Articles Written by Alex Kagin
With China’s GDP growth rate reaching over 8% over the past 5 years, China still may be in it for another year. China looks good for the long run, but their short run bubble may be a risky investment. With the Olympics coming and FDI in 2007 reaching 67.3 billion dollars, the highest in the world, China may have risk of a slow down. Problems include their 1.5 trillion USD forex reserve and their appreciating currency which are at the forefront of news.
Expectations have been rising faster then…
As we all know there has recently been pressure on China to appreciate their currency because of the trade imbalances seen in Europe and America. As well, other East Asian countries are running into problems with their markets because China’s currency is doing so much better then theirs. Here is a quick run down of the problems, which can help you to analyze the situation.
The biggest problem is that China’s currency is undervalued by as much as what some people think is up to 35%…
Developing the coastal regions for so long during the Mao period has left a huge disparity between the economies of the interior and the coast. The gap is so large that even though the interior in some areas is growing at the same rate as the coastal regions, the absolute gap only grows larger because of the disparity of their starting points.
While the six and seven five-year plans were based on the system that economic development would diffuse into the center from the coastal regions, this was not a good idea…
After having the opportunity to visit a rural farming community in China it made me realize many things about China’s impressive growth. It is not an efficient growth, but an inefficient one. We see skyscrapers and massive Olympic structures being constructed every month but this is only a small part of China. Outside the two great cities of Beijing and Shanghai some small communities with de-collectivized farms hardly have any paved roads, and some have none at all. While we see this huge growth in China now, I do not believe that this growth is sustainable. My main reasons are as follows:
1. No infrastructure between inner and coastal China exists. During my visit to a small village the people said…
Over the course of this month I will be posting a series of articles on the Chinese economy. Just so you all know, I have been studying here at Beida for the semester or as foreigners call it Beijing (Peking) University and have come across some interesting realizations about China and their economy. While I do think this double digit growth they have been going through it true even by United States calculations, we do not see what this growth actually looks like and how long this is sustainable for. We see their stock market quadruple, and ADR’s skyrocket on U.S. capital markets but you get a new perspective when you are living in it. The questions that I will be looking at and the series or articles I will be posting will be on a wide range of topics about the Chinese economy. Please feel free to post comments and or suggestions of future articles for this month. Stay tuned for new articles.
Saturday, Nov. 10, 2007
by Alex
China’s market is getting harder and harder to understand; if they are in a bubble and how long it will last, or if there will be a correction and when, is a major topic with the coming Olympics. So I thought I would move the topic to another area. While there have been huge amounts of FDI in Asian countries, especially China, most people have been overlooking Africa. Global FDI levels for 2006 put Africa at 2.7% with investments equaling $36 billion.
Africa is in its growing stage. Africa’s GDP is expected to grow by 6.2% in 2007 according to the IMF which means it would grow faster then the world economy. Ghana’s stock market was even the world’s third best performing market last year, and Egypt topped that list. Africa is so filled with investment opportunities with a growing infrastructure, many more businesses will be able to begin operating in Africa. This is without even mentioning the abundance of natural resources spread across Africa.
There are already some opportunities to invest in Africa right now through ETF’s such as EZA, and GAF. Both have been increasing over the past year. Do some research and this may seem like a good opportunity for you. This could be a good spot to hedge against the U.S. markets.
Thursday, Nov. 8, 2007
by Alex
As we all saw on Wednesday, the Federal Reserve made equal 25 basis point cuts to the Federal Funds Rate and the Discount Rate. While we are happy that core inflation is not going to be a large problem with this rate cut, and that we are easing rates in a growing economy where we just saw the U.S. economy grow at an annualized growth rate of 3.9%, I believe that many other problems will arise.
While lowering rates will bring along a lower borrowing cost I do not think that our economy needs this. Doing this will only bring people to spend more money on things they do not need. As we saw already companies that sold necessities like The Procter & Gamble Company(NYSE:PG) and Johnson & Johnson(NYSE:JNJ) have both been doing well though the subprime market problems.
Lowering rates now will also…
With oil prices hitting $92 a barrel and could possibly go higher, corn and soy ethanol are sounding pretty cheap and are beginning to be a real alternative, not just something we talk about. E85 can even be found for under $2.00 a gallon in cities scattered across the United States, where gasoline sits almost a whole dollar higher.
Companies like Archer Daniels Midland Company (NYSE:ADM) and U.S. Global Investors Global RES (MUTF: PSPFX) are hitting highs on rising gasoline prices. While oil supplies are disappearing at a rapid pace, ethanol has finally become a cheap alternative to oil. Companies like Pacific Ethanol Inc. (NASDAQ:PEIX) and MGP Ingredients (NASDAQ:MGPI), which are trading at lows, could be staged for a comeback if oil prices continue to stay at highs.
It’s easy to forget about these renewable resources when oil comes back down, but remember renewable resources never go away. Prices can only get cheaper as interest grows and new technologies are invented to produce ethanol as well as other sources or energy cheaper.
Rising oil prices have also brought more attention to alternative energy such as solar power. Just recently HelioVolt raised $101 million for producing their flexible solar panels. SunPower Corp. (NASDAQ:SPWR) as well is making solar panels for homes and businesses that want to become more energy efficient. While in the past alternative energies have not been embraced, this could be the time to start noticing their benefits to society. Historically oil prices have increased during the winter seasons and that is what we are heading into.
Tuesday, Oct. 30, 2007
by Alex
