China Trade Grows
Research for Online Investors

by John Dalt

6/10/11

China released their May trade balance numbers this morning.  Exports grew by 19.4% over May 2010 to $157.16 billion.  Last week, China reported manufacturing activity had slowed in May!  Of course it did, April exports grew at a 29.9% rate over April 2010.  Imports were also up in May, to $144.11 billion.  CNN reports the Chinese trade surplus for May was $13.05 billion.

Don’t take solace in China’s imports going higher.  They don’t import consumer goods; they import raw materials to make the do-dads you buy at Target and Walmart.  Copper, steel, and coal; China buys the seeds of production to add value, then sell to the world.  Cheap energy and cheap labor equals growth of 10% per year.

Here in the U.S., we are really crowding our GDP higher.  Push as hard as he can, President Obama can’t seem to get the U.S. economy to grow.  The U.S. economy grew at an annualized 1.75% in the first quarter.  If we divide that by four (four quarters) that means the economy actually grew 00.4375% in the first quarter.  Since business inventories grew, some of that growth is sitting in warehouses.

Isn’t there something wrong when you have to a carry a country’s GDP growth to 4 decimal places to be absolutely accurate?  It just seems much easier to off the cuff say “Oh, I think China will grow 10% this year, like the last few years.”

Jim Rogers, one of our favorite contrarians, told the Wall Street Journal that the U.S. faced a major crisis under the weight of a “staggering debt” that would be worse than the 2008 credit crisis.  Rogers observed the dollar would be a “total disaster.”  He blames the government for the debt and the Federal Reserve for ‘easy-money’ policies.

Rogers appeared on Fox Business News today, he said “these clowns in Washington are running up the debt…Bernanke has been wrong about everything for the last seven or eight years”

Here is a clip of Jim Rogers from October 2008.  Remember, this is just before the elections, and Turbo Tim Geithner was at the New York Fed.  TARP was the hot topic as Paulson worked to prop up the financial system.

This clip is always available on our website under MarketToday Archive, just click on “Legendary Investor Jim Rogers”  It is great to watch a Capitalist!

The S&P 500 has traded down to 1268 as we go to press, we are not quite to the 1250 level of support, but it will be interesting to watch the action going into close.

Yesterday we wrote about the importance of having a plan in your investments, and following that plan.  I don’t want to put a hard sell on you, but we offer Galt’s Long-Term Portfolio service for investors that want to own 20 stocks with a minimal amount of headaches.  If you would like a little more action, why not sell covered calls with us in the Buy, Sell, Hold service?

We do all the work for you in both investing services. Recommend the stocks, watch the news and trailing stops, recommend when and at what price to sell, etc. If you don’t have a plan, I heartily recommend both of these to anyone! All you have to do is check your email and enter your orders.

We made an opportunistic buy today on one of the largest companies in America. We had our eyes on the stock for the last few months, and got it today. We owned them before, selling last year for a 49.1% profit. I don’t think our long-term subscribers will do that well this time…but you never know until you run the race!

Home prices are back in the headlines, showing further declines last month.  We price homes in dollars, today’s chart shows the price of a median Single-Family Home if it were priced in one ounce of gold. This results in the home / gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes a relatively low 106 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down over 80% from its 2001 peak (to a level last seen in 1980) and remains well within the confines of a six-year accelerated downtrend and continues to close in on its 1980 trough.

Chart courtesy of www.chartoftheday.com

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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