Balloch is the former ambassador to China for Canada, and has been on the ground there for 20 years. As he said in an October speech to institutional investors: "If you think of China as a $7.3 trillion economy right now, domestic consumption represents over $3 trillion in economic activity, roughly the size of the entire German economy . . . As if by stealth, China has slowly but substantially begun to rebalance its economy away from exports and fixed asset investment. The restructuring of the Chinese economy so many have been clamoring for is well underway." Stocks are cheap. The chart below, courtesy of Bloomberg tells the story. Currently, the S&P 500 P/E ratio is about 14x. The forward P/E, i.e., the P/E ratio based on next year's consensus earnings forecast is about 12.7x. Based on the historical average of 17.0x, stocks are cheap right now. If you are a "reversion to the mean" disciple the current pricing environment should give you a great deal of comfort about the value in stocks. Under a P/E analysis, the materials and industrial sectors are very cheap. We like and own Deere ( DE), Cliffs Natural Resources ( CLF), Monsanto ( MON) and Archer Daniels Midland ( ADM). Europe is stabilizing. European leaders have not only been proactive, but effective in solving their debt and economic issues. One of the biggest weights on global growth and stock markets has been worry about break up of the EU. With recent events in Europe, I believe that worry is now effectively off the table. The events that give me confidence are 1) German agreement on a single regulator, in Brussels, to oversee bank capital rules, budgetary decisions and investments among other economic concerns; 2) German agreement on several provisions of the European Stability Mechanism (ESM), which is headquartered in Luxumbourg and oversees financial assistance to financial troubled EU members. 3) Fairly robust bond auctions for the PIGS nations. The emergence of former prime minister Silvio Berlesconi is unfortunate, and Greece, though upward and onward if you squint very hard, will continue to rattle, but in 2013, the world is going to breathe much, much easier about the EU.