small way now. Schwartz View: Again, yesterday seems like just another bounce in a larger bear market environment, caused by entrenched bulls who refuse to admit the primary trend has now changed and is now pointed downward. The problem with this bullishness -- investors refusing to admit they are wrong, a terrible habit in the stock market! -- is that it indicates we’re still in the early stages of this bear market. Again, safely position yourselves and, unless you’re a trader, take the summer off. Of course, keep reading my letters. Why? Well, let’s see, to improve your knowledge base of how the stock market works and to make sure you don’t miss the opportunity to get back in. Bear markets do have endings. The last Mama Bear market, 2000-2002, ran for slightly less than two years with the most damage coming in the 2^nd year. The last Papa Bear market, in 1973-1974 ran for two years. And that very famous big bad Papa Bear market, which this one is looking more & more like, ran from 1929-1932, or just under three years. So all bad times do pass.

"Are Emerging Markets Overpriced?"

RichardSchwartz — Wed, 23 Apr 2008 13:57:00 GMT

I was just asked: “Are emerging markets overpriced?” Let me answer that question for all of us. Emerging markets are fairly valued. Not overvalued, considering their substantial going forward growth prospects but not undervalued either considering they will be hurt if the US paper economy slow down eventually ripples outward and slows the real economy as well. Looking past any near and intermediate term economic slowdowns, emerging markets will probably outperform developed markets going forward. These countries – China, India, parts of Asia, Eastern Europe, Brazil and parts of South America, South Africa and some other parts of Africa, the Middle East and more are growing rapidly. So their higher than in the past valuations are probably fair now, not under priced, not over priced. And this is emerging markets/developing countries’ time to shine, to grow rapidly now that they are benefiting wonderfully from globalization (sort of like the early days of Microsoft, Genentech, Apple, Ben & Jerry’s, AOL, Google, etc. These formerly, newly emerging corporations all had their time in the spotlight and these times were before the companies really matured.) Today, millions of emerging market peoples are rapidly moving up the economic ladder (of course, starting way down low). They are first getting cars, appliances, better food, a reliable roof over their head, home mortgages, other loans like microcap loans, and more. And thus their countries’ Gross Domestic Product growth rates are far outstripping those of developed countries. Most are experiencing GDP growth rates of +6% to +10% and higher. THIS IS THEIR TIME! Also many emerging markets should benefit from the ongoing commodity bull market which should last another five or ten years. Again, my theory is that commodities will stay stronger longer this year than most believe. Of course, sometime down the road, say next year, if the US economic slowdown spreads out, as I expect, commodities will have a very big correction and thus so will emerging markets. Still, after that correction is over, I expect emerging markets to take up their leadership role once again. Recently, I’ve liked emerging markets in Latin America more than those is Asia. (Disclaimer! I hold some UBPIX, ProFunds Ultra Latin America.) What with China’s stock market down about 50% and China worried about overheating and inflation and all. So, near term, I’ve been staying away from China and India and others in Asia. But watching China closely for a bear market bottom, today I’m changing. Thus this morning’s recommendation to start to dip our toes back into the Chinese region, looking to take this advantage of this downdraft as an opportunity to get into China.

China Scale-In Buy Starts Today!

RichardSchwartz — Wed, 23 Apr 2008 13:50:00 GMT

SCHWARTZ BUY RECOMMENDATION this morning. Yes, with China (domestically) down -50% off its peak and the related Chinese region indices down slightly less but now showing some signs of a bottom and turn around, I’d suggest that its time to put some sidelined money back to work in ASIA (during this beginning of the Asian Century). One mutual fund I’ve stumbled on, I wasn’t out there looking for it, is Fidelity China Region Fund (symbol FHKCX) and I’m sure there’s other similar funds from other fund companies which are just as good as well. (I plan on searching for them.) A neighbor asked me to look into FHKCX. When I did I liked what I found. Here’s the scoop. FHKCX invests in the Asian region, those countries which are closely tied economically to China. Like Taiwan (which long time, and so far correct, Chinese & commodity bullish advocate, well-known Jim Rogers has recently bought into and is recommending), Hong Kong, China itself, Australia & Indonesia, etc. I looked at some of the companies in the portfolio, names such as Taiwan Fertilizer, HON HAI Precision, Hutchison Whampoa and liked what I see. In other words, there’s lots of well known Asian powerhouses in the portfolio which are tough to buy shares in for American investors. I liked that. Also, FHKCX, after falling -40% from its peak on October 29^th, 2007, hasn’t set a new low since March 19^th., all the while the Shanghai Stock Exchange keeps dropping (and mauling millions of new Chinese investors; there was obviously a bubble there). That satisfies “Trader Vic” Sperandeo’s first of three requirements for a reversal-of-trend, not going down any longer. His second requirement, breaking a downtrend line drawn off the top, is also in place. And the third requirement, a successful retest, if we use a little leeway, is possibly in place as well. Vic says two out of three is enough to buy. So I like the FHKCX chart overall.

