Money Morning Chief Investment Strategist Keith Fitz-Gerald talked U.S. Federal Reserve policy with "Varney & Co." host Stuart Varney on FOX Business Monday morning.
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We've heard reports of a slowdown in the Chinese juggernaut. Forecasts have shown that China's economy will grow by "only" 7.5% in the second quarter of 2013.
Europe is already in a recession, and America's own economic growth is wheezing along at less than 1% this quarter.
Is the media hype about China's economic growth slowdown overblown, or will it have real fallout for the United States and Europe?
Money MorningChief Investment Strategist Keith-Fitzgerald speaks with FOXBusiness' "Varney & Co."about what these figures really mean for the global economy. Watch the following video for the answer.
The hubris of central banking and Keynesian monetary theory is being shredded. But yesterday’s sell-off also shows markets want to fix this mess. Lots of stocks are at sale prices. Read more...
- Issue #1: Samsung profit is soaring, while tech king Apple is on the decline. Is this because of buzz Samsung is creating for its phones, or are we witnessing a major consumer shift for the hottest tech products? Does Samsung have a shot at winning over Apple lovers?
- Issue #2: IBM CEO in an internal company video tells employees after a weak earnings report to get their act together - or get out. Is this too harsh, or a necessary tactic to turn the company around? Can it work?
- Issue #3: Outstanding loans by the biggest banks to U.S. companies fell 9% in the first two weeks of April compared to the end of March. What's behind the decline - and what does it tell us about the U.S. economy in 2013?
Most are really just reincarnations of concerns voiced since 1970 when China first began to open up. In that sense, they're really nothing new.
So rather than tackling the same old "they'll never succeed because they're not democratic" or "ghost cities" arguments that seem to incessantly make the rounds, let's frame them in terms of what's in the news lately and dig into the subtleties that escape most Westerners.
And, let's start with one of the questions I get the most.
Q - Is China going to have a "hard" or "soft" landing?
A - This one stumps me. Where have the people asking this question been? China's had a soft landing for the last four years. They are already there - the economy is slowing, debt is rising, and the urban migration may be closer to an end than people think.
The fact is that nobody can define what a Chinese soft or hard landing actually is because Western metrics don't apply. It's just a catch phrase that gets bandied about in the media.
That's why I believe this question is really a matter of perspective. For example, there is no question China faces huge challenges, but those challenges are no different than many we've faced here in our own past.
During the last century we experienced two world wars, multiple recessions, a depression, and a presidential assassination -- and still the Dow rose more than 20,000%.
China will, too. The genie is not going back in the bottle.
As I recall, many people in England thought that America was a pretty silly venture at one time. And don't forget that the world thought Japan was good for nothing more than cheap tin toys following WWII.
Looking at China through Western lenses is a mistake.
Q - The Chinese copy everything. Companies can't make money there, especially lately.
A - That's simply not true. Domestic Chinese companies have made plenty of money. So have foreign companies like McDonalds, ABB, Coke, and even GM, which have been fabulously successful there because they've taken the time to localize their products.
Not many people know this, but the ultimate sign of executive status is a jet black Buick minivan in Beijing at the moment. How's that for a contradiction?!
On that show, which begins at 9:30 a.m. (EST), Fitz-Gerald is tentatively scheduled to sit in for co-anchor Chris Cotter, and to talk about State of the Union issues with company "co-members" Charlie Payne and Tracy Byrnes. The list of guests is currently scheduled to include:
Doing so right now is nothing more than a "widow-maker" trade that will test both your patience and your pocket book. And yet, "shorting" the U.S. Treasury bond market is an opportunity you can't afford to pass up - so long as you execute the trade correctly.
For the best Treasury bond strategy to deploy right now, please read on...
"New financial times require new financial tools, and I believe options are a must in today's fragile markets," says Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Learning to use options effectively takes some time - particularly if you are set in your ways - but market conditions have changed so much in such a short time that you have to make the effort if you expect to both maximize profits and guard against major reversals."
Fitz-Gerald regularly employs both stock and index options in his Geiger Index advisory service, which has scored a remarkable 32 profits in 32 tries since its inception.
With the growth rates that its economy has turned in the past few years, no economist could ever accuse China's leader of not trying hard. China now claims to have jumped over Japan to take over the No. 2 spot in the world economic pecking order.
China's next target: The No. 1 U.S. economy.
In fact, some experts believe that China could catch up to the United States' $14.4 trillion economy in as little as 10 to 15 years.
Still, while the yuan does need to appreciate, critics in the United States should remember that the dollar too is flawed, and that the uneven relationship between the two currencies has often worked to America's advantage.
Treasury Secretary Timothy Geithner has thrice declined to tag China as a currency manipulator in his biannual report to Congress. Geithner even delayed the release of the most recent report to give China more time to adjust its policy. That move paid off in June when just days ahead of the Group of 20 (G20) leaders' summit in Toronto, Beijing announced that it would allow the yuan to appreciate against the dollar. Since then, the currency has risen about 1% against the greenback.
Geithner, who made two visits to China in the spring for closed-door talks with top officials on the issue, called the policy shift a "significant step" in his report, but said the yuan remains "undervalued."
What matters now is "how far and how fast the renminbi [or yuan] appreciates," Geithner said, adding that the United States "will closely and regularly monitor the appreciation" of the currency.
As Keith Fitz-Gerald, Money Morning's Chief Investment Strategist, pointed out last week (June 10), from January through May, the dollar gained ground against all but two of the world's leading currencies - China's yuan and the Japanese yen - and it retained parity with them. The greenback appreciated by as much as 16% versus the struggling euro, which last week (June 8) briefly dipped to a four-year low below $1.20, and 13% against the British pound.
The InterContinental Exchange's (ICE) U.S. Dollar Index (USDX), which measures the dollar's value versus a trade-weighted basket of six leading foreign currencies, climbed from a low of 76.732 on Jan. 14, 2010, to an intra-day high of 88.586 on June 8.
And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.
With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.
Before you answer, consider the following:
- If you invested $1,000 in the Standard & Poor's 500 Index in 1950, it would have grown to $613,013 by December 2007.
- If you had tried to "time" the market and missed the 30 best months in that 57-year period, the value of your initial $1,000 investment would have risen to just $35,404 - a difference of $577,609.
- But if you tried to time the market and missed the 30 worst months in that time, your $1,000 would have grown to $9,509,094!