(Please join me in welcoming two of the world’s most respected investment analysts to the Weiss Research team! Boris Schlossberg and Kathy Lien (click here for bios)Â — both regulars on CNBCÂ — are widely quoted and sought after by cautious investors the world over. We believe their insights will help make 2016 among your most profitable years ever! — Martin Weiss)
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Either way, China is struggling to keep her flame burning. And while the candle won’t be burning out anytime soon, even if it flickers it would bring darkness to every corner of the world. When economic giants slow, the world suffers, and you need to be prepared because China’s new economic plan will soon be approved.
For the past 30 years, China was the hottest economy in the world. Its double-digit growth rates fueled everyone from developed to emerging-market nations and protected many countries from deeper downturns during the Global Financial Crisis. But don’t be mistaken; China does not look at the world as a charity case. The leaders there are singularly focused on what is best for China, regardless of consequences. Right now, China’s focus is to shift its economy from manufacturing to consumption, and it will stop at nothing to achieve that goal.
China will not hesitate to bring on a world of hurt in 2016 to achieve its policy targets. Chinese officials are preparing for their most ambitious economic transformation since the “reform and opening up” policy of 1978 — yes, the one that turned China into the greatest economic success story of the past three decades. The growth-at-all-costs model is no longer going to work if they want sustainable growth. By 2020, China plans to double incomes from 2010 levels because the average worker needs to earn a lot more than 56,300 yuan a year (the equivalent of $8,600) to have enough disposable income to support a consumer-based economy. They also want to create 10 million jobs a year, but they’ve been light on the details.
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| China wants to double the income of citizens by 2020. |
The only concrete announcement they made was to drop the “one-child policy” and adopt a two-child policy. Ending the one-child policy is a smart move, but it will take decades to pay off. Over a quarter of China’s population is 50 and over and, according to the World Bank, in spite of the relaxation of the one-child policy, China’s working population will shrink 10% by 2040. Many Chinese have grown accustomed to having only one child and the financial burden of having more than one could deter some families from taking advantage of a program that the government desperately needs to work. Recent surveys find that only a quarter of women who are able to have another child plan on doing so.
For now, the days of 10% growth in China are clearly over and the country is headed for its slowest expansion in decades with repercussions that will be felt around the world. China’s focus on environment and social reforms will be costly. Remember that one day in August (the 24th) when the Shanghai stock market dropped 8.5%, causing the Dow Jones Industrial Average to drop almost 600 points? With Chinese growth expected to hit a wall in 2016, the most dramatic and disruptive period for emerging and developed markets is upon us. And that could mean the end to the bull market in U.S. stocks.
So to make money in 2016, it will be extremely important to be selective, not only about the stocks you choose to buy but also the markets you choose to invest in.
Best wishes,
Boris and Kathy
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Regular columnist Mike Larson takes a look at your recent comments:
Is “Sell Everything” the best advice you’ve heard from Wall Street in a long time? Or the worst? Several of you weighed in on my column yesterday highlighting the RBS call.
Reader Richard said: “There is no way that anyone can convince me that RBS is not correct. The world cannot pay the debts we have built. It’s time for cleansing and it won’t be pretty.”
Reader Howard countered by saying you can’t stay on the sidelines forever: “Finding the bottom is never easy. When you have had historically low prices in commodities, at some point the smart money will re-enter the market. This market has been in decline for some time and each of us will decide when the time is right. Don’t wait too long.”
Reader Larry shared this view about how the market backdrop has changed for the longer term: “You can make money when stocks go up, and you can make money when stocks go down. The climate, however, has changed over the past year. We previously bought on dips. Now we better sell/sell short/buy inverse ETFs when the general market bounces up into technical resistance.
“I just made 10% on my portfolio with bearish trades, and I plan to do it again after this expected bounce. It is not rocket science. You just can’t do bullish trades in bearish markets without losing money.”
Reader Scott concurred with the bear market assessment, saying: “The market has been in a monthly bear sell mode since April 2015. The downside is just getting started. Since April-May, the strategy has been to get out of longs and sell rallies. Has been working gangbusters for me.
“Income is no good if your underlying asset declines 20%, 30%, 50% or more – look at oil. Better to be sitting totally in cash, waiting for the long-term trend to change back up. It could be quite a while – one to two years at least, maybe more. Look how long gold has been in a downtrend – over four years now.”
