{"id":51680,"date":"2014-05-22T20:57:50","date_gmt":"2014-05-23T00:57:50","guid":{"rendered":"http:\/\/countingpips.com\/?p=51680"},"modified":"2014-05-22T22:23:37","modified_gmt":"2014-05-23T02:23:37","slug":"if-you-stand-too-close-youll-miss-this-australian-share-market-story","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/05\/if-you-stand-too-close-youll-miss-this-australian-share-market-story\/","title":{"rendered":"If You Stand Too Close You\u2019ll Miss This Australian Share Market Story"},"content":{"rendered":"
May 22, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

What’s that?<\/p>\n

The end of the world isn’t nigh?<\/p>\n

Maybe things aren’t as bad as the worrywarts in the mainstream media suggest.<\/p>\n

After a few days of falling markets the Australian share index gained 1% yesterday.<\/p>\n

Is this it? Is it time to pack away the emergency kit and buy stocks<\/a> again…?<\/p>

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The reality is that nothing has changed. It was the time to buy stocks two weeks ago, and it’s the time to buy stocks today.<\/p>\n

The latest news that sent the Australian share market<\/strong><\/a> higher wasn’t a surprise. Or it wasn’t a surprise to your editor anyway.<\/p>\n

As for the rest of the market, well, everything seems to surprise them.<\/p>\n

What was the news?<\/p>\n

As Bloomberg<\/em> reported:<\/p>\n

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‘A Chinese manufacturing gauge rose to a five-month high in May, sending Asian stocks higher on speculation the economy is stabilizing after government moves to counter a slowdown.<\/em>’<\/p>\n<\/blockquote>\n

The gauge in question is the HSBC purchasing managers’ index (PMI). The markets go into a lather every month waiting for this gauge. Will it be above 50 (meaning China’s economy<\/a> is expanding) or will it be below 50 (meaning China’s economy is contracting)?<\/p>\n

But who cares? By focusing on the detail the mainstream is completely missing the biggest story of all.<\/p>\n

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That’s no way to look at a painting…or an economy<\/strong><\/h2>\n<\/p>\n

Let’s give you an example. When you go to an art gallery, what’s the best way to view a painting?<\/p>\n

Is it by standing up close, eyeballs touching the canvas?<\/p>\n

Or is it by taking several steps back so your eyes can see the whole picture, and so that you can appreciate the entire story that the artist is trying to tell?<\/p>\n

The answer is obvious.<\/p>\n

And yet time and again when it comes to the financial markets<\/a> — and China especially — most commentators choose to look at the market up close…eyes to the canvas.<\/p>\n

That’s fine when it comes to analysing an individual stock. But when you’re looking at big picture trends, and potentially the biggest economic trend in the past 100 years, then it pays to stand back and look at the whole picture.<\/p>\n

That’s the way we see China.<\/p>\n

Yes, we get it that the PMI is important. We understand that it reflects whether Chinese businesses are growing or contracting.<\/p>\n

And we also get other details, such as whether individual companies are in danger of default. But on that subject, so what?<\/p>\n

Businesses go bust in Australia all the time. What would the mainstream prefer, that China bails out bond investors by buying debt at par rather than letting those firms default?<\/p>\n

It strikes us that China is doing the right thing by letting businesses default on loans. It’s exactly what the US and Europe should have done with businesses that were in danger of default in 2008.<\/p>\n

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Where to invest is an easy choice<\/strong><\/h2>\n<\/p>\n

Perhaps if the US and Europe had let businesses and banks fail the world economy<\/a> would have gotten over the worst of things long ago.<\/p>\n

But that didn’t happen.<\/p>\n

And besides, that isn’t even important. What’s important is the single biggest trend facing the world economy today.<\/p>\n

It’s the biggest change in economic influence for more than 100 years. Of course we’re talking about the rise of China and the virtual certainty that it will soon overtake the US as the world’s biggest economy.<\/p>\n

That’s what’s important. Not whether China’s manufacturing expands by this much this month and that much next month. That’s just small potatoes.<\/p>\n

You need to look at the bigger picture. And the bigger picture is that far from being at the peak of growth, China’s growth spurt has barely begun.<\/p>\n

We asked our emerging markets<\/a> analyst Ken Wangdong for his take on the China growth story. He says China has another 15–25 years of rapid growth. He also said:<\/p>\n

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‘China’s GDP per capita is still just 21% of the United States, while its aggregate size is 80% of the US economy.<\/em><\/p>\n

‘China’s urbanization rate is just over 50%, meaning half of its population still needs to be industrialized and urbanized. China’s rural population is sitting on an agricultural sector that only produces around 10% of China’s total GDP.<\/em>’<\/p>\n<\/blockquote>\n

We’ll take Ken’s views on China over most of what we read in the mainstream press, which is mostly from analysts who have never even stepped foot on Chinese soil.<\/p>\n

Ken has lived there, and worked there. He knows the issues and knows the culture.<\/p>\n

The bottom line is this: yes, China has plenty of issues to face as its economy continues to grow. But that’s true of every growing economy. It was true of 18th century England, 19th century America, and Germany and Japan in the 1950s.<\/p>\n

If you look too closely at China you’ll see some bad things, just as you would if you look too closely at a Western economy. But ask yourself, which is more likely to overtake the US economy<\/a> in the next few years — a Western economy or China?<\/p>\n

You know the answer. Therefore, the investing decision is easy.<\/p>\n

Cheers,
\n Kris+<\/a><\/strong><\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

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\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au What’s that? The end of the world isn’t nigh? Maybe things aren’t as bad as the worrywarts in the mainstream media suggest. After a few days of falling markets the Australian share index gained 1% yesterday. Is this it? Is it time to pack away the emergency kit and buy stocks again…? The […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-51680","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/51680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=51680"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/51680\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=51680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=51680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=51680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}