US Stocks Will Crash Just Like China Is Doing
Volatility in Chinese markets has hit the global markets and will spill over into the US.
We have a big selloff in emerging economies. In dollar terms many emerging markets have tumbled.
The US is essentially the last man standing, and I think it will spill over to the U.S…. GM -- about 34 percent of the sales are in China and close to 50 percent of the profits come from China… In July car sales were down 7 percent and more to come.
“This is clearly the indicators that are coming out of China," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. There is tremendous risk in this market right now; in addition, you haven’t had a more than 5 percent correction (in U.S. stocks) in years, so we are so overdue for a correction.”
Meanwhile, as for why China devalued its currency, he could only guess.
“We don’t know exactly why China began to weaken its currency. It could be because of massive capital outflows. It could also be a warning signal to the world that if the world, notably the U.S., doesn’t treat China fairly -- and they have some reasons to believe that certainly from their perspective, that they also can embark on economic and financial warfare,” he said.
With nearly $1 trillion exiting emerging markets in the past 13 months, one expects the US to also be affected, Fox Business Network reported.
The bank credit analysts said there will be a bloodbath in emerging economies -- we already had one to a large extent. If you adjust the poor market performance and the currency weakness -- probably more to come.
But I don’t believe the US will not be affected at all and I would look at valuations. Valuations are not exactly cheap in emerging markets but they are becoming reasonable… I think the U.S. will be the last to unfold.
But some experts won't write China off entirely, at least not just yet.
Now that China's economy is hitting some turbulence after soaring for the last 25 years, it's natural to ask "is China headed for a Japan-like era of economic stagnation?," as Steve Forbes, editor-in-chief of Forbes Media, puts it on Forbes.com.
Steve Forbes answer is quite ironic, given communism's usually damaging effect on economies. "Not likely, and the reason is the survival of the Communist regime," Forbes says.
"A prolonged slowdown would be politically catastrophic for the Party. The economic boom that has existed since 1978 is what gives the regime its legitimacy."
China's economic slowdown will actually force positive reforms, Forbes says. "These will include major tax cuts and . . . liberalizing capital markets."
(Newsmax Wire Services contributed to Marc Faber’s article).
Dr. Marc Faber is the editor of The Gloom, Boom and Doom Report and a major contributor to Strategic Investment . Dr. Faber has been headquartered in Hong Kong for nearly 20 years, during which time he has specialized in Asian markets and advised major clients seeking down and out bargains with deep hidden value - unknown to the average investing public - bargains with immense upside potential. Dr. Faber is the author of the current best-seller: Tomorrow's Gold.