Finally, Reader Craig said: “I agree about the ‘no panic selling’ view. Stocks will continue to drop and several small-to-medium-size oil companies will file for bankruptcy. These are interesting times and if you play your cards right, you will make lots of money.”
Thanks for sharing these opinions. Yesterday’s late day bounce and the early strength today are evidence that short-term, oversold rallies are possible at any time. They could even carry for a few hundred Dow points over the span of a few days.
But over the long term, I agree that we’ve seen a major change of character in the markets. That raises all kinds of new risks … but also massive profit opportunities, as Readers Craig, Scott, and Larry point out.
Didn’t comment yet? Then don’t wait – use the discussion board below to share your thoughts now.
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Iranian forces detained and held 10 U.S. sailors yesterday after they strayed into the Islamic Republic’s territorial waters. But Iran said that the intrusion was accidental, and the U.S. apologized, and released them after only a brief time.
Last year was a record for mega-deals in corporate America and around the world. The problem? Now all those companies have to pay for them. This Bloomberg story points out that corporations will have to raise a record $280 billion this year to finance previously announced M&A deals, up from $258 billion last year.
Unfortunately, they’re going to have to do so in a debt market that’s growing increasingly hostile by the week. That means companies will have to pay higher interest rates or make other concessions to bond buyers in order to get deals done. The risk of a major deal failure, and subsequent market volatility, is also clearly on the rise.
The National Football League is bringing professional football back to Los Angeles. Team owners voted in favor of billionaire Stanley Kroenke’s proposal to relocate the St. Louis Rams to a new stadium complex that will be built in Inglewood, California.
The glass-roofed facility will cost as much as $3 billion, and likely include peripheral entertainment facilities. The San Diego Chargers were granted an option to join the deal, potentially giving L.A. two NFL teams. It will take a few years to complete the facility, during which time the Rams will probably play their games at the Los Angeles Memorial Coliseum.
What do you think about Iran’s latest move in the Persian Gulf? Will some of these mega-deals start failing, and how will markets react? Do you think the NFL is making the right move by heading back to Los Angeles? Hit up the comment section below and let me hear about it.
Until next time,
Mike Larson
{ 57 comments }
It is worth considering currencies for a moment.
1. If the US$ faced no debt challenges and was backed by gold then it could be argued that it is worth something. When an unbacked currency is debt ridden and just printed excessively with out backing, then it just becomes a means of exchange.
2. For a Wall Street bank to say ‘Sell everything’ then this must be viewed with suspicion. One of the main reasons why stocks are trading at inflated prices is because the currency equivalent is also inflated. At least with stocks a trader has something of worth. What is a trader going to do with cash on the sidelines for an extended period other than to await a further opportunity to reinvest. This current market turmoil needs to be re examined in light of more favourable Chinese data than predicted was released over night.
China can make the numbers read whatever they want. They are a closed society. Someday as the saying goes “The jig is up”
I prefer silver and gold at the current price levels. Big losses in major stocks in 2015.
I think Iran has made a deal to wait until after the election to opt out of the agreement, get their fissionable uranium back from Russia and have the bomb by next February. Of course they will have an extra $150 billion to spend on development of ballistic missiles and to support their Shia caliphate agenda. When we “snap back” the sanctions they will tell us where to stick them. Unfortunately our President is so naive as to think the whole world wants democracy and freedom and it will cost us dearly.
Aman, Brother Frebon, I agree. By the way, who was the idiot that thought up giving
Iran $150 billion in the first place?
The same person that figured we needed to apologize for our sailors surrendering their boats and weapons. The head scarf was a particularly nice touch. You can’t make this stuff up. Jim
The same POTUS who promised yes we can and spent his time in office with no we can’t
Remember, frebon, it was the Sunnis who came up with the ISIS/ISIL Caliphate. That is merely an extreme version of Saudi Arabia’s Wahhabi version of Islam. Iran’s Mullahs have a different version, which may be nearly as extreme.
have thought for quite some time that LA needed a team again- just too big of a market not to have one !!!!! Pete Cavert
My son and I were commenting about LA gaining-losing-gaining…….on again-off again with the football thing and the thought was that that market’s ethnic make-up and population in general always made for an uncertain market that never support a major team in FB! Now they want to build a $3 billion monstrosity to molly coddle some elitist owner who will probably not have to sink a dime in its construction! The people end up holding the bag all the time. 10 years out we’ll hear they want to be the Juneau Raiders and Alaska will be building them a baby-sitting facility!
sell sell sell Buy water
LA just too big not to have a team !!! Pete
and Bama could beat most NFL teams at this time…Pete Cavert
Really Pete? Bama could beat most NFL teams? Bama couldn’t even beat the Niners! College teams have too many weaknesses on defense (as illustrated by the high scoring games in college) that the pros would take advantage of. And for the most part the pros don’t have a myriad of deficiencies on defense (usually at most just one area which the rest of the defense rotates toward) for which Bama could try to exploit. Even the Niners would beat Bama 35-7.
