| China's Big Problems Are Creating a Big Opportunity | | By Dr. Steve Sjuggerud | | Tuesday, May 9, 2017 |
| China's local stock market has fallen for four consecutive weeks. Investors are spooked.
And for good reason…
China has been cracking down on speculation and financial leverage. And that has caused turbulence in the market. As Bloomberg reported over the weekend…
| The [Chinese government's] tightening campaign has erased at least $453 billion from the value of Chinese stocks and bonds since mid-April… Sales of asset-management products by lenders and trust companies have plunged by more than 30%, while domestic real estate transactions have slowed. |
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This crackdown might sound bad for the markets at first… But the important thing you need to understand is, China is reining in what needs to be reined in…
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China's credit system expanded "too recklessly and too quickly," hedge-fund manager Kyle Bass told Bloomberg last week.
Bass is betting on a Chinese credit crisis. One of his big concerns is the size of China's "wealth management products" (WMP) industry. WMPs offer higher yields… But they are not part of the official banking system. Instead, they are part of China's lightly-regulated "shadow banking" sector.
Huge amounts of cash have flowed into WMPs from Chinese investors. But they encourage too much leverage and reduce transparency.
China wants to move investor money out of the shadow banking system and into the proper banking system. The government has taken decisive action here recently… And it has seen results. "The number of wealth-management products issued by Chinese lenders sank by 39% in April from the previous month," Bloomberg reported over the weekend.
And it's not just WMPs. The crackdown is happening across the board… real estate, cross-border money flows, etc. China has tightened up regulations. And it has raised interest rates.
Investors have gotten the hint. They are speculating less, and buying fewer WMPs. The Chinese government is getting what it wanted.
The thing is, this government tightening campaign creates an incredible investing opportunity…
With across-the-board government clampdowns, investors are scared of China right now. Nobody is invested. Not the Chinese, and not foreigners like you and me. Everyone who wants to sell has sold (or close to it).
This setup typically means we have an "asymmetric" trade setup… where our upside is dramatic, and our downside risk is limited.
Sure, the market could weaken a bit more in the near term. But this setup is what I want to see… China is cheap. And right now, it's also extremely hated. That means we have limited downside risk versus dramatic upside potential in China.
Don't look at this clampdown as a negative. Instead, see it as a positive… China is reining in what needs to be reined in. It's doing the right thing. Meanwhile, investors have fled.
Perfect. Get some money to work in China now, if you haven't already…
Good investing,
Steve
Editor's note: China is cheap and hated today – exactly the kind of setup Steve looks for in the markets. Not only that, but he believes $1 trillion is set to flow into China starting almost immediately. Early investors could see 500%, or even 1,000% returns as this massive change unfolds... So it's crucial that you get your money there first. Click here to learn more. |
Further Reading:
Steve has written about the outstanding opportunity in China several times recently. Catch up on his bullish argument here... |
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HOW AMERICANS ARE SPENDING THEIR MONEY
Today, we'll check in on the spending of American travelers... Regular readers know we look at several sectors that tell us what's going on in the U.S. economy. In the past, we've discussed how credit cards, swimming pools, and cruise lines can show us a lot about how American consumers are feeling. And that's true for the hotel business, too. Today, we're looking at a top performer of the sector: Hilton Worldwide (HLT). The $20 billion hotel chain owns 14 world-class brands – with more than 4,900 properties around the world. Last year, the company opened nearly one new hotel per day. The company earns about 80% of its sales from the United States. And its business performs the best when people are traveling... So its performance is a good measure of the American economy. As you can see in the chart below, the hotel business has been booming. Hilton's shares are up nearly 70% in the past 15 months... and just hit a fresh 52-week high. It's another good sign that the American economy is "chugging along"... |
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| Don't worry... Trump won't crush China... Trump has been one of the major fears keeping investors away from China in recent months. One of his campaign promises was to crack down on China... including a potential import tax of 45%. I don't think this will ever happen... |
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Former hedge fund manager and currency expert Dr. Steve Sjuggerud is urging folks to mark their calendars for a huge upcoming rally in this overlooked market. Click here to learn more. |
| You Don't Need to Be Rich to Win. You Need This... | | By Brian Weepie | | Monday, May 8, 2017 |
| | "Having the most money doesn't always make you the winner," Moneyball author Michael Lewis said to us on stage. |
| | More Proof That This Bubble Is About to Pop | | By Justin Brill | | Saturday, May 6, 2017 |
| | The latest data suggest the boom in auto sales has already peaked... |
| | A Serious Warning About the Coming Collapse in Corporate Credit | | By Porter Stansberry | | Friday, May 5, 2017 |
| | Listen to this warning... The next financial crisis won't be like any other you've ever seen. |
| | A Bubble in This Sector Could Trigger the Next Financial Crisis | | By Porter Stansberry | | Thursday, May 4, 2017 |
| | Today... something I don't think you've seen anywhere else before – the "butcher's bill" of our current economic policies. |
| | This Market Has Doubled Three Separate Times in the Last 12 Years | | By Dr. Steve Sjuggerud | | Wednesday, May 3, 2017 |
| | You might not know it, but this country's stocks have doubled in a single year three separate times – all within the last dozen years. And there's a great chance that it will happen again, soon... |
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