Signs Chinese Stocks Are Poised For Another Run
While the outlook for U.S. stocks will likely remain gloomy at least until the next round of quantitative easing begins, the next few months could see big gains in the Chinese stock market. I have an opportunity in mind that could help you take advantage of this, but first let me review some of the reasons why China is so attractive right now: 1. China Passes New Milestones. China has recently surpassed Japan to become the world's 2nd largest economy. It has also become the world's largest energy consumer, and the world's largest car manufacturer. General Motors now sells more cars in China than in the U.S. What's more... 2. China's Growth Rate Promises Big Returns. Despite the economic slump in the Western world, China's projected growth rate remains robust. I doubt it will fall below 8% for many years. With U.S. growth low to non-existent today, investors need to have some exposure to China’s expansion. But more importantly, the figures for the first half of 2010 suggest that China's economy is rebounding, even as the U.S. recovery remains a long way off. For instance... 3. 176 IPOs Were Launched in Chin in the first 6 month of the year. The large number of IPOs this year is a bullish sign that tells me free enterprise, entrepreneurship, and innovation will drive China's economy forwards. 4. Retail Sales In China Topped 1 Trillion yuan. With consumer spending weakening in the U.S., China hopes to lessen its dependency on exports and grow its domestic consumption to sustain its economic miracle. And that is exactly what's happening. Retail sales in China surpassed 1 trillion yuan—or $180 billion—growing at a year-over-year rate of 18%. This trend, if continues, should produce rapid sales growth for Chinese stocks. Besides, Chinese exports have also rebounded... 5. Chinese Exports Hit New High. China's exports for June set a new record. What's more, China’s exports exceeded imports again, giving China, in July, its highest trade surplus level in 18 months. 6. Industrial Output Rose 13.4%. While the U.S. recovery remains a long way off, China's industrial output continues to grow. 7. Fixed-Asset Investment Rose 25% in the first half of the year. Total investment in fixed assets rose has been growing at a double digit rate since 2001. In July, China's foreign direct investment rose 29%, a relative “slowdown” compared a breakneck pace of the last year. These factors and many more tell me that Chinese stocks are poised to break out of the trading range they have held to for the past few months. Anytime after Labor Day, we could see the beginning of a very rapid rise. To help you take advantage of this urgent opportunity, I have arranged for you to attend a private briefing on China's best investments...

currency trading
Until relatively recently, the only practical way for you to play currency (FX) markets was by wading into the potentially treacherous waters of futures contracts. This often required you to have a separate account unrelated to your stock brokerage account. Yes, you could trade on margin, putting up as little as a few thousand dollars. But because of the contract size, even a very small move against you could have been disastrous. For example, a euro FX contract is for 125,000 euros (US$185,000 at current rates). A $.0001 per Euro change equals $12.50 per contract. More often than not, investors who tried this kind of trading got beat up pretty badly for their effort unless they initially put up most of the value of the contract. But now, with currency ETFs, you can trade through your stock brokerage account and gain access to this lucrative market with an initial outlay of, say, only $1,000-$2,000 and not have to worry that a minor move in the wrong direction might wipe out your entire investment.

the price of gold
Yesterday, we awoke to find gold prices off sharply, furthering the consolidation the metal has been under for several days now. What prompted yesterday’s selling was a comment regarding gold from an official from the Bank of Korea (BoK), the South Korean central bank. Like many others recently, the Asian nation is known to be interested in diversifying its foreign reserve holdings away from U.S. dollars. At nearly $271 billion, South Korea’s dollar reserves are the sixth-largest in the world. Traders have been expecting South Korea to follow the lead of China, India and others, by adding gold bullion to its reserves. After all, among the world’s largest economies, South Korea has the smallest gold holdings with just 14.4 metric tons of gold, the equivalent to 0.03 percent of total reserves. That makes them the odd man out as most nations do hold at least a modest portion of their reserves in bullion: 10 percent on average for all nations, and considerably higher levels for the more developed nations. The U.S., for instance, has about 77 percent of its reserves in gold bullion. But contrary to expectations—and reasonable belief—Lee Eung Baek, head of the BoK’s reserve management department said in an interview, “We follow the big trend. Gold isn’t the trend.” Mr. Lee’s statement that gold isn’t in a trend is just plain wrong. As you can see from the chart below, which shows the gain for gold during the past year in both U.S. dollars and South Korean won, while the metal’s performance in terms of the Asian country’s currency has been more muted, it is in a bull market in more than just greenbacks. Indeed, gold has been a better investment than holding most paper currencies over that time. A long-term chart, say since the beginning of the decade, would demonstrate an even more pronounced uptrend for the yellow metal. In terms of the won it has gained more than 300 percent! We found it odd the South Koreans would forego the metal simply because it “offers little value,” with “no cash returns” in the worlds of Mr. Lee. Given that gold is the only “currency” that isn’t simultaneously someone else’s liability, and with so many of the world’s major currencies seemingly racing each other to the debasement cellar, to say gold offers little value is absurd. We look forward to reporting the day when the South Koreans get religion and start buying gold. We don’t know if will be at $1,500 an ounce, $1,800 or $2,000, but we’re confident that day will come. Of course chances are Mr. Lee will have gotten the boot before then. In the short term, gold could pull back further. There’s a gap in its price chart down around $1,047, so a dip slightly below that level is quite possible. But that represents a rather modest decline that would merely erase the gains of the past month. Moreover, it would set the stage for another leg up in the bull market that shows every indication of being in a major long-term bull market. A few weeks back we pointed to investors’ lackluster interest in silver as a sign that the party is just warming up in precious metals. The South Korean official’s ambivalent view toward gold is another indicator that we have far further to go on the upside. If, again in the words of Mr. Lee, “There’s an illusion in gold,” it’s that the metal isn’t a legitimate asset class that deserves a prominent place in every portfolio. Don’t let the current minor pullback shake your faith in precious metals. Instead, view it as a good buying opportunity. The fundamental case for gold remains as strong as ever.

