Many investors are focusing on China's recent moves to curtail lending and cool its economic growth, but in doing so they're forgetting that the Chinese economy has withstood the financial crisis better than any other economy in the world. And it remains investors' best bet.
"When the financial crisis forced the neoliberal economic system into a dead end, the shortcomings of the capitalist system were exposed for all to see," read a Jan. 5 front page editorial in the People's Daily, the central government's official mouthpiece. "But a China that was pushed to a crossroads proved its 'national capabilities' in taking on a crisis by answering with the advantage of the socialist system with Chinese characteristics."
That statement is cavalier almost to the point of tastelessness but Beijing has earned those bragging rights. China's economy expanded by 10.7% year-over-year in the fourth quarter as most of the world continued to struggle with the aftermath of 2008's financial crisis. For the full year, the nation's gross domestic product (GDP) grew 8.7%.
That easily tops the government's 8% target and dwarfs the economic growth posted by other economies around the world.
Financial Crisis
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"Financial Reform" Just Camouflage for Wall Street's Latest Power Play
Anti-Wall Street sentiment makes for a good cover, but behind the scenes and rhetoric, legislators are working with the country's largest financial firms to fashion a new system that concentrates even more risk and reward at fewer banks.
And what's more, the underlying socialization of the system will guarantee the success of excess with the full faith and credit of taxpayers.
On Dec. 11, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which among other things, creates a consumer protection agency, strips the U.S. Federal Reserve of certain powers and subjects it to politicization, calls for big banks to finance a $150 billion bailout fund and gives the government power to break up or coddle financial firms as they see fit.
The Senate will try and reconcile the House bill with an earlier version of its own bill. Legislators are hoping to have a final bill ready sometime in early 2010.
But, in a testament to the power of Wall Street, what's on the table is what works for bankers and the Street. The resulting de-facto socialization of American banking is nothing more than Wall Street's secret agenda to eliminate competition, grow bigger profit engines and rely on the perception of a socialized system to support cheap funding.
And what's more, the underlying socialization of the system will guarantee the success of excess with the full faith and credit of taxpayers.
On Dec. 11, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which among other things, creates a consumer protection agency, strips the U.S. Federal Reserve of certain powers and subjects it to politicization, calls for big banks to finance a $150 billion bailout fund and gives the government power to break up or coddle financial firms as they see fit.
The Senate will try and reconcile the House bill with an earlier version of its own bill. Legislators are hoping to have a final bill ready sometime in early 2010.
But, in a testament to the power of Wall Street, what's on the table is what works for bankers and the Street. The resulting de-facto socialization of American banking is nothing more than Wall Street's secret agenda to eliminate competition, grow bigger profit engines and rely on the perception of a socialized system to support cheap funding.
U.S. Stocks Will Reward Optimistic Investors in 2010
I have been surprised to see the air thick with pessimism in recent weeks. Not so much the stock market, where the sentiment indexes show the bulls dominating the bears by slightly more than 52%. But among the general public.
An NBC/Wall Street Journal poll last week found that 55% of all Americans feel the nation is heading the wrong direction. This is the highest level since January of this year - when the financial crisis was red hot and U.S. President Barack Obama was just entering the White House! That's amazing.
A recent CNBC "Wealth in America" report found more negativity. Negative sentiments were expressed about the economy, stocks, home values, and wage growth. Faith in institutions like the U.S. Federal Reserve, the U.S. Treasury, and the financial sector were very low. President Obama's approval rating has fallen below 50% for the first time.
However, Merrill Lynch & Co. Inc. researchers picked up on this theme, and said in a recent note to clients that 2010 would be the year we exit the "pessimism bubble."
And I couldn't agree more. In fact, there might not be a better time to buy stocks.
An NBC/Wall Street Journal poll last week found that 55% of all Americans feel the nation is heading the wrong direction. This is the highest level since January of this year - when the financial crisis was red hot and U.S. President Barack Obama was just entering the White House! That's amazing.
A recent CNBC "Wealth in America" report found more negativity. Negative sentiments were expressed about the economy, stocks, home values, and wage growth. Faith in institutions like the U.S. Federal Reserve, the U.S. Treasury, and the financial sector were very low. President Obama's approval rating has fallen below 50% for the first time.
