The winter sell-off has arrived! China got hammered today, Philippine shares were down 7.9%, Hong Kong was down 1.8%, Malaysia fell 2.8%, India's BSE fell 1.3%, and U.S. stocks fell the largest percentage since 2003. In short, there is a bubble effect going on just like there was last year. People have all of a sudden freaked out and gotten scared of stocks after people worry about an economic recession.
One economist said "It looks more and more like the economy is a slow growth economy" and "Moderate economic growth is good -- an abrupt stop in economic growth scares people." Excuse me? Abrupt slow-down in economic growth? When did this happen? Last I checked, in the 4Q the economy grew 3.5%. If people aren't satisfied with that, I don't know what to tell them. People are speculating that the Chinese and U.S. economies will slow down, and it seems like an extremely random speculation. The U.S. economy is growing at a good pace that people should be satisfied with considering the circumstances we are currently in. The economist who is quoted above is says the economy looks more and more like a slow growth economy. What does he expect? The U.S. is huge, we're not going to be seeing 10% growth. 3.5% is a very good number, period. I doubt we'll see much faster growth than that anytime soon, and I'm fine with that. I don't think anyone should expect much faster economic growth than what we've been seeing. As for the Chinese economy, it needs to slow down, or a lot of problems will pop up. The government wants it to slow down, otherwise Hu Jintao wouldn't be making statements that the growth needs to be cooled, and the government wouldn't be raising taxes on middle class items. People worried about a slow down in the Chinese economy haven't done their research - it needs to slow down.
I kind of get the feeling economists just needed something to yap about. The U.S. economy is very strong, and in my opinion the Chinese economy isn't in that bad of shape. For Chinese investors' sake, I hope it does slow down. It's been nearly a year since the government made the statement that the growth needed to cool for other problems to stay at bay, so I don't know why people would be concerned enough about it cooling off a bit to make the market fall 9%. People who don't know about the Chinese government's effort to cool economic growth shouldn't be invested in China. I bet the majority of people investing in China don't know about these efforts, people are blindly putting their money into a place they haven't researched (tech, anyone?).
I think this is a great opportunity. I believe this new speculation is incredibly lame, people haven't done their research into the U.S. and Chinese economies. The U.S. economy is not stumbling, there's no evidence it is struggling. Greenspan's comments have really fed this worldwide sell-off, and it has me wondering why. He said it is a possibility that the U.S. economy could hit a recession in 2007, but that it is also dangerous making short-term forecasts. His comments really weren't that strong, to me it sounds like more of a thought rather than a statement. A recession in the coming nine months seems very unlikely to me, because the economy is very strong right now and is growing at a very nice rate (I'll say what I've said before, 3.5% growth is nothing to smirk at). The growth may very well slow down a bit, but a recession? No. I don't see that coming.
There's a good chance that the markets will see continued pressure in the coming weeks, possibly months. Speculation is a deadly force these days with the markets, and economic speculation can develop into a lot of theories that get people even more worried. The Chinese market was trading at a premium, so I can understand a sell-off, but 9% on economic speculation seems awfully rough, especially when you consider that the speculated slow down is something the government actually wants and is trying to get. Until there is more evidence that these economies are truly having lots of trouble like people are saying, I'm not going to believe a word of this speculation. People are already jumping to conclusions. I think this speculation is rubbish, we'll see and learn soon enough.
Now is a great time to look for bargains. Hansen fell nearly 6% after 4Q sales rose 54% to $151.1 million, which beat analyst estimates of $148.74 million. A great opportunity there. Chipotle B shares fell 5% to $56.00 on no news. Great opportunity. Chinese stocks are worth looking into. Ctrip fell 5.05% today to $58.64. They're starting to look attractive. Tata Motors has been hit down to $18.05 on no news, and they've been reporting excellent results. Great opportunity. Home Inns & Hotels Management, a Chinese hotel chain reporting triple digit growth numbers, was hit down 13.28% today on no news at all. That's looking very interesting.
Sell-offs happen, they always will be around, and they are the best opportunities to get money invested in stocks. I see no good reason to believe this new speculation, I've seen very little evidence that suggests the U.S. economy is headed for a recession in the next nine months. If the Chinese economy slows down, investors should be even more satisfied with their choice, assuming they've done their research into the economy and the moves the government has been making for nearly a year now to cool the growth down. Once you do your research, I think you'll see that this isn't much more than an excuse for people to take the gains that have come in the past months. I see it as a great opportunity for investors, and we may be blessed even more and see more pressure in the coming weeks. Now's the time to invest.