Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Buy Stocks on Weakness

Stock-Markets / Global Stock Markets Oct 12, 2007 - 06:31 AM GMT

By: Yiannis_G_Mostrous


Best Financial Markets Analysis ArticleThe bull continues to charge ahead. I still expect some kind of correction at some point this month because it would be uncharacteristic for the markets to continue going up with no interruptions.

The main risk remains the shaky situation in the credit world. Consequently, the slowdown of the US economy could turn into a recession that would be very bad for the global economy. At this time, the probability for a recession by the end of the year or the first quarter of 2008 is around 50 percent.

It isn't difficult to identify economic excesses in advance. Being able to specify the tipping point is the problem. And it's one that the perma-bears haven't been able to solve either. They've been giving the wrong advice for two years now.

But if the global economy is able to help the US avoid a recession and adjust to its problems gradually--as it's done for the past 12 months--then everyone will do just fine. Bottom line: The potential outweighs the dangers, slightly.

Look at Japan

Japan has to be the least interesting market in the world right now. Nobody I've spoken to is interested in investing there, based on the perception that, because there are so many opportunities elsewhere, money allocated to Japan is dead money.

There are better opportunities right now than Japan, which is why I've ranked the country quite low as a fresh money buy for some time.

On the other hand, the negative sentiment surrounding the market offers an opportunity for long-term investors to pick some undervalued stocks, if only from a contrarian point of view. And no, I don't think you'll be walking into a “value trap.”

Big banks, in particular, have been the dogs of the Japanese market for a while now. They're down substantially from their June highs and now trade at favorable valuations. 

Recent credit woes have also added to the already negative sentiment, even though Japanese banks have relatively little exposure to overseas subprime mortgage problems and little risk in nonperforming domestic loans. Last time I checked, Japan isn't in the midst of a financial crisis.

Japan is enjoying a secular bull market that commenced in 2003. As I've noted on numerous occasions, I expect growth to continue as the Japanese economy gradually moves out of deflation while consumers return in strength, thus allowing Japanese firms more pricing power.

Recent developments on the monetary front do, however, bear watching. The decision by the Bank of Japan (BoJ) to leave rates unchanged gave an indication to the market that BoJ members want to see more evidence on price inflation. It remains to be seen if Japanese authorities will be able to effectively navigate the economy back to normality (i.e., out of the deflation trap) and allow it to flourish once again. 

Bears and Asia

The bearish argument regarding the current economic situation calls for the end of the financial system as we know it or, as it's been nuanced during the past five years, a global financial collapse.

I'm not ready to bet on such an outcome. With regard to Asia, embedded bears have spread their negativity on the region since the beginning of the year--and, therefore, missed out on a great ride--at least until now.

Asian markets strength was also the main reason they sold off violently during the summer selloff. When money managers need to cover losses elsewhere, they sell the markets where they have the biggest profits--throwing the baby out with the bathwater.

A lot of funds have also been moving to the so-called safe haven of the US market. Although there are reasons--basically valuation-related--for such a move, it doesn't make a lot of sense to me. It is, after all, the US economy and its securitization industry that's the source of the problems everyone's so worried about this time around. 

Putting your money in a market with a slowing economy and a financial system coping with significant new challenges is bizarre. If you don't want to put your money to work in the “high risk” markets of the East, buy gold and short the US consumer instead.

Looking beyond the current situation, Asia remains the region of choice for serious long-term investors. Asia is leading a great global economic transformation and will be the engine of growth for years to come. And the region ex-Japan is still enjoying a long-term bull market that commenced at the bottom of the 1998 Asian Crisis.

The events of 10 years ago have proven a fortunate catharsis for the region. The main reason I like the long-term Asian investment theme is the economic reform, moves toward privatization and the commitment to free trade that emerged from the crisis and has since defined Asian governments and the region's economic establishment.

Economies and earnings in the region continue to be strong and are accelerating in some cases. Savings rates are still high, salaries and property prices continue to rise, and consumption is on an uptrend. Diversify your portfolios and have exposure to Asia. 


By Yiannis G. Mostrous
Editor: Silk Road Investor, Growth Engines

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .

Yiannis_G_Mostrous Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in