Is it just me, or is this one frustrating market? One day, we’re down triple digits on the Dow Industrials. The next day, we’re up triple digits. And then, there’s no follow through whatsoever!
Two days ago, I asked whether China was an ally or an adversary. I also said the relationship between our two countries is increasingly devolving into an “Economic Cold War.”
Well, it sure looks like the picture is becoming clearer — and not in a good way. China is now embracing a sometime-adversary, Russia, in a massive bear hug … and it has huge implications for us as investors and Americans.
Just look at the news out yesterday. China and Russia inked a historic energy supply deal that could be worth $400 billion over the next 30 years.
For China, it ensures a steady supply of natural gas to fuel its growing economy.
For Russia, it provides a massive new market for its gas should Europe increasingly look elsewhere for energy supplies in light of tensions in Crimea and Ukraine.
And for both China and Russia, it solidifies an economic and political alliance between the two nations — one a Communist country and one a former Communist nation increasingly being run like a dictatorship with Vladimir Putin at the helm.
The deal will involve massive infrastructure spending on both countries’ parts. They’ll need to lay hundreds of miles of pipelines and spend billions of dollars building import/export facilities to get the gas from wellhead to market.
“China is now embracing a sometime-adversary, Russia, and it has huge implications for us as investors and Americans.”
Russia will ultimately ship an estimated 38 billion cubic meters of gas to China a year. And eventually, the deal could allow Russia’s Gazprom to play a bigger role in the worldwide market for LNG — liquefied natural gas sent by ship to importing countries including Japan and South Korea.
The timing of the announcement seems awfully suspicious, given the U.S. indictment of Chinese military officials for spying a couple days ago. And it comes along with a separate announcement that China may tighten security and other restrictions on technology firms operating in that country.
Bottom line: My colleague Larry Edelson’s predictions for more global tensions, and an intensifying “war cycle” are looking increasingly prescient.
China and Russia are coming together in an alliance that could hurt U.S. interests. More tensions are flaring in Eastern Europe, with 11 Ukrainian soldiers killed after Pro-Russian activists attacked a checkpoint and convoy there. And in Thailand, the military just launched a coup, booting out that country’s elected government.
|Russia’s deal with China provides a massive new market for its gas should Europe increasingly look elsewhere for energy supplies in light of tensions in Crimea and Ukraine.|
For investors here in America, these developments underscore the risk of pouring our hard-earned dollars into troubled emerging markets. Instead, if you’re looking to invest abroad, consider some of the more promising vehicles I’ve highlighted. That includes Indian stocks, which continue to soar amid optimism about the new government there.
Another approach? Focus on companies that are uniquely positioned to benefit from the boom in DOMESTIC energy production. The U.S. is becoming the “Saudi Arabia of the West” thanks to a massive production and drilling technology boom. That’s fattening profits for a wide variety of companies you may not have even heard of.
Two of my favorites can be found in my new, just-released special report, 6 Stocks Set to Soar In 2014 — and Beyond. I’m happy to report that these stocks have been setting multiple all-time highs in the past few months. But if I’m right, we’re just getting started.
After all, the world is going to need an alternative to the Russia-China axis to meet its energy needs. We can be that alternative as we build out our production and export infrastructure, in both the oil and natural gas markets.
So what are your thoughts? Is China becoming more of an adversary than an ally? Why is it cozying up to Russia here, and what are the ramifications for investors like us? Do you think the U.S. production boom can insulate us from potential negative impacts or not? Let me know at the blog!
|OUR READERS SPEAK|
Meanwhile, yesterday’s piece on Obamacare (a.k.a. the Affordable Care Act) brought almost universal condemnation. A lot of it focused on the program, but the U.S. health care system in general got a lot of grief, too.
Reader John said: “Can our economy handle higher premiums? Well, with or without the ACA we’ve seen nothing but higher premiums for as long as I can remember. If there were no such thing as “Obamacare” I have no doubt we’d still have rapidly rising premiums.
“With or without the ACA, our healthcare system is fatally flawed. We are the only major Western democracy that’s allowed the insurance industry to be the gatekeeper. 30 percent of every dollar goes to the insurance company while millions go uncovered. Even the clunkiest Socialist systems work better than that.”
Reader Ray joined in, saying: “Not only is Obamacare a total disaster in the making, but the apathy and ignorance of the electorate is the reason it’s upon us in the first place. This best ever experiment in the history of nations is on its last legs. Unless we do something to turn this train wreck around in 2014 and 2016, we are doomed to repeat history … as seen in the Socialist countries of Europe and beyond.”
Finally, Reader Vince L. added: “Don’t see how this ‘Affordable Care Act’ is affordable. I just received our renewal notice and we will have to pay an additional 20 percent per month!!! … This law does nothing about reining in cost.”
The bottom line? The Federal Reserve is out of bullets when it comes to doing anything about stimulating the economy. QE has been a total bust, and low rates aren’t helping even formerly rate-sensitive sectors like housing.
We need to deal with other regulations, taxes, and policies in a smart way if we’re going to unshackle economic growth! Many of you believe that sapping even more take-home pay from American workers in the form of surging health premiums is a step in the wrong direction!
As always, feel free to weigh in on this issue at the blog.
|OTHER DEVELOPMENTS OF THE DAY|
The long-suffering housing market ticked up a bit in April, with existing home sales rising 1.3 percent to a seasonally adjusted annual rate of 4.65 million. But that missed expectations … the number of homes on the market surged almost 17 percent … and home price appreciation slowed to 5.2 percent, the tiniest rise in 26 months. More “Echo Bust” evidence? You bet!
The scramble to buy ever-lousier bonds at ever-higher prices and ever-lower yields continues, according to the Financial Times. It’s the “Yield Chase” writ large — an incredibly important topic I’ll cover in more detail for you soon.
Ahhh France. A nation of fantastic wine, exquisite cuisine … and a serious bureaucratic snafu! The country ordered more than 300 new trains to upgrade its transportation system. But officials overlooked the fact 1,300 of France’s railway stations don’t have enough room to accommodate them!
Quelle horreur! It’ll cost $68 million to make retroactive repairs. Oops.
Reminder: If you have any thoughts to share on these market events, all you have to do is hop on over to the blog and leave your comments.
Until next time,