Broken China ??
We are all well aware of the impact of the sub-prime debacle on the US and European markets.There is also a lot of debate going around about so called "decoupling" basically the premise that not all markets are so intertwined with the US that they are likely to suffer if the US does go into a recession.
One of the markets identified as possibly not being linked to the US is China, that being said though there is a definite desire within the Chinese government to try to put the brakes on their economy without causing it to slow down to much.So is China Broken?
(In my view ) One of the greatest investors of all time doesn't think so. here is a recent article from Fortune magazine which puts Jim's perspective on China.
NEW YORK (Fortune) -- You might expect Jim Rogers to be gloating a
little bit. After all, the famed investor has been predicting a
recession in the U.S. economy for months and shorting the shares of
now-tanking Wall Street investment banks for even longer. And with fears
of a recession sparking both a worldwide market sell-off and emergency
action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear.
But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.
"I'm extremely worried," he says. "I have been for a while, but I just
see things getting much worse this time around than I expected." To
Rogers, a longtime Fed critic, Bernanke's decision to ride to the
market's rescue with a 75-basis-point cut in the Fed's benchmark rate
only a week before its scheduled meeting (at which time they cut it
another 50 basis points) is the latest sign that the central bank isn't
willing to provide the fiscal discipline that he thinks the economy
desperately needs.
"Conceivably we could have just had recession, hard times, sliding
dollar, inflation, etc., but I'm afraid it's going to be much worse," he
says. "Bernanke is printing huge amounts of money. He's out of control
and the Fed is out of control. We are probably going to have one of the
worst recessions we've had since the Second World War. It's not a good
scene."
Rogers looks at the Fed's willingness to add liquidity to an already
inflationary environment and sees the history of the 1970s repeating
itself. Does that mean stagflation? "It is a real danger and, in fact, a
probability."
Where the opportunities are
The 1970s, of course, was when Rogers first made his reputation - and a
lot of money - as George Soros's original partner in the Quantum Fund.
And despite his gloomy outlook for the U.S., he still sees opportunities
in today's world. In fact, he sees the recent correction as a potential
gift for investors who know where to head in global markets: China.
Rogers has been fascinated with China ever since he rode his motorcycle
across the country two decades ago, and he's been a full-fledged China
bull for several years. In December he published his latest book, an
investor-friendly tome titled "A Bull in China: How to Invest Profitably
in the World's Greatest Market." And that same month he sold his beloved
Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L.
Hunt and moved his family full-time to Singapore - the better to be
closer to the action in Beijing and Shanghai. (He bought the New York
mansion 30 years ago for just over $100,000; not a bad return on his
investment.)
But in a November interview with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level.
With the bourses in Shanghai and Hong Kong both some 20% off their
recent highs as of late January, Rogers says he's starting to consider
new investments.
"I'm delighted to see what's happening in Shanghai and Hong Kong," he
says. "As I've said, if things hadn't cooled off, the Chinese market was
in danger of turning into a bubble. I find this most encouraging. The
government's been doing its best to try and cool things off. Mainly
they've been trying to deal with real estate but it's having an effect
on stocks, too. I would suspect the correction isn't quite over in
China. But I'm gearing up. I didn't put in any orders for tomorrow but
I'm starting to prepare my list of things to buy in China. Whether I buy
this week or this month or this quarter, who knows. But I'm starting to
think about buying new shares in China for the first time in a while.
And I'm not thinking about buying in America."
Ultimately, Rogers doesn't think that the troubles in the United States
will be much of a drag on the prospects for the People's Republic.
"Anybody who sells to Sears (SHLD) or Wal-Mart (WMT) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."
Having been someone who has had an an uncanny knack of being ahead of the curve on most of the recent big Macro trends, I personally would not be betting against Jim being right again this time.
Good Trading
Alan
