Greenspan and the Chinese bubble

We all know that Alan Greenspan has made a big masterpiece in the international markets, in the last part of the 20th century.

Even, after leaving the Fed, any remark from Mr. Greenspan make some noise. But, as always: good noise.

Mr. Greenspan, right now, is telling us about China. In this case, what he has said, doesn't surprise us: former Federal Reserve Chairman Alan Greenspan warned a big correction is due in Chinese stocks.

We do not believe in trees rising to the skies. The bubble in Chinese stock market, will burst, right now, or 3 years from now.

Investors, with or without speculative behaviour will be burned. Just because of that, the warning from Mr. Greenspan it is very healthy.

Going deep....

IMF is telling us: The global economy should turn in an energetic performance this year, even though its biggest player, the United States, is expected to experience its weakest growth in five years.

This is wishful thinking! The real estate and mortgages issue in US, will spread in a major way. Even the IMF will assume that risk: Although there have been some "tentative signs of stabilization" in the troubled housing sector, the "housing correction still has a way to run," the IMF said. "A turnaround in residential construction is still several quarters away."

In a scenario like this, IMF speaks in a world economy growing at 4.9%. This is bullshit! Especially, if we look to the main driver's growth:

• The U. S. economy is expected to grow by 2.2 percent this year.
• In Europe, the IMF is projecting Germany to expand by 1.8 percent this year, an improvement from a previous projection of 1.3 percent growth.
• Britain should see economic growth of 2.9 percent this year.
• Japan, meanwhile, continues to recover from a decade-long stagnation. It is expected to post economic growth of 2.3 percent this year.

The emerging markets are doing well, but their weight is not so big in the world economy:

• China, is expected to log blistering growth of 10 percent this year.
• Russia is expected to see economic activity increase by 6.4 percent this year.
• India, which grew by 9.2 percent last year, will moderate to 8.4 percent this year.

How could it be possible, to grow 4.9% in 2007?

Mini crash?

After the warning of Mr. Greenspan, about a possible future slowdown, Chinese investors had a bad day: Chinese stocks plunged nearly 9 percent Tuesday, erasing about $140 billion of value amid fears that authorities would crack down on speculation that drove shares to record highs.

Be cautious! Value investor behaviour will be the best in such times.

2006: a fine year

Source: www.bigtrends.com

After a fine return in 2006, next year will be possibly good. To us, it is important to find basic materials as the most profitable sector in the year. It is clearly a sign of the strength of the emerging countries (China, India, Brasil, Russia, Vietnam and others). Probably, in 2007 we will see these emerging countries arriving to new products and services, and through this, to strengthen new markets like technology and financial services. Pay attention also to the energy sector and to autos (mergers and alliances will come again).

Globalisation is in good shape

According to the World Bank, globalisation is in good shape: "The World Bank's annual global economic prospects report, released on Wednesday, is a rare thing these days: a study glowing with optimism about the future for globalisation".

And this, could mean a victory to the western countries, particularly US: "Key to the report's long-term projections is the emergence of a "global middle class" - defined as those with an annual per capita income between the average in Brazil and in Italy, about $4,000 and $17,000 respectively".

And this: "These are the buyers behind, for example, the massive rise in car ownership in China's cities, which appears to reflect an obsession with car ownership as a membership badge of the country's emerging consumer class as much as it does a means of transportation along Beiing's increasingly traffic-clogged roads".