You’re probably right about the score…..but I would love to see it played!
Is Nick Sabin the best coach or what? Jim
Even this past year’s sorry Ravens would beat ‘Bama!
It has been and still is a drugged economy, reason fo wich is needed a severe disintoxication cure
Get in there and buy in the morning. Buy on the dips. Don’t be drips. Greatest buying opportunity of a lifetime. Let the bear trap catch you by the wallet.
So L.A. steals two teams from elsewhere. This will be the second time they take away from St Louis – didn’t they build a new stadium to keep the Rams, a few years ago? Maybe it is time for the NFL to think about adding six more teams – one in each division. Aside from St Louis and San Diego, there are other cities that might like teams. Offhand, Silicon Valley/San Jose, San Antonio, Orlando, Memphis, Raleigh/Durham and Norfolk/Virginia Beach/Newport News come to mind as perhaps having the populations to support teams. Maybe others.
Pardon me, I just realized there are eight divisions, but I did name eight cities.
Silicon valley already has the “San Francisco” Forty Niners.
POLITICS & RELIGION GO BANG
News is never simply “good or bad”. Instead, Its much more nuanced. Simpletons ( a majority), have great difficulty comprehending reality. So, they must follow the crowd or rely on what others tell them. No independent thinking which means, no truly independent voters either, just disaffected partisans.
Definitions mean everything or nothing at the same time. Without meaning, words are just words (rhetoric). Volatility is more than just a statistical measurement of a population- volatility can also mean abrupt and low valleys and high peaks ( Think Southern Sierra Nevada Mtns. in Lone Pine, CA ). So, volatility can be long term, not just daily price movements, or both. I say both. Therefore, we should expect a bone-jarring double digit draw-down sometime in the next few years or just say “eventually”. That means this decade. So, why not be ready for it?
Bullish, sell-side bias, optimism ( It can’t happen here), or other (conflicting) organizational interests seem to crowd-out or overpower our own good common sense or even self-preservation with most investors. Clients respond to what is really going on, unless they are brain dead. Many seem to be so.
I believe an extreme bear market is almost a certainty, but not yet. Whatever happens this year is a warning or prelude. Then a final “Last Hurrah”, as I expect Janet Yellen to blink and push for a final QE-4, possibly “bigger and better” than all the preceding episodes of QE. The financial press will bring out their favorite lines at that time such as ” The Biggest Ever”. Just make sure you have a designated driver (Financial Advisor) when you leave the Party.
So, never count the Fed out, Yet. Probably by the end of this decade, as a even stronger dollar crushes all the other currencies and economies along with it. By then, you really want to be in gold. I plan on it. When the U.S. Dollar Exchange Rate rocketed-up in the Fall of 2014, we got our first “Red Flag”. That was what got me buying some gold coins ( a few). After that, there should be no surprises. Not here anyway. We are headed for collapse, but not yet. So, don’t get in the lifeboat until the ship starts to *lurch. Then bail, fast.
http://www.businessinsider.com/albert-edwards-if-im-right-the-us-stock-market-will-fall-75-2016-1
https://sp.yimg.com/ib/th?id=OIP.M37f607c2028c66254467353481014b30o1&pid=15.1&rs=1&c=1&qlt=95&w=149&h=112#inline
It is interesting about the Rams returning to LA. That is where they started and left because no fan base. The Oakland (T)Raiders went also they came crawling back home. It seems to me the Chargers tried LA and didn’t like it. Los Angeles the NFL/AFC heart breaker. The (T)Raiders now have a hard time playing before a sellout crowd. Oakland was also promised a Super Bowl if they took Al Davis’ floating football franchise back, so when did Oakland move to Santa Clara?
L.A. has really changed in the past couple of decades. The Raiders should have NEVER moved back to Oakland. It is a city similar in some ways to Detroit south of 8 mile….except there really isn’t much but blight. I try to avoid work there; it is a dangerous place, IMO. Too many years of one party / leftist politics.
Best thing I did was go 50% Cash back when the Dow was above 17,800 coming back up from October….obviously a rally to sell into …bought 100 shares of VXX @ 15 and change, Bought IMAX March 2016 $30 Puts ..no matter how many Cautiously Bullish (Many Stocks I Still Like) Comments I read here from “Safe Money” or Mike Larson …Plus there should be a Link here that takes me to Safe Money—Like some Other subscriptions I Have …I almost never get any emails from SAFE MONEY —Only Money & Markets..Maybe I should call the Office & Find out ….Half the time ..I Don’t even Know what is IN the PORTFOLIO …….I Just have these “discussions” & Opinions …..If I’m PAYING For advice I Should have EASY ACCESS To it! …or did my subscription Run Out & All I Get is the Free Newsletter?? …Now after all these Cautious, still see good values, buy on dips …and 1800 Dow points down later……the tone starts getting more bearish ….so is that Right Now or is that a Contrarian play, because you are now starting to “throw in the Towel” meaning “Buy when there’s blood in the streets”??
How do you rationalize China’s slowing economy weighing on global markets with the fantastic investment opportunities in energy?
Los Angeles lambs left and no one thought that they would ever return. Pete Carroll made USC what the Rams should have been. We have the Clippers who are also refugees from San Diego, what do we need with the Chargers? Finally, Inglewood?? Come on, that is so far from DTLA it’s not funny. We will need to upgrade the Blue Line to make it work. We will also need to clean up Inglewood. Good Luck, I am fine with USC. Go Trojans!!
I Also bought 15 contracts of UUP 2018 $24 puts when the UUP was at $25.80 ….and shall accumulate more any time it tries to get above $26. I wish there was MORE GUIDANCE than …..”So what do you guys think”???
Ronnie, I think 2016 is much like the year 2000…Look there for guidance.
I also have UUP. Waiting for 27.
The devaluation of the yaun ..ripple. Cause world of hurt..What about the n korean nukes? Easy for mainstream to push it aside as hocus pocus. Does this mean our president doesnt have the best interest for the country in mind that he cant even get on a horn to find out what is going on? I guess it was much simpler to make certain that the chickens had plenty of coop space. There has been tests in 06, 09, 13, 15 by the Koreans, thanks in part to the Pakistan. The KN08 is a mid range missle can be an ICB they have displayed the modified missle,which would be capable of reaching the U.S. no concern by white house? Foreign affairs?
China must resolve itself as either capitalist or communist. The capitalist moves it has launched in the past decade are indeed applaudable, yet, they remain intrenched in a communist society, controlling and discriminating it’s populous. When I read “analyst” financial views and opinions, I can not help but think the “big picture” of democracy and indeed opportunity for global “citizens” is overlooked, especially in regards to China. Saudi Arabia, India, and Russia (to name only a few) also play the game of lip service regarding their autocratic rule.
I read a very devastating article on their situation a few days ago. Krugman was lauding their management a year ago but if this researcher has it right….they are very close to realizing existential problems. No matter what, they had better keep those people fed or they will be looking at another nasty revolution. And red won’t be the color favored on the next one.
It’s a bit ironic that the Royal Bank of Swindlers is telling investors to be carefull in 2016 perhaps they should have been as clever in 2008, then maybe they would not have robbed the shareholders, and tax payers in the UK for a huge bail out, but all is OK because the stupid. arrogant Chairman Ex Sir Fred Goodwin has said how sorry he is, So that makes it all better for every one, Why did he not end up in Prison ! only the politicians can answer that one, That grade one fully paid up idiot still gets a pension that would make your eyes water, why am I bitter that idiot forced me to close my business and put 25 good people out of work, And now RBS is telling people to be carefull, 8 years to late.
Too many investors thought of China as an industrialized national economy, which it is not. At best it is a sub-contractor you deal with as needed and for as long as it benefits you. When they change the rules, as they often do, be prepared to change suppliers. Long term reciprocal arrangements with countries, like companies, are built over time and based on mutual trust and best interests.
North Korea’s expertise in missiles and atomic bombs is about where the Germans and the US were in 1945. In 1905 the most powerful Nation on earth launched the most powerful battleship of its time. It could hurl over one ton of high explosive devastation 10 miles. The United States of 1975 could hurl 1,000 million tons of thermonuclear devastation to anywhere on earth. We should be as afraid of North Korea today as we should have been afraid of the England of 1905 with its first Dreadnaught in 1975. As to North Korea being able to hit us with a missile, I have lived my whole life with the Soviet Union able to hit us with 1,000 million tons of thermonuclear destruction and haven’t wet my pants once. Someone needs to get a grip.
