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However, playing the Chinese capital markets involves excessive political and economic risk. The country is also stalling, but continues to grow well above other global regions, including Europe and the eurozone. My investment advice is that you need to build a well-diversified portfolio that would enable you to play Chinese growth stocks, especially small-cap stocks.
China is the second largest economy in the world and is continuing to roll along at a nice pace in spite of the country’s gross domestic product (GDP) slowing to 8.1% in the first quarter, down from 8.9% in the fourth quarter. The International Monetary Fund (IMF) estimates that the U.S. will grow its GDP by around 2.5% this year, compared to around 8.5% for China.
While the risk is high in trading Chinese stocks, especially of the small-cap variety and for smaller trading accounts given the selling of Chinese reverse merger stocks over the past year, you could also play China via some good exchange-traded funds (ETFs). If you are looking for some Chinese Internet plays, find out which stocks are the most interesting in Surfing China’s Internet for Profits.
In the ETF area, I like the PowerShares Golden Dragon Halter USX China ETF (AMEX/PGJ), which has strong small-cap components.
If you are looking for more of a blue-chip focus, take a look at the iShares FTSE/Xinhua China 25 Index (NYSE/FXI), which holds the top major companies in China. Holding this … Read More
The fact that consumer spending has not tanked in spite of unemployment being at over nine percent and expected to stay around this level through 2012, and continued weakness in housing is encouraging.
We have a likely debt default in Greece, pegged at a whopping 98%. Ireland and Portugal continue to struggle with muted growth and massive debt. Spain may be needing help. Bond yields are rapidly increasing in Europe in line with the risk levels. You can get a whopping 70% yield in Greek bonds, but then the bonds are likely to default. In comparison, the current yield on a U.S. 10-year bond is less than two percent. Germany and France are suffering due to their focus on the poorer nations. Germany is said to have no issues letting Greece default and then dealing with the debt crisis mess after.
I must admit the fact that consumers continue to spend despite any strong or sustained job growth and continued weakness in housing is encouraging. With consumer spending accounting for two-thirds of GDP, retail sales will eventually be stronger when the jobs and housing areas improve, albeit it will likely take over a year.
I’m in Modena today, home of the iconic “Ferrari” brand. My mind is wandering quickly…thinking about Europe and America. Invariably, I wander off to government austerity measures. I apologize in advance to my readers if I have been talking too much about this as of late. But that’s all I hear from people here. They are upset. Governments in Europe are cutting fast and deep.
Consumer spending drives the economy and gross domestic product (GDP) growth, accounting for about 70% of GDP in the U.S. The retail sector has been rebounding in spite of the lack of jobs and the declining home prices. The S&P Retail Index (RLX) is trading near its 52-week high, up 37% from the 52-week low. The RLX recently traded at its highest level since the index was created in 2007.
Since the financial crisis, the global equity markets have shown a solid turnaround before witnessing some sort of risk aversion during 2011, as the European problems continued to worsen. Asian equities have been the worst-performing markets year to date, whileU.S.markets ranked amongst the top performers.
During the technology euphoria in late 1999 and early 2000, I recall that a friend of mine had taken out a massive loan against the value of his home and bet on several high-risk micro-cap stocks. I remember his position surging from $100,000 to nearly two million dollars in less than two months. He asked me my investment advice on what to do. I said take profits. He did not listen and sat on the two stocks all the way back to well below his initial investment!
Stocks are in rally mode, with the key stock indices battling back to above their respective 50-day moving averages. There is some euphoria surfacing, but I believe it is somewhat overdone. My investment advice is that, before you get too ambitious and chase stocks higher, you need to take a step back and think about the situation and where you are at personally.
So far, even without strong job growth and with continued weakness in housing, consumers continue to spend, which is helping to drive the economic renewal, albeit sluggishly. This is positive and clearly encouraging once the jobs and housing areas improve. The Fed realizes this.
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