A Bloomberg article published yesterday opens with the statement:
“If you look at the Chinese data, you should stop debating about a hard landing… China is in a hard landing.”
Morgan Stanley’s chief Asian strategist, Adrian Mowatt, goes on: “Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.”
China’s economy has been something of an economic miracle. It’s posted double-digit growth for as long as I can remember.
China’s constant trade surplus has filled the coffers with $3 trillion in cash, mostly U.S. dollars.
In the wake of the financial crisis, it was Chinese stimulus spending — not U.S. — that really boosted global GDP.
China has been the buyer of last resort for cement, steel, coal, copper, gold, oil — you name it, China buys most of it.
For the last year or so, China has raising reserve requirements for lending at its banks to combat inflation. And it’s worked. Prices have been coming down. Inflation is at a 20-month low.
Problem is, economic growth is slowing as well…
Recent economic reports show that factory output is increasing at the slowest rate in three years.
Retail sales are lower than estimates. Real estate sales were down 25% in the first two months of 2012.
But the biggest surprise may be that China actually posted a trade deficit — the biggest one in 22 years.
Numbers are one thing; charts tell the story better…
China buys — and uses — more coal than any other country in the world. And coal stocks have been getting killed.
Here’s Alpha Natural (NYSE: ANR):
Even with a small bounce over the last few days, the stock is down 28% from its highs just a month ago.
Copper is often referred to as “Dr. Copper” because it’s the only commodity with a PhD in economics.
And copper is giving a bearish assessment of China’s economic growth prospects, according to copper giant Freeport McMoran (NYSE: FCX)…
Freeport-McMoran is down around 18% since last month’s highs. It now trades with a very low forward P/E of 7.
Freeport-McMoran has been hurt by strikes at a mine in Indonesia. Still, the stock is also pricing in slower demand from China.
Of course, due to its giant foreign reserves, China has the ability to spend its way out of an economic slump. And it will almost certainly do so…
Because the one thing China can’t afford is angry citizens who can’t get jobs.
So despite the bearish look of these charts, it may be a good time to pick up a little Freeport-McMoran.
The stock could easily have 20% upside over the next few months. And it pays a decent 2.6% dividend, too.
And there’s an emerging opportunity that may do much better than 20%…
One of the analysts here at Angel, Nick Hodge, tells me China wants to raise prices for a material called graphene.
Graphene is something of a “miracle” compound of carbon. It’s highly conductive. IBM is experimenting with it to make super-transistors and microchips. Graphene can also radically lower the cost of solar energy.
Right now, China owns something like 70% of the world’s supply of graphene. And they want to push the prices higher.
China did this with rare earth metals a few years back. The move pushed a leading rare earth stock from around $10 a share to over $70.
Nick is currently recommending a small mining company that has a tremendous supply of graphene in a mine that virtually no one knows about. He’s prepared a video investment conference to get the word out about this stock to Wealth Daily readers, before he “goes public” with his profitable discovery.
This profitable is event is right around the corner — next Thursday, March 22, at 7 p.m. (EST).
And it’s totally FREE for Wealth Daily readers.
Space is limited for Nick’s presentation, and I understand it’s filling up fast. All we need is an email address so we can save your spot and send you the necessary information for Nick’s profitable presentation…
Take a moment to sign up here.
And one more thing: Happy St. Patrick’s Day!
Sincerely,
Briton Ryle
Research Analyst, The Wealth Advisory
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