another big quarter
Intel (INTC) has done it again. The world’s largest semiconductor chipmaker reported third quarter earnings last night that once again beat market expectations. Not only that, the quarter was so impressive that the results actually surpassed the company’s own updated guidance released two months ago. Thanks to a strong back-to-school season, growing China sales, as well as general industry restocking, Intel collected $9.39 billion in revenues, easily outpacing consensus expectations of $9.05 billion. Gross margin (percentage of sales remaining after costs of production are taken out), which has steadily risen for the last 3 quarters was 58 percent, beating the company’s own expectations of 53 percent. These two factors led to larger profits, as net income was reported at $1.86 billion, or 33 cents a share, handily beating estimates of roughly $1.5 billion or 27 cents a share. Intel, whose chips already power more than 80 percent of the world’s PC, continues to expand its global reach – particularly in China. On the company’s conference call, Intel’s CEO Paul Otellini reiterated his thoughts that Asian consumers will lead a rebound in the personal-computer industry – initiating a rebirth of year-over-year growth in that market this year (which is contrary to most analysts’ predictions). The region already accounts for 65 percent of Intel’s sales – 55 percent if you take out Japan. Gartner Inc., a technology research firm, noted that shipments of PCs in China grew by 11 percent in the second quarter over the year-earlier period, far beyond the 2.8 percent growth seen in the first quarter. Gartner has yet to release their third quarter figures, but based on Intel’s results, we expect to learn that the pace has remained torrid. Intel’s outlook for the fourth quarter was also exceptionally upbeat. The company expects revenue for the current period to be $10.1 billion (plus or minus $400 million), outpacing consensus estimates of $9.7 billion. Further, the company sees margins expanding even further, expected at 62 percent (plus or minus 3 percent). While already impressive, the margin number is also notable given that if the company can reach the high-end of its range it would represent Intel’s largest profit margin in the last decade. Needless to say, we are impressed with the company’s quarterly numbers, and think Intel is executing its fundamental business plan exceptionally well. With less reliance on the domestic market (only 20 percent of sales), and continued expansion into developing economies, Intel’s revenue stream is growing at a fast clip. The diversity of revenues also helps reduce overall business volatility. This utterly dominant company is trading at less than 15 times 2010 earnings, and with a PEG of 1.4, the shares continue to represent compelling value.

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Dow heading down

At first, I kept hoping it was a terrible mistake. It was, to say the least, most serious and most unwelcome occurrence that demanded my immediate and decisive attention I have been receiving alarming signals from our proprietary computer system. What I saw disturbed me because this system is the most powerful and consistently accurate financial forecasting tool I know. The program is signaling the strong probability that the U.S. stock market will suffer a catastrophic crash sometime in the next few months. While we’re all rooting for the DOW to hit 11,000, you could see it at 8,500 or lower within the next 6 months! I am the only one to know about this system, because along with leading Yale mathematicians, I was one of the developers of this tool. Of course, my knee-jerk reaction was, how can that be when the market has made such a significant recovery since March? You know, from reading my advisories, that I’m basically a long-term optimist. Like millions of America’s individual investors who have their retirement money and personal wealth tied to the stock market, I’ve wanted to believe in the stimulus package, to finally feel comfortable that we really were emerging from the long nightmare of this horrific economic recession. Like you, no doubt... I’ve been rooting for the DOW to end the year above 11,000... But... I’m also a realist. And, although I certainly didn’t like the forecast of a catastrophic crash, I have to admit that it did not come as a total surprise. The handwriting has been on the wall for some time. It’s just that we don’t like what it says. Let me tell you, those alarming computer signals were the clincher. I’ll go into more detail on the computer program that generated the alarming forecast and why it’s more accurate than anything else out there in a moment. But just let me say here that. . . I myself am making significant changes to what I’m doing with my own personal money as a result of this forecast! I trust it implicitly, more even than my own subjective analysis because. . . The computer is neither bull nor bear, has no love for any particular stock, does not suffer from false pride, does not need to prove how smart it is, is never in denial, and never needs to blame someone for its mistakes. That said, you don’t need a super computer to suspect that all is not right with the economy, it simple makes things more definitive. As you read on, we’ll take a rational look at the myriad and complex, interacting economic pressures at play that are rapidly merging into the dreaded perfect storm that the market bears have been predicting for some time. Because I pledged to always "put my money where my mouth is," I’ve already alerted Members of my Million Dollar Portfolio what I’m doing now to not only survive, but prosper from the coming financial collapse. But, because I take this warning of an imminent and severe stock market crash so seriously, I feel obligated to share my altered strategy with subscribers to all advisories.

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