SCHWARTZ BUY RECOMMENDATION: Wednesday, April 23rd, 2008

BUY FIDELITY CHINA REGION FUND! NOW! BUY 25% OF YOUR NORMAL SIZE POSITION IN FHKCX NOW.

Then settle back and wait to see if we can get some profit going our way. I figure scaling-in is the only fundamentally sound way to invest today. As soon as we have some profit and further upside confirmation, we’ll buy another 25%. I don’t want to go too much further than 50% since I still think this rally is a bear market rally. But with China, which Jim Rogers calls “unstoppable” for the long term, down -50% domestically and -40% in outside mainline China trading, and Rogers resuming buying, this substantial size pullback is a good buy point. Even if things get much worse, we’ve already missed -35% to -50% of a bear market. We can afford to put a foot back in the water here. In point of fact, we can’t afford not to!

Real & Paper Economies Have to Meet in the Middle; Right?

RichardSchwartz — Wed, 16 Apr 2008 13:32:00 GMT

THE REAL ECONOMY VS. THE PAPER ECONOMY The Real Economy. Oil at a record, rice too. Gold hitting $1000 an ounce, silver way up. Corn prices boosted by ethanol demand. Food riots in Haiti, Guatemala, Argentina and more. 24 countries dropping food import tariffs because they are seeing food shortages. A two page color article in this morning’s New York Post comparing food prices this year to last; milk up +26%, eggs up +41%, flour up +32%, grapes up +35%. I mean we all use gasoline, most of us anyway, and the price is through the roof. And we all need food, right? With the great increase in global prosperity, mainly coming from developing countries, over the last decade or so, the demand for energy, minerals, foodstuffs is way up. This is the real economy, right? Other facets and prices of the food chain of the real economy also remain strong. The US, Canada, Australia and other countries are exporting food and energy and minerals, etc. to all parts of the world where they are needed. Thus trade is thriving. Which means transportation systems like tankers and railroads remain strong as well. Regions of the world which have benefited handsomely from the great rise in overall commodity demand and thus prices have lots of money to spend and are doing so. The Middle East is in a building boom. Dubai’s growth amazes everyone who sees it first hand or even on TV. The professional golf tours play there now and Tiger Woods is building a golf course there. Horse racing is now global and big races were just held in Dubai. Some are even predicting the current building and skyscraper frenzy there will lead to an eventual bust. Probably, but when? Russians who got rich after the collapse of communism are now moving to London, calling it Londongrad. Other Russians go skiing at certain resorts in Switzerland and compose most of the traffic. Eastern Europeans are gaining access and working in western Europe. Millions of Latin American’s are working in the US and are sending money home. More millions of Chinese now compose the “factory floor” of the world and have moved up into the middle class. And on and on. There’s a global wide infrastructure boom going on in Latin America and Africa and other places as well what with China making deals to build roads, ports, etc. in return for its voracious demand and need for oil, gas, copper, soybeans, wheat, etc. Schwartz View: In other words, the global real economy is doing well and causing increased demand for food and energy to hold strong. This after a long period of underinvestment in the search for new supplies of such. Commodity and China advocate and long term super successful investor and long range seer extraordinaire, Jim Rogers says the global commodity demand/supply equation is way out of whack and won’t get back in balance for many years yet as overall commodity supplies are extremely low, be it copper, sugar, oil, cotton, corn, silver, etc., etc., etc. since no one’s invested in the search for new supplies for a couple of decades. His studies show commodity bull markets, once started and this one began in 1998/9, last about 16 to 20 years, thus he’s projecting this one out to 2015+. And now that global demand is surging, ala the grand entrance of China onto the world economic scene with its entrance into the World Trade Organization back in December 2001, the global commodity system is being stressed by much increased demand and years of underinvestment. The Paper Economy. Then, on the other hand, we now have Wall Street’s big problems spreading worldwide. Wall Street always pushes hard for maximum profits. And the longer a bull market runs, the more insulated from trouble Wall Street feels it is and thus the harder they push. This time around, the bull market ran much longer than normal, five full years making it way past the top of the normal bell distribution curve and a very “old man” bull market. Thus Wall Street pushed extra hard for extra long. And along the way, as is its