However, Merrill Lynch & Co. Inc. researchers picked up on this theme, and said in a recent note to clients that 2010 would be the year we exit the "pessimism bubble."
And I couldn't agree more. In fact, there might not be a better time to buy stocks.
As Time's "Person of the Year," Fed's Bernanke Joins a Long List of Infamous Underachievers
There's a culture in our society that rewards bad behavior. Take the Fort Collins, Colo. couple that pretended to send their 6-year-old boy up in a homemade balloon so the family could star in a reality show?
Well, Time magazine's anointment of U.S. Federal Reserve Chairman Ben S. Bernanke as its "Person of the Year 2009" is an example of the same thing.
For starters, no other U.S. central bank head has been a "Person of the Year." Not William McChesney Martin Jr. (Fed chairman, 1951-70) who defined monetary policy accurately, saying the Fed's job was "to take away the punchbowl just as the party gets going." Not even Paul A. Volcker (Fed chairman, 1979-87), who bravely pursued a tight-money policy that broke the back of inflation.
Well, Time magazine's anointment of U.S. Federal Reserve Chairman Ben S. Bernanke as its "Person of the Year 2009" is an example of the same thing.
For starters, no other U.S. central bank head has been a "Person of the Year." Not William McChesney Martin Jr. (Fed chairman, 1951-70) who defined monetary policy accurately, saying the Fed's job was "to take away the punchbowl just as the party gets going." Not even Paul A. Volcker (Fed chairman, 1979-87), who bravely pursued a tight-money policy that broke the back of inflation.
$10 Billion Bailout Just Beginning of Dubai's Debt Problems
When Abu Dhabi agreed on Monday to provide Dubai with $10 billion to settle some of its debt obligations, it may have temporarily soothed the concerns of major creditors. But the bailout, and a separate move to set out a legal framework for further debt restructuring, won't do much to relieve Dubai's long-term debt problems.
Plenty of questions remain as Dubai works to repair its reputation and tries to renegotiate the rest of its debts. The full extent of its liabilities is uncertain, but Dubai's known debts are roughly equal to its total economic output last year, with some analysts estimating its total obligations at $100 billion or more, Bloomberg News reported.
"It's not going to stop and go away," John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, Saudi Arabia told Bloomberg. "There's still debt that needs to be settled in 2010 and 2011."
Plenty of questions remain as Dubai works to repair its reputation and tries to renegotiate the rest of its debts. The full extent of its liabilities is uncertain, but Dubai's known debts are roughly equal to its total economic output last year, with some analysts estimating its total obligations at $100 billion or more, Bloomberg News reported.
"It's not going to stop and go away," John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, Saudi Arabia told Bloomberg. "There's still debt that needs to be settled in 2010 and 2011."
Billionaires Turn to Beggars as Financial Crisis Torches the World's Fortunes
The holiday season is traditionally the time when society extends a helping hand to the less fortunate among us. But this December, thanks to the world's continuing economic unease, we've got a whole new class of "poor" people to worry about.
They're called billionaires - or, even more tragic, "ex-billionaires" - and, according to Forbes magazine, they've taken a bigger financial hit in the past 15 months or so than in any year since the magazine started tracking the fortunes of the world's richest people back in 1987.
In fact, the most recent Forbes survey found that the total number of billionaires around the globe plunged from a record 1,125 in early 2008 to just 793 in March 2009 - a net decline of 332, or 29.5%. Even worse, the total net worth of the world's recognized billionaires plunged 45.4%, from $4.4 trillion in 2008 to just $2.4 trillion this year (numbers are based on stock prices and other values assessed in mid-February). That translates to an average net worth of just $3 billion, down 23%, or $910 million, from 2008.
How to Profit From the "Next" Dubai
The Dubai World default is a matter of only $60 billion - mere peanuts when compared to other elements of the global financial crisis. It's thus of concern only to those silly enough to invest in real estate there (and the European banks foolish enough to finance it.) For the rest of us, it is a useful reminder that sudden collapses don't really come out of nowhere - they can be foreseen, and smart investors can plan for them.
