Infusions
FALLS CHURCH, Va.–The US continues to feed the world morsels of negativity.
The latest is Citigroup’s “request” for capital infusion to the sheikdom of Abu Dhabi. When one of the biggest banks in the world is willing to pay 11 percent interest, essentially a junk-level yield, in order to strengthen its capital base, the emperor is indeed without clothes.
Things will get worse for the US economy and the rest of the world before they get better. The best outcome: The US avoids recession and the rest of the world picks up the slack until the US recovers. That scenario could still happen, but the picture is fading.
Recent developments at Citigroup provide further illustration of my long-term investment thesis. The world is moving to a more multipolar economic and political system with new economic superpowers rising, preparing to challenge US supremacy. Although the US will remain a very important player in the global economic stage, it will gradually lose its hold on supremacy.
The rise of China and India, the re-emergence of Russia and the abundance of capital looking for growth-related investment opportunities are the main catalysts for this new global economic order. These changes offer the potential of superior returns for the patient, well-positioned investor.
A new silk road is opening through which funds will flow in increasing amounts to the emerging economies of the world. Such economies are already absorbing progressively larger amounts of investment capital as they integrate into the global economy and embrace economic change. In due time, they’ll also start buying more assets in the more developed economies.
Short-term market gyrations notwithstanding, the trend remains positive for emerging economies and markets, with Asia leading the way. And because this is the main game in town, Asia will continue to trade at premium valuations. A solid correction could change that, but such an incident would present another great opportunity to buy the region and allow latecomers to hop on the bull ride at more reasonable prices.
In the context of the Silk portfolios, one approach is to pick one stock for each sector. Consider the following, in order:
The iShares Malaysia (NYSE: EWM) exchange traded fund (ETF) is also a good buy because the Malaysian market is a good growth story and offers superb valuations.
Short Recommendation Update
If you followed the Nov. 13 China Life Insurance Co (NYSE: LFC) recommendation and shorted it around 85, your stop-loss should now be at 88.
The latest is Citigroup’s “request” for capital infusion to the sheikdom of Abu Dhabi. When one of the biggest banks in the world is willing to pay 11 percent interest, essentially a junk-level yield, in order to strengthen its capital base, the emperor is indeed without clothes.
Things will get worse for the US economy and the rest of the world before they get better. The best outcome: The US avoids recession and the rest of the world picks up the slack until the US recovers. That scenario could still happen, but the picture is fading.
Recent developments at Citigroup provide further illustration of my long-term investment thesis. The world is moving to a more multipolar economic and political system with new economic superpowers rising, preparing to challenge US supremacy. Although the US will remain a very important player in the global economic stage, it will gradually lose its hold on supremacy.
The rise of China and India, the re-emergence of Russia and the abundance of capital looking for growth-related investment opportunities are the main catalysts for this new global economic order. These changes offer the potential of superior returns for the patient, well-positioned investor.
A new silk road is opening through which funds will flow in increasing amounts to the emerging economies of the world. Such economies are already absorbing progressively larger amounts of investment capital as they integrate into the global economy and embrace economic change. In due time, they’ll also start buying more assets in the more developed economies.
Short-term market gyrations notwithstanding, the trend remains positive for emerging economies and markets, with Asia leading the way. And because this is the main game in town, Asia will continue to trade at premium valuations. A solid correction could change that, but such an incident would present another great opportunity to buy the region and allow latecomers to hop on the bull ride at more reasonable prices.
What to Own Now
On the narrower issue of present market conditions, the picture remains cloudy. Pessimism rules and many investors continue to be short. The bears have strong arguments, but this gloomy mood could also be seen as a contrary indicator, making this a good time to establish long positions.In the context of the Silk portfolios, one approach is to pick one stock for each sector. Consider the following, in order:
- Real Estate: Cheung Kong (Hong Kong: 1, OTC: CHEUY)
- Banking: United Overseas Bank (Singapore: UOB, OTC: UOVEY)
- Consumer: Hengan International (Hong Kong: 1044, OTC: HEGIF)
- Telecommunications: Mobile TeleSystems (NYSE: MBT)
- Coal: Yanzhou Coal (Hong Kong: 1171, NYSE: YZC)
- Pharmaceuticals: Dr. Reddys Labs (NYSE: RDY)
- Industrials: Mitsubishi Heavy (Japan: 7011, OTC: MHVYF)
- Oil: LUKOIL (Russia: LKOH, OTC: LUKOY)
- Power: Datang International Power (Hong Kong: 991, OTC: DIPGY)
- Technology: AU Optronics (Taiwan: 2409, NYSE: AUO)
- Publishing: SCMP Group (Hong Kong: 583, OTC: SCPXY)
- Infrastructure: Keppel Corp (Singapore: KEP, OTC: KPELY)
- Entertainment: Melco PBL Entertainment (NSDQ: MPEL)
The iShares Malaysia (NYSE: EWM) exchange traded fund (ETF) is also a good buy because the Malaysian market is a good growth story and offers superb valuations.
Short Recommendation Update
If you followed the Nov. 13 China Life Insurance Co (NYSE: LFC) recommendation and shorted it around 85, your stop-loss should now be at 88.
Fresh Money Buys
Because the investment process is constant, if you’d like to add to your positions in portfolio recommendations or allocate new funds in a diversified way, focus on the following markets (consult the Portfolio pages on the left of your screen for details), in order (for both countries and sectors):- Singapore (banking, telecommunications, industrial)
- South Korea (electric power, banking)
- Hong Kong (real estate, banking, infrastructure, publishing)
- India (pharmaceuticals)
- China (consumer, coal, power, oil, water, e-commerce)
- Russia (telecommunications, energy)
- The Philippines (Telecommunications, Real Estate)
- Malaysia (ETF)
- Taiwan (technology, telecommunications)
- Europe (pharmaceuticals, industrials, communications equipment)
- Japan (banking, industrials)
- Macau (gaming)