norm, developed new ways to invest and max profits. This time around Wall Street invented the “securitization” and “globalization” means of investment. Since this bundling of any and all loans together and then marketing them globally is so new, the kinks haven’t been worked out of the system. Thus Wall Street ran with the ball, ignored what was an unknown amount of risk, caved into competitive pressures to perform and rationalized that if things went wrong, they’d all go down together. Eventually, when the indexes invented to value these opaque investments became the standard, it backfired on Wall Street. When last August 9^th, BNP Paribas said it had asset-backed losses to write off, based on this new indices I believe, everyone else had to start marking-to-market and the unraveling began. Now the paper economy is in big trouble. Huge investment losses are reverberating backward and real job losses in these paper shuffling firms are becoming more and more ubiquitous. This morning I read about the size and scope of these job eliminations. Swiss banking giant UBS is projected to cut 10% of its workforce, London’s financial center is looking at upwards of 40,000 firings, investment banks in general are cutting payroll at their fastest pace in years according to Challenger Gray & Christmas, the tracking firm, the first quarter firing rate was triple previous years’ first quarters. Last year, financial services firms cut over 150,000 jobs. Wachovia Bank, a multi-bank holding company, based in North Carolina just posted an unexpected loss. Washington Mutual, a large western-US based financial services firm is expected to cut 3000 jobs soon. Some quotes today are: “Financial services are at the center of this recession,” by Challenger, Gray CEO John Challenger. Chief executive Kerry Killinger of WaMu (Washington Mutual) says: “Northing of this scale has happened since the Great Depression.” And: “This is the toughest credit cycle I have seen in my years in the industry.” In other words, now the huge billions in paper losses are causing much turmoil in employment in the paper economy. In brokerage firms, asset managers, in investment banking, at hedge funds, at money center banks, at investment banks. And the trouble has rippled out further and to the far outposts of the paper economy. First the credit services companies like Moody’s, Fitch and Standard & Poor’s came under attack. Then the commercial paper market, the auction-rate market, jumbo loans. Fannie Mae and Freddie Mack fell hard and got their share of the blame. Former Federal Reserve Chairman Alan Greenspan, the leader of the paper economy, is being criticized heavily. We have many mortgage brokers going under. And now the ripple effects and feedback loops are kicking in. States and cities, like New York city, are looking at their upcoming budgets and groaning. Some are turning a blind eye like new New York Governor Patterson (no pun intended) to upcoming drop offs in incoming tax revenues and are just hoping things will miraculously improve or figure they will handle big budget deficits another day. Schwartz Summary: No use me going on and on. We all know the paper economy is in big trouble. And we all know where this trouble is going to lead. To trouble for the real economy, the goods and services producing part. With some type of lag. Many are now warily watching the shippers, Wal-Mart, the emerging markets, oil inventories, the price of gold, for some indication when and how much these big problems in the paper economy will spread out to the real economy. The question I’m now constantly asking myself is when do these two economies meet in the middle? So far we haven’t seen that much damage. Prices of commodities remain fairly strong although tremors have shaken the real economy from time to time. The latest being back on March 17^th when silver fell some 25% in just 48 hours after a bearish call by an influential guru, Bob Prechter, Jr. of Elliot Wave fame of the past. But generally commodity prices have held firm. Oil, as we all know, seems now devoid of all fundamentals, seemingly. At least the near term fundamentals. We always have the Jim Rogers identified scenario of an out of whack longer term demand/supply equation in the back of our minds. My best guesstimate is that the troubles in the paper economy are surreptitiously spreading out to the real economy, globalization or not, and will show up down the road. Sort of similar to the 1973-1974 Papa Bear market period, whereby the first year of the big bad bear market, energy held firm. Only this time around since we have the whole world waking up to the fact that there is global competition to secure our energy future and secure enough food to feed our peoples, demand should stay stronger, longer than most expect. Bottom line investors while keeping a low profile should get their existing portfolios overweighted to and supported by the real economy. Not totally jump ship too soon.

Only One Global Trend!

RichardSchwartz — Tue, 08 Apr 2008 14:02:00 GMT

GLOBAL VIEW. Especially Important View Today! I’m looking around at as many global stock markets as possible this morning. To refresh myself as to exactly where they stand and what that bodes for the future. Broad brush thinking-wise, I want to confirm a global uptrend has now started if at all possible. Regular readers know one of my long held premises is that there is just one global stock market trend. I weekly wall charted global stock markets for many years in the 1990s and feel there is just one primary trend in place globally. Naturally there are a few exceptions, like Japan in the 1990s, and some global stock markets outperform others in percentage moves but generally when the US stock market rises, other global stock markets do also. And vice versa as happened over the last nine months. It wasn’t just the US stock market falling while Europe or Asia kept rising. No, they all move together in general direction. Let me reiterate, I believe there is just one major global trend, up or down, or sideways too, that the majority of markets follow, in their own ways, together. Of course, even in determining or interpreting this one primary global trend, at times there is some gray area. Like now. I’ve sort of been obsessing about my own interpretation recently. That is whether we should use closing lows or intraday day lows to calculate successful retests and whether what just transpired from January through March is a real Double Bottom retest or just a normal, more minor bounce in an established downtrend but let me attempt to move beyond that this morning, time will provide that answer, since this is a very important global movement we’re talking about. Let’s see what we can learn from cataloging the global stock markets into 2 groups.

Lower Lows. Right now most global stock markets stopped going down about the same time, say back in January, same as here in the US. Subsequently, MANY DID GO TO LOWER LOWS, like Germany, Austria, France, Italy, Switzerland, Portugal, Ireland, Greece, Iceland, Hungary, Hong Kong, Japan, Australia, China, India, Korea, Malaysia, Indonesia, New Zealand, Philippines, Vietnam, Venezuela, And the Nasdaq Composite here in the US.

Successful Retests. But some OTHERS DIDN’T GO TO LOWER LOWS. They successfully tested their January lows in March and since have stared rising. Like England, Spain, Holland, Sweden, Belgium, Denmark, Finland, Norway, Luxembourg, Canada, Mexico, Brazil, Argentina, Chile, Peru, Colombia, Poland, Czech Republic, Russia, Taiwan, Thailand, Pakistan. And the Dow Industrials and S&P 500 here in the US.

As you can note, there is a split down the middle about which global stock markets tested their lows successfully and which undercut their January lows. First, let me say that an undercut low doesn’t necessarily mean a retest wasn’t successful. In fact, in terms of individual stocks, traders have learned to drive stocks below their previous lows in order to “run in the shorts.” Meaning big time traders know that less experienced traders and investors set stop losses just below the old lows and therefore are wont to make sure they get those stop losses kicked off. Which causes an undercut to appear really bad, but likely isn’t. You see? So, overall, I have to conclude from looking all around the globe this morning, at important and large global stock markets to smaller and less important ones, that the near term global trend is up. And is generally worth playing since we’re not sure, we’re never sure, just how powerful this new up move will ultimately prove to be. Myself, I’m still skeptical but one has to use cold rationality when it comes to the stock market, right? So I’m already back in and playing this rally. To a modest extent. But since this rally is happening globally I have to consider putting more money back to work. The Principle of Relative Strength. As to just where to add money, a closer look at which countries and regions of the world are outperforming above shows more strength centered around the US, say in Canada, Mexico, Brazil and South America. And also some strength in Eastern Europe, maybe centered around Russia, maybe not. While underperforming are Europe and Asia. Countries centered around Germany, the engine of Europe, and around China and Japan, the epicenter of Asian growth. Schwartz View: From this perspective, I have to conclude that emerging markets general look better than developing countries. Especially those in Latin America. There are now ETFs to play most all countries so that gives us some direction, right?

China's Bear Market Bottoms Out On ...

