Clouds Gather as China Bulls Celebrate

Note that the current freight rates are virtually at the crash lows of 2008, the depth of the global crisis. At that time, world trade came to a virtual standstill. The current lows mean either that ocean shipping firms have found the secret of transporting goods at very low cost, such as solar-energy or perpetual motion, or there is a huge oversupply of ships, or not as many goods are being shipped.

We believe the problem is the latter.

Over the long term, true economic growth will be very hard to come by in China. That's contrary to popular opinion. The huge post-2008 financial stimulus is over and created only bubbles in real estate, inflation and speculation. China won't repeat that. Entrepreneurial freedom is required at this stage of the long-term cycle. But communism and corruption stand in the way of that. Phony GDP growth numbers don't create actual growth.

Andy Xie, a great observer of the Asian economic scene, writes in a recent report:

The statistics in emerging economies are not accurate. The GDP data in China and India, for example, do not reflect their 2012 slowdown. My estimate is that the growth rate in emerging economies declined by half in 2012 from 2011. It could be seen in trade stagnation and weak commodity demand.

This concurs with our view that the emerging markets are very vulnerable right now. But that's where most analysts recommend investing.

However, governments can play their flim-flam game for a long time before the masses catch on. We are now of the view that the decision has been made at the highest levels in China to whitewash all official numbers, making everything look beautiful. The statistics will continue to be positive for awhile and the negatives will be hidden.

Don't be fooled!

Wishing you successful investing.

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