I tend to agree with you, however, North Korea (and for that matter, their friend Iran or even ISIS) are not like the Soviet Union. The Soviets were always global chess players. They were brutal; but they at least seemed to understand that mutual destruction would not be to their advantage and in fact the one time that such came close (1962)…they backed down. I doubt some of our current opponents would choose such a course of wise action. They seem rather maniacal. And regarding the technology for throwing distance for the devices….I suspect these foes would probably try subterfuge…sneaking stuff in with suicide teams or such.
You are right Mike We had better get a strong leader elected to the White House that
will get our thermonuclear devastation built back up before China, Iran, North Korea
and Russia wipe us off the face of the earth.
It’s certainly commendable to seek world peace but I think a lot of Americans simply dont understand that these people would vaporize us in a millisecond if the thought they could get away with it. They despise Free Peopke and all we stand for.
It might be argued that ALL politicians despise any freedom except the freedom to vote for them. And pay the bills.
Red Scare, Strategic Defense Perimeter, Domino Theory, Bomber Gap, Missile Gap and Window of Vulnerability all warnings sternly issued to fleece the American sheeple and enrich the MIC. Their one common element was they were all false. As Reagan said, Government is the Problem and at least with our inane Foreign Policies since 1945 he was right.
Talk softly and carry a big stick.
Chairmain Royce House of Ca is sponser bill institute sanctions on n.korea along with Japan and others. Obama is I guess convinced its 1905. Must be why he doesnt seem the least bit concerned about our compact with the Saudi to provide safety and protection in exchange for oil being in jeopardy.
Corrected chairmain ed Royce of ca house of foreign affairs
It is all about demographics.
As for China, they have their problems, but still expect their economy to grow about 6.2% this year. If our economy could do so well, we’d be singing “Happy Days Are Here Again!” When the present Chinese market decline ends, that should be the place to be – if they can get their currency under control.
By whose measure does China grow > 6%? China has a massive debt/gdp overhang which suppresses grow. They are communist pretending to be capitalist. Look at their inept stock market interventions and beware. It is more likely that a resession happens than growth continues.
China — How much do they spend on their armed forces and weapons? What proportion of their GDP is used for this? The last few years the armed forces are being expanded, and they have become constantly more aggressive. Diverting large amounts of capital / taxes for these purposes is bound to be millstone around the neck of the overall economy. This doesn’t help most of the population, who get fewer benefits from thier taxes — only more police state.
If China’s military spending is a millstone around their economy’s neck we’ve got the friggin Rock of Gibraltar around ours.
When a nation spends very much of it’s revenue on the military, it needs to justify the expense. Hence the series of little wars we have been fighting for several generations. Russia recently joined the club, and we begin to see the results. Now China seems headed that way also. How long before someone goes a bit too far and we have World War III?
I agree Chuck! Countries that keep spending money on warfare are going to have…………….guess what?………………….warfare! Why haven’t we ( US, other Arab nations, and others in Europe not built even one desalinization plant to get clean water and a source of desert irrigation for crop cultivation in places where people are starving in North Africa and parched areas in the Middle East? Which way do people think the U.S. can make enemies faster? By bombing them or feeding them? So, maybe desalinization is inefficient, but until something better comes along no one will object to a clean glass of water, will they?
If you are looking for a bottom try the Dow at 4324 no doubt about that. The writing is on the wall so short and puts is the way to go from here on out.
Great comments & views. Something to learn from great people like u. Thank you.
4324? Even Harry Dent beats that at 6000
It’s all about Geography. Japan’s banks made a lot of bad loans in the bubble economy. The long stagnation that followed turned many other loans bad as well. So one theory of Japan’s slump was that the country was in a liquidity trap mainly because it’s banks were financially weak, fix the banks and the economy would recover. If theirs liquidity problems in Japan this is bound to be having an effect on China’s economic health.
I learned a long time ago(Columbia Univ. 1960) “sell when others are
greedy and buy when others are fearful. At this moment it seems clear to me fear is
ruling and the “voting machine†is nuts. Oil goes down and the players for whom oil is an input go down although allmovther things being equal the decline in oil can only increase thier profit. Of course I have no idea if this is the bottom-we will only know that in hindsight-but if one has a multiyear time horizon I think it’s ok to begin to scale in. Luckily I am about
30-40% in cash and about 2% in SPY puts.