My long-term indicators are positive, but the intermediate-term have gone to neutral.
China's market is currently showing abnormally high risk for investors.
My indicators don't show China's market as having much bearing on the U.S. market right now.
My longer-term indicators remain positive, and there doesn't seem to be any reason to take a defensive posture at this time. Unfortunately, after reading an article in The Wall Street Journal last week, I can't say the same about China. The investing strategies being pursued there are classic danger signals for that market and are instructive to look at because they may become problems for our market as well.
In China, hundreds of thousands of new accounts are being opened by unsophisticated investors attempting to capitalize on the huge bull market that has already occurred.
In the article, it was pointed out that one of the favorite strategies is to invest in companies that have stock identifiers containing the number eight (the number eight has good vibes in Chinese numerology). These identifiers are comparable to our ticker symbols. So, in our market, the strategy might translate to "buy any stock that has a ticker symbol with an 'X' in it."
Obviously, this is not the most rational approach to investing. This is an environment that creates enormous bubbles in securities markets, and we all know what happens when bubbles pop. The Nasdaq market of 2000-02 is still pretty fresh in everyone's memory. So, I feel that investing directly in the Chinese market at this time simply exposes an investor to abnormally high risk.
Investing Five Debt-Free Investing Opportunities 5/30/2007 2:04 PM EDT The lack of debt makes companies appealing both to the investor and other companies.
At the time of publication, Moore was long Ameriprise Financial, Amerisafe, Becton Dickinson, Buckeye Technologies, Cal-Maine Foods, CF Industries, Consolidated Graphics, O'Charleys, CGI Group, IntegraMed America, Kinetic Concepts, Layne Christensen, Methode Electronics, New Frontier Media, Quadramed, Scholastic, Sauer-Danfoss, TBS International, Boots & Coots, W-H Energy Services, Warnaco Group, Crane Company, Gardner Denver, Nova Chemicals, PepsiAmericas and Teleflex, although positions may change at any time.
Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback; click here to send him an email.
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