General Electric Company (NYSE: GE) has more than a century of history behind it and it's seen worse times than we're going through right now. It's a global juggernaut, and its foothold in emerging markets - particularly China - makes the company worth looking at.
But at the end of the day, its financial unit is holding GE back, and that isn't likely to change any time soon.
Let me explain.
Question of the Week: Readers Respond to Money Morning's Afghanistan Mineral Wealth Query
The news that there is $1 trillion of Afghanistan mineral wealth hiding in the country's scarred and deserted landscape has global investors calculating how likely it would be for this incredibly poor country to transform itself into a natural-resources powerhouse.
It has also spawned debates about which nations should be given a piece of this vast apparent fortune.
The discovery - and its transformational potential - is mind-boggling: At $1 trillion, the estimated value of the mineral reserves is 100 times the size of Afghanistan's entire economy, estimated at $12 billion. And it's not just the dollar figures that could bring about change. Much of Afghanistan's economic activities involve drug-trafficking and terrorism. About 40% of the country's population lives below the poverty line, and 70% lives on $2 a day.
We Want to Hear From You: Are You Worried About China's Currency Rise Sparking Inflation?
After months of intense political pressure, China announced Saturday that it would allow its currency to gradually appreciate against the U.S. dollar. China's currency - the yuan - has been pegged to the American greenback since 2008.
"This is going to lead to a transition from export-lead, investment-lead to more of a consumption-lead economy going forward," Jing Ulrich, chair of China equities and commodities at JPMorgan Chase & Co. (NYSE: JPM), told CNBC. "I think the ramifications are profound not just for the next few months but actually for the coming years."
Not surprisingly, U.S. exporters embraced the news as an opportunity to compete against Chinese companies and to reduce the U.S. trade deficit. Foreign nations, including the Untied States, have accused China of undervaluing its currency to give its exporters an advantage in global trade.
Why China's Foxconn Will Hurt the Global Economy More Than the BP Oil Spill
Before this month, chances are pretty good that you'd never even heard of Taiwan's Foxconn International Holdings (PINK ADR: FXCNY). And yet, Foxconn is one of the world's most important manufacturers.
Given that the formerly anonymous giant is now at the forefront of the zooming escalation in labor costs that's currently taking place in Mainland China - and given the enormous implications of the inflationary pressures that will result - chances are excellent that Foxconn will have a bigger effect on the world economy this year than even BP PLC (NYSE ADR: BP).
If that weren't enough, China's decision to let the yuan appreciate against the U.S. dollar will actually magnify this impact: If the Chinese currency strengthens, then the yuan-denominated wage increases will have an even-more-inflationary effect on the cost of China-made goods selling at your local Wal-Mart (NYSE: WMT).
To understand the "Foxconn Effect" - and to see how to position your investments - please read on...
China's Plan For Yuan Appreciation Likely to Boost Inflation in U.S. & Lift Chinese Consumer Stocks
China's plan to let the yuan appreciate against the U.S. dollar is likely to hit U.S. shoppers in the pocketbook, while also making the stocks of companies with goods aimed at Chinese consumers more attractive.
But because of wage pressures, the effects of China's move to introduce more flexibility to its currency policy won't fundamentally change its inflation problems, according to Money Morning Contributing Editor Martin Hutchinson.
"With workers in China demanding huge wage increases to keep up with prices, there's really no economic case for letting the yuan appreciate," Hutchinson said in an interview yesterday (Monday).
But a rising yuan and wage increases in China may gradually spell bad news for U.S. consumers.
"Eventually, the guy shopping at WalMart Stores Inc. (NYSE: WMT) won't like it when he sees prices go up 15% or more...prices of Chinese goods - everything from video games to sweatshirts - are likely to rise in dollar terms," Hutchinson said.
China's CNOOC Will Ramp Up Deepwater Oil Drilling as BP's Oil Spill Kills U.S. Exploration
China's CNOOC. Ltd. (NYSE ADR: CEO) will step up its long-term deepwater oil exploration plans with a close eye on safety measures in the wake of the BP PLC (NYSE ADR: BP) Gulf oil spill that has halted U.S. deepwater drilling. The state-controlled oil company has exclusive rights to develop China's offshore resources and has […]
We Want to Hear From You: Is Afghanistan's Mineral Wealth a Blessing or a Curse?
The news that there is $1 trillion of Afghanistan mineral wealth hiding in the country's scarred and deserted landscape has global investors calculating how likely it would be for this incredibly poor country to transform itself into a major global exporter.
It has also spawned debates about which nations should be given a piece of this potential fortune.
At $1 trillion, the estimated value of the mineral reserves is 100 times the size of Afghanistan's $12 billion economy. And it's not just the dollar figures that could bring about change. Much of Afghanistan's economic activities involve drug trafficking and terrorism. About 40% of the country's population lives below the poverty line, and 70% lives on $2 a day.
Will Afghanistan's Mineral Wealth Bring the Nation's Rebirth or a Commodities Curse?
Overnight, Afghanistan has gone from being a political pariah to one of the most significant, and potentially richest, countries on the globe. But can the rocky, war-torn desert - known mostly for harboring terrorists and exporting opium - be reborn as a major commodities exporter?
U.S. geologists have found some $1 trillion of untapped mineral deposits in Afghanistan, The New York Times reported Sunday. Afghanistan's mineral wealth includes large caches of iron, copper, gold and lithium that could turn the country into one of the most important mining centers in the world.
Think of Australia, Canada, and Latin America. That is the league into which these geographical revelations have thrust Afghanistan.
"There is stunning potential here," General David Petraeus, commander of the United States Central Command, told The Times. "There are a lot of ifs, of course, but I think potentially it is hugely significant."
Those "ifs" include ongoing warfare, a lack of infrastructure, and more than a little political corruption. But the upside for the country is enormous.
While U.S. officials estimate the potential value of Afghanistan's mineral wealth at $1 trillion, President Hamid Karzai said last month during a visit to Washington that his country's deposits could be worth three times as much.
So why did it take so long for this information to surface?
Taiwan Outlines Export Deal With China To Boost Its Economy and Open Door for Global Trade
Taiwan on Sunday announced a monumental trade deal with China that will boost the island's exports and shift its economy toward China-centric policies.
The Economic Cooperation Framework Agreement (ECFA) will reduce tariffs on 500 products exported from Taiwan to China and 200 products shipped from China to Taiwan including car parts and machinery. It will also open the door for Taiwan to be included in future free trade agreements that China previously prevented because it viewed Taiwan as a rebellious province.
"Signing the ECFA is a route that Taiwan must take and it is a milestone, " Liu Bih-rong, a political science professor at Soochow University in Taipei, told Bloomberg. "It signifies how the relationship between the two sides has recovered and, more importantly, it will pave the way for more free-trade agreements and benefits. "
The agreement's details still need to be ironed out and should be finalized by early July at the latest.
Buy, Sell or Hold: A Copper-Price Rebound Could Mean a 50% Gain For Freeport McMoRan Copper & Gold Inc. (NYSE: FCX)
It's time to play "the metal of the economists"- copper. And that brings us to one stock: The publicly traded king of copper - Freeport McMoRan Copper & Gold Inc. (NYSE: FCX).
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market: