Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Sell US Stock Market Rallies and Buy Asian Dips

Stock-Markets / Chinese Stock Market Feb 14, 2008 - 01:44 PM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleLarry Edelson writes: Have Asian economies delinked from the U.S. or not? Are they independent of each other? Now that the U.S has caught a cold (recession), will the rest of the world, especially Asia, catch it?

These seem to be the major questions on investors' minds these days, from Wall Street to Main Street. And who can blame them for wondering?


After all, more than $423.4 billion in foreign investment has poured into Asia and Southeast Asia just in the past two years. So there's a huge amount of new money at risk.

And if Asia is as dependent upon the U.S. as it has been in the past, then Asian economies and stock markets are going to get hit hard, which, in turn, will create a vicious downturn, pulling the U.S. indexes even lower.

So today I want to take a hard look at the relationship between Asia and the U.S., and I'll do my best to provide you with the most objective answers to the foregoing questions.

First, let me say right up front that there are NEVER any absolutes in economics. So, at the risk of sounding ambiguous, the answer to the above questions is: Yes and no.

Let me explain ...

Yes, Asian Economies Are More Independent Of the U.S. Economy Than EVER Before

When I look at the recent economic statistics, I don't see how anyone can honestly claim that Asia is still completely beholden to the U.S. economy.

China, and other Asian countries,       have <br />      piles of money in reserve.
China, and other Asian countries, have
piles of money in reserve.

Of the 11 major Asian and Southeast Asian economies (comprised of China, Japan, India, Taiwan, South Korea, Singapore, Hong Kong, Malaysia, Thailand, Indonesia and the Philippines) ...

  • Eight have current account surpluses.
  • Eight have more than $100 billion in reserves, with China having the largest in the world (currently $1.528 trillion).
  • Ten of them (Japan is the exception) are growing at a faster rate than the U.S., by factors ranging from two times U.S. economic growth to as much as 4.6 times in the case of China.
  • With the exception of China, all have unpegged their currencies from the U.S. dollar and from fixed-rate currency regimes. As a result, their economies are more flexible.

It doesn't take a rocket scientist to conclude that all of this evidence points to an Asia that's not only economically stronger than it was just five or ten years ago, but also one that is far less dependent upon the U.S. than ever before.

However ...

Asian Economies Do Not Operate In a Vacuum

No country does. To think that Asian economies are 100% decoupled from the U.S. economy is foolish. They still ...

  • Account for more than 30% of U.S. imports .
  • Represent almost two-thirds of the world's foreign currency reserves, money that is by and large invested in U.S. dollars.
  • Receive more foreign investment from the U.S. than any other region .
Exports to the U.S. are still important, but Asian economies have become more independent in recent years.
Exports to the U.S. are still important, but Asian economies have become more independent in recent years.

Plus, there is no denying the psychology of economies and markets today. Especially in an era of lightning fast communications via e-mail and the Internet, herding behavior can spread around global markets more rapidly than ever before.

So in this sense, Asian markets are more connected to the U.S. markets than they previously were. As a result, a panic in the U.S. can easily set off a panic in Asian economies, regardless of their stronger fundamentals.

Indeed, we've already seen this in the latest bear move – weakness started in the U.S., but the Shanghai Composite Index lost almost 32% of its value during the recent decline.

But as I pointed out two weeks ago , that sell-off was way overdone in relation to the underlying fundamentals in China, which remain VERY strong, to say the least.

That's why I told you China represented one of the best buying opportunities around, and I suggested using the pullback to buy the FXI or the U.S. Global Investors China Regional Opportunity Fund (USCOX) .

So to summarize, here are my three important conclusions ...

Conclusion #1: Asian Economies Are More Resilient Than Ever Before

While Asian economies still have ties to the U.S., there's no question in my mind that they are less dependent on the U.S. than they have ever been.

Their economies are also stronger ... more self-sufficient ... and more resilient than they've ever been ... due to their accumulation of foreign reserves as well as their current account and trade surpluses, and more.

Conclusion #2: I Still Suggest You Buy the Dips in Asia!

Asian economies and stock markets remain in long-term bull markets. So when you see declines in Asian markets, consider using them as buying opportunities.

There's tons of money to be made in the Asian markets – now and for years to come. And it's easier than ever before to buy into these markets.

Investments like the previously mentioned FXI and USCOX are terrific. And there are many more Asian plays ripe for the picking now as well.

Conclusion #3: Make Sure You Are Holding ONLY Natural Resource Stocks And Gold in the U.S.

As I've noted in previous issues and in my Real Wealth Report forecast issue, all of my indicators suggest that the U.S. economy and broad stock markets are now in a bear market.

Don't wait for think tanks or Washington to officially announce the U.S. is in a recession. By the time they do, it will be too late – and the economy will be much closer to the end of the recession than at the beginning.

I still fully expect to see 11,000 on the Dow Jones Industrials, and possibly lower. So I suggest using these rallies you're seeing to get out of nearly ALL U.S. stocks you own, including tech stocks.

The ONLY stocks I consider worth holding are natural resource shares – energy, food, etc. Although these issues are not immune to declines either, many of them will buck a downturn in the broader markets.

Lastly, make sure you're holding gold in this environment. Central banks around the world – not just the U.S. – are pumping dollars into the global economy like never before.

Despite what they publicly say or admit to, politicians and central bankers want as much inflation now as possible. It is the ONLY way out of the credit crisis in the U.S.

Whether or not it will work remains to be seen. But one thing is for sure ... high inflation will send natural resource stocks and gold rocketing higher. 

Best wishes,

Larry

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules