Huge Influx Of Chinese Capital Could Power US Stock Boom

Discussion in 'Wall St. News' started by SiSePuede!, May 13, 2007.

  1. Is it just me or is this another sign of topping? With all the world expansion, strengthening currencies(Not the dollar for sure), and everything that econ indicators are pointing to, how much crack do you have to smoke to start thinking that the Chinese will be buying into the US?}&dist=hplatest

    Is the best yet to come ... from China?
    Commentary: Huge influx of capital could power U.S. stock boom
    By Mark Hulbert, MarketWatch
    Last Update: 9:53 PM ET May 13, 2007

    ANNANDALE, Va. (MarketWatch) -- More than a few of you expressed incredulity this week upon learning that Richard Russell was now envisioning an unprecedented global economic boom.
    Russell, of course, is well known as the granddaddy of the investment newsletter world, having published his Dow Theory Letters since 1958, nearly 50 years ago - longer than any other investment newsletter editor publishing today. It's also well known that Russell has been bearish on the stock market's major trend since late 1999, treating the market's impressive strength over the last four-plus years as a counter-trend rally within the context of a primary bear market.

    But a week ago, Russell changed his tune, becoming bullish in anticipation of an "unprecedented world boom (that lies ahead." His primary reasons were technical: The not one, but two, trading days during April in which each of the three major Dow averages - the Dow Jones Industrial Average , the Dow Transports, and the Dow Utilities closed at a new all-time high See May 8 column
    The bears among you who e-mailed me took Russell's conversion as a sign that the stock market had topped, on the contrarian theory that a sell signal is triggered when the last bear throws in the towel. The bulls among you were happy to have Russell in your camp.
    But none of you seemed able to accept that a huge bull market was imminent. Even the bulls among you were more inclined to believe that the current bull market is getting rather long in the tooth.

    This inability to envision an unprecedented global boom got me to wondering if one could tell a plausible story that explained what it was that Russell's technical analysis was envisioning. It would have to be major, of course. Something that might qualify would be an early end to the war on terror, including a peaceful resolution of the Iraq war and of tensions with Iran and North Korea. Yet, though anything is possible, I know of no investment adviser, even in his wildest dreams, who is forecasting that this is about to happen.

    So ever since Russell's conversion, I have been on the lookout for plausible stories of this magnitude. I think I found one that at least comes close.
    To be sure, just because a story is plausible doesn't mean that it will play out as envisioned. But until I came across this one, I didn't think a story could be told that was even remotely plausible.

    I owe the story to Dennis Slothower, editor of a newsletter called On The Money. In his hotline Friday night, he pointed out that the China Banking Regulatory Commission, in an attempt to cool its overheated stock market, had ruled that Chinese banks "can now invest as much as 50 percent of funds in overseas stock markets."

    Slothower calculates that this means that "up to $2.3 trillion in China monies ... can now move out of China."
    To put a sum like that in perspective, consider that the total value of all publicly traded stocks in this country is around $15.1 trillion, according to Wilshire Associates. If even a modest fraction of the $2.3 trillion makes its way into U.S. stocks, we could see a "further parabolic advance in equities," as Slothower puts it.

    I hasten to repeat that there is no guarantee that the future will play out this way, just because a plausible story can be told. Slothower, for his money, remains only cautiously bullish, with 30% to 40% of his model stock portfolios in cash.

    I nevertheless find it noteworthy that a story can be told about the stock market that provides plausible grounds for believing that maybe, just maybe, the best in the stock market is yet to come. End of Story

    Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
  2. Es posible! Recuerdes esto, when foreign investors become interested in foreign assets, be very careful! They require more time to muster the confidence to go the last major buyer at the final top in any market sector. Que tengas mucho cuidado!