You see, I did foresee this one, for Money Morning readers - 16 months ago, before the global banking crash. Back in July 2008, I wrote that Dubai's economy was "more bubble than boom," that it had "a construction bubble worse than the Florida market and a monetary policy looser than Ben Bernanke's" and that "its return to earth will be painful and probably not long delayed."
You see, I did foresee this one, for Money Morning readers - 16 months ago, before the global banking crash. Back in July 2008, I wrote that Dubai's economy was "more bubble than boom," that it had "a construction bubble worse than the Florida market and a monetary policy looser than Ben Bernanke's" and that "its return to earth will be painful and probably not long delayed."
Is Government Debt the Next Crisis to Strike?
While American investors were busy enjoying their Thanksgiving dinners, global markets were shaken by word that Dubai asked for a payment holiday on the $59 billion it owes via its investment vehicle, Dubai World. The move, which comes as oversized bets on Persian Gulf real estate sour, was considered a default by the major rating […]
Removal of Stimulus Packages Next Year Poses Bubble, Credit Risks Says World Bank’s Zoellick
The global economy must be wary of bubble and credit risks in 2010 as central banks around the world begin removing stimulus, warned World Bank President Robert Zoellick yesterday (Wednesday).
Speaking to the press at the Singapore Foreign Correspondents Association, Zoellick said policymakers must be vigilant in preventing asset bubbles and that the private sector is needed to stoke demand.
"And so when that stimulus money has run its course, then the question will be, will the private sector rebuild demand?" he said.
Speaking to the press at the Singapore Foreign Correspondents Association, Zoellick said policymakers must be vigilant in preventing asset bubbles and that the private sector is needed to stoke demand.
"And so when that stimulus money has run its course, then the question will be, will the private sector rebuild demand?" he said.
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Part of the problem going forward for East Asian economies is policymakers typically follow the U.S. Federal Reserve. However, nations choosing to do this may face challenges because the recovery won’t be symmetrical.Investment News Briefs
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Where to Find Big Profits in a Post-Crash World
[Editor's Note: The essay that follows was adapted from "Fiscal Hangover," a brand-new global investing book written by Money Morning's Keith Fitz-Gerald. For more information - including details on how to get a $10 discount off of the cover price - please click here.] As I write this, everyone from Wall Street to Main Street […]
A Year After the Crisis, the Global Economy is Firing on All Cylinders
What a difference 12 months can make.
Just one year after every national economy on earth was in deep trouble, a powerful global rebound is underway. In fact, the global upswing is a lot stronger than most investors realize.
So don't let a few days' decline here and there cause you to lose sight of one of the most important investing trends investors will find today.
Just one year after every national economy on earth was in deep trouble, a powerful global rebound is underway. In fact, the global upswing is a lot stronger than most investors realize.
So don't let a few days' decline here and there cause you to lose sight of one of the most important investing trends investors will find today.
Here's Why the U.S.-China Tire Tiff Could Lead to Great Depression II
When U.S. President Barack Obama late Friday (Sept. 11) signed an order that imposed an additional duty of 35% on tires imported from China, it set up the potential for an old-fashioned trade war. Currently, global trade is down only 20%. During normal times, worldwide commerce would recover on its own. But as most investors […]
Buy, Sell or Hold: The SPDR Gold Trust ETF (NYSE: GLD) Continues to Offer Investors a Hedge Against Inflation
The just-concluded Group 20 (G20) meeting left us with a chorus of very "prudent" governments and central bankers singing the praises of easy monetary and fiscal conditions. So where can we take refuge when all the central banks in the world print money and governments run deficits in order to spend like drunken sailors? The […]
Three Ways to Profit As Taiwan Rebounds From the Financial Crisis
By Martin HutchinsonContributing EditorMoney Morning As you scour the globe for potential post-financial-crisis profit plays, don't overlook Taiwan. Stock markets around the world have already started to rebound with joy as investors begin to believe that that the unpleasant global recession is finally nearing its bottom. Unfortunately, there's one sobering conclusion many investors have so […]