RichardSchwartz — Mon, 31 Mar 2008 13:38:00 GMT

CHINA again and again. I write about China so much that I get bored with it. But China is the new global power and thus very important. Plus commodity advocate and long term perspective guru, who I haven’t seen call much wrong, Jim Rogers believes so strongly in China that he sold his NYC townhouse and moved to Singapore. And got his daughter a Mandarin-speaking nanny, all to live closer to where he figures the forthcoming action and big profits are going to come from next. Plus he predicted a big sell off in China, which by the by, fell another big -5% today, and that’s coming true. A sell off he figures will be a great buying opportunity. Plus, Jim not Jimmy, he hates that moniker although I’ve heard three people on CNBC including popular Dennis Gartman call him Jimmy recently. Obviously they don’t know him well if at all if they call him Jimmy. Sort of reveals some of the hot air on the Street. Anyway, I want to keep a close eye on China now. Because I have to agree with Rogers that China is riding a major wave and I want to get on that wave at some point although I wish one of these financial media types would ask Rogers some insightful questions about China instead of the usual mundane questions like what he thinks about the Fed’s latest moves. We all know by now that Rogers believes debasing one’s currency as our government and Fed is doing has never proved a good move in the past and won’t be this time either. I just wish someone would ask Rogers about China’s amoral behavior to start. Moving on, here’s what’s been going on in the Chinese indices: Date of Top % Move DownShanghai Stock Exchange Composite 10/16/07 -44%USX China Index (symbol HXC) 10/31/07 -36%Hong Kong 10/30/07 -28%Taiwan TAIEX Index 10/30/07 -24% (low on Jan. 23, 2008) * Rogers just mentioned that he’s buying Taiwan now because, even before the recent Taiwanese elections which the more pro-Chinese mainland candidate won, he sees more China/Taiwan economic ties going forward. This should greatly increase Taiwan’s prosperity piggybacking on China’s wealth. This is probably why Taiwan set a near term low back a couple months ago. Taiwan has an ETF (symbol EWT) which I’m looking to get into at some point, both trading wise and investment wise, waiting at least for the celebration on Monday, after the election, to subside. Schwartz View: My best guesstimate is that China’s stock markets bottom out during or around the August Olympics. From now until then, worldwide attention is going to be drawn towards China and all the bad, illegal, unethical, polluting and amoral activities and policies its currently following. Protestors will show up all along the Olympic Torch’s 100 plus day path and journey from Greece to China with reports in that London and Paris are scheduled protest points along the way. All the while Chinese inflation is out of control, food prices are way up and internal protests are going to add to China’s woes. And millions of new Chinese investors who opened their first stock brokerage accounts last year are now seeing their portfolios shrink which feeds on itself. The government itself has its hands full trying to reduce the smog that’s lies heavy over Beijing and is also in the process of tightening, not lowering interest rates, to do something about inflation caused by massive foreign money coming into China. Manipulating the stock market upward is the least important item on China’s agenda, at least for now and until the Olympics wind up. But when a bottom does come, we certainly ant to identify it as quickly as possible. Rogers, with his in depth studies of past bull and bear markets in any and all investments including directing his college students to help, and his world travels by car and motorcycle, has a long term global view I trust explicitly. And I can’t say that about many if any other pundits.

China's Shame Highlighted

RichardSchwartz — Mon, 31 Mar 2008 13:29:00 GMT

GLOBAL VIEW. China & the Summer Olympics. I watched the always depressing BBC (British Broadcasting Corp.) news last night at 6 pm. (Right after Inside Racing which this time of year showcases the 3-year old horses getting ready for the Kentucky Derby, coming up the first Saturday in May, shortly after the Masters. Add in the return of golf and the opening of trout fishing and this is a good time of year for me.) Getting back to business, the Olympic Torch just started on its footpath from Greece to Beijing for the summer Olympics. And immediately Tibet protestors began laying down in the way. Awful to watch them wrestled out of the way screaming, waving Tibet flags (I assume) and with red paint splattered on, and such bad publicity for China. When the torch reaches London, talk is there will be protestors there as well. And with China’s amoral relations with any and all rogue countries, etc. like Sudan, as long as China can get natural resources from these countries, we have to expect further protestation. Schwartz View: It’s going to be very hard for China to revive its stock market with China being cast in such a negative light for the next six months of lead up to the August Summer Olympics.