Noise vs. Information
CHINA — It is very much a present influence. Wait until you see to what extent China is going to influence our future. (Thanks to Richard Russell, of Dow Theory Letters)
China’s population is five times that of the U.S. China has one of the world’s oldest civilizations with a long history of innovation. The Chinese invented gunpowder, and paper money. Although isolated for centuries, China is rapidly joining the rest of the world.
China’s Communist leaders, like leaders in any nation, want to remain in power. Since the Internet makes communication increasingly available in China, the Chinese leaders realize that to remain in power, they can no longer do it solely by force. Instead, they must raise living standards in China. Well aware of the power of nationalism, China’s leaders are determined to show the Chinese people as well as the rest of the world that China will soon rival the great Superpower — the U.S.
Oh yes, China’s leaders have one powerful problem. They must provide jobs for 25 million Chinese that enter their work force every year. 25 million! The Chinese leaders are dictators and will do anything they can to succeed. Theft of our intellectual property is being allowed, perhaps even encouraged by the Chinese government. Bootlegging CDs and software is small potatoes compared to how China has picked Boeing’s pocket for critical technology and is now competing with Boeing by selling mid-size passenger planes to other nations. Chinese autos are next. When China’s huge economy needs steel, concrete and oil, and it needs a lot of it, prices go up here. The U.S. owes China a huge amount of money and must borrow more each month to continue buying their doo-dads. And there is a big military build-up going on over there, too, with one report discussing a Chinese fleet with 85 submarines by 2010. Yikes! At what point our interests will clash, I don’t know, but there are many potential problem areas.
So that’s the picture as briefly as I can put it. China, a growing colossus, building assets and expanding both its economic and military power. They hold a lot of cards — and the US, a Superpower that is the world’s number one innovator, but also the world’s biggest consumer and debt-builder which gives them more leverage over us every day. Where will it all lead? Frankly, I don’t know. Politics is not my business. But investing is. So we have begun following several Chinese investments so that we can take part when the politics begin to affect the investments.
Market Technicians Association Retreat