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TheStreet Open House

Why I'm Buying in China

I see headlines including phrases like "End of an Era," "The Biggest Bankruptcies in History," "Why Your Home May Be a Bad Investment" and "Road to Bankruptcy."

Let's take a walk on the wild side and get Iced Out in China. In other words, let's take a look at a few luxury goods companies in China that I believe are set to appreciate in price more than the stock market in the next year as the global rebound continues.

But first, I'd like to address the VIX, which has frequently been used to gauge market fear and uncertainty. I propose that it is not measuring fear at the moment, but rather is measuring the market rallying potential. Seeing as how it measures future expected volatility, it can either get expensive if this is positive or negative expected volatility.

My belief now is that it is the positive market potential that is holding the VIX above 25. Feel free to call this the Panic-Buy Hypothesis and to compare it to the Efficient-Market Hypothesis. Initially, it was the reversion back to reality that led the shorts to cover themselves. Before that, they were the cool kids in town. This has been going on too long, and money is starting to come off the sidelines to "start speculating."

The long run implications of this speculation money feeding the global bull market include people getting rich and buying luxury goods. Sure, you could take advantage of this by buying the Gold Shares (GLD) ETF, but I think you'd be missing out on the real action. My sentiment is that the global fear contagion drove a lot of people to stash their assets in the dollar and U.S. Treasuries.

As the fear dissipates, the bears go into hibernation. I expect that the newer picture involves less dollar demand and more demand for the global assets that have been shunned into oblivion over the last two years.

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