When the news is dominated by sensational headlines about the closing of BP’s pipeline in Alaska and the arrest of 21 bomb-plotting terrorists in the U.K., many of us push economic headlines to the side.
I confess — even I’ve been watching too much CNN and not enough CNBC lately.
But there’s a lot more going on in the world than just the terrorism and oil woes. Check out this headline …
ECONOMIC REPORT:
U.S. Trade Gap Narrows in June
The trade gap measures how much stuff we import vs. how much stuff we export in a given period.
So, on the surface, the news behind this headline sounds positive: Our trade deficit dropped 0.3%; to $64.8 billion in the month of June.
However, the devilish details in the trade report painted a very different, very dangerous picture:
- First off, a $64.8 billion deficit is still a mountain of money and nothing to be proud of. In fact, $64.8 billion is the fifth-largest monthly deficit in our history.
- Meanwhile, the May trade deficit was revised upward by $1.1 billion to $64.97 billion. As the old joke goes: “A billion here, a billion there … pretty soon we’re talking real money!”
- Plus, in the first six months of the year, our trade deficit hit $768 billion on an annualized basis. That puts us on track to smash last year’s record of $716.7 billion.
And in case you want to blame high oil prices and OPEC for the deficit … think again. The total value of imports from OPEC countries was $13.5 billion in June — a slight drop from $13.6 billion in May.
Most importantly …
Our Imports from China
Ballooned to $24.1 Billion
That’s the second highest amount … ever!
To put that into context, our deficit with China is currently 13% higher than last year’s imbalance of $202 billion, the highest ever recorded with a single country.
Put yourself in China’s shoes for a moment: How would it feel to be on the other end of the trade imbalance?
Pretty darn good, I bet! The country is clearly on a roll …
According to Beijing’s General Administration of Customs, China pulled in its third straight month of an all-time high trade surplus. For July, the country enjoyed a trade surplus of $14.6 billion. That’s a 40.6% increase over last year!
And in the first seven months of the year, China’s trade surplus mushroomed to $75.95 billion, a 51.9% increase over the same period in 2005.
But it might also surprise you to learn that China is not only sending record amounts of items overseas, it’s also buying record amounts of imports.
This year through July, China’s imports were up a very strong 21.1% to $432.95 billion.
After all, when a country’s economy is firing on all cylinders, it’s not only producing and selling, it’s also consuming and buying.
In other words …
There Will Be Winners
On Both Sides of the Sea
Even though China has the upper hand when it comes to the current trade situation, there will be some winners in the U.S., too.
Heck, there are several domestic industries that are going gangbusters by profiting from Asia’s massive growth.
Just last week, in “What NOT to Buy Today,” I told you:
“I think [the U.S.] will continue to dominate many industries, including aerospace, alcohol, health care software, financial services, pharmaceuticals, agriculture, media and entertainment, defense, tobacco, gambling, environmental services, insurance, publishing, and biotechnology.”
The June trade numbers prove my point. Even though the U.S. is running a massive trade imbalance, our country did export a record $121 billion worth of goods in June.
Some areas that lead the charge — food, beverages, industrial supplies and materials, and capital goods. Some of the companies in these industries are worth a look.
At the same time, please don’t overlook the companies based in Asia. If you don’t have a significant stake in Asian companies, you’re missing out on some spectacular profit potential.
For example, the Hang Seng index hit 17,346 last week — its highest close since September 7, 2000. It’s up by almost 17% for the year.
Some of my favorite Asian stocks are even hotter:
China Mobile (NYSE:CHL) jumped almost 20% in the few short weeks since I recommended it to my Asia Stock Alert subscribers on July 7.
Are you more of a mutual fund investor? Look at the table I put together … it shows a number of Chinese funds and their recent performance numbers. Many are up by double digits for the year!
| Fund |
Ticker
|
YTD Gain
(through 8/10) |
| Oberweiss China Opportunities |
OBCHX
|
37.1%
|
| Dreyfus Premier Greater China |
DPCAX
|
35.0%
|
| Columbia Greater China |
NGCAX
|
28.6%
|
| Mathews China |
MCHFX
|
21.8%
|
| ING China |
IFCAX
|
14.8%
|
| Guinness Atkinson China & Hong Kong |
ICHKX
|
14.1%
|
| US Global China Region |
USCOX
|
12.2%
|
Clearly, investing in Asia has paid off big time. And I think you can continue to reap the rewards over the next decade by following this simple strategy: Stick to Asian companies that are big exporters to the U.S. and U.S. companies that are big exporters to Asia.
The most important message: Don’t just read the sensational headlines. Look at the more mundane economic data, too. That will help you to position your portfolio to benefit from what’s happening behind the scenes.
Best wishes,
Tony
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MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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