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Strategies & Market Trends : Ride the Tiger with CD
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From: Canuck Dave5/29/2007 2:38:42 PM
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"Will China crash?", and if it does, "What form will it take?".

Predict the correct outcome of those two questions correctly, and you will be interviewed on Business Television in a few years. Maybe even ring the bell at the NYSE.

Now, one little ingredient we all need to add to our collective witch's brew of thought is that China is not like occidental capitalist societies in one important regard. To wit; they are not a bunch of differing races collectively exploiting more or less unused lands. No, they have 3000 years of history as a unified country, have over a billion inhabitants, and have been in decline for probably over 700 years.

Put an asterisk beside "boom" and "bust" as befalling expansionist economies. What happens when a billion people who have had nada for centuries suddenly get a collective whiff of the good life? How are they handling it? How would they react to losing what little they've gained?

Let's assume that there is a collapse of demand from the United States associated with a "bust". But also assume gold is also doing poorly so the US dollar is still relatively strong. China, with over 1.2 trillion dollars of US holdings will sell a few to keep nascent consumption going at home. They will uses some of those dollars to also buy raw materials at presumably cheap prices thereby contradicting my assumption above.

Gold must do well in my opinion.

Bottom line? I think existing boom and bust metaphors are inapt for an increasingly China-centric world, so I am staying the course with my investments. A bust may indeed come and we each have to decide how best to handle it.

Good luck to all our decisions.

CD
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