Leaving It Up to Chance

05/14/2009 10:47 am EST

Focus: GLOBAL

Igor Greenwald

Chief Investment Strategist, MLP Profits

Some of the economic recovery's green shoots are beginning to brown around the edges. Not that tufts of weeds sprouting from a mountain of monetary manure were ever going to look especially pretty.

Then again, as famous economist Chance the Gardener once observed, "As long as the roots are not severed, all is well." That might be what they're thinking in China, where the stock market has lately braved heights not seen since the Olympic torch was lit.

It might have been that simple, too, for buyers who pushed crude oil as high as $60 a barrel, before cooler heads prevailed. The recent rally's roots—the printing press, pervasive doubts, resilient nonfinancial corporate profits—certainly seem intact notwithstanding this week's weeding of the weaker hands.

Asia is following China's lead in skirting an outright recession and looking forward to faster growth next year. Chinese retail sales were up almost 15% year over year, pretty impressive given a global trade slump that cut exports 23% over the same span.

Not to be outdone, the antipodean contrarians Down Under are snapping up anything that's not nailed down, reports macroeconomics maven Greg Weldon. (More from Greg on the Australian revival next week.)

Even in grumpy old Europe there are hopes that the worst has passed, voiced most recently by European Central Bank Chief Jean-Claude Trichet, who's overdue for a lucky guess.

Perhaps most heartening of all, gloom-ridden Britain saw a ray of sunshine. April retail sales rose 4.6% year on year. The rate of descent in housing prices and industrial output slowed. All in all, it was a lovely garden party, until the shovel-wielding undertakers showed.

The Bank of England, bless her rheumy soul, stomped all the tender shoots hard the very next day. The similarly sour German chancellor insisted Germans have done more than most to make things better, though critics wondered why the German economy continues to lag, if that's the case. Loath to be left behind, European market strategists beat a hasty retreat. North American bears took over CNBC, ordering steak for breakfast, lunch and dinner.  

The European Commission slapped Intel (Nasdaq: INTC) with a $1.45-billion fine for chipping away a little too enthusiastically at the dwindling market share of rival AMD (NYSE: AMD). Intel plans to appeal, and its upbeat commentary about the current quarter's trends spared the shares.

Fellow Dow component Bank of America (BAC) incurred a bigger market hit after letting go of its Asian ambitions. The B of A (now more of A than ever) unloaded a $7.3-billion stake in China Construction Bank at a 14% discount to the market price.

Soon after China & Emerging Markets Report editor Paul Goodwin warned of climax tops, the stock he'd refused to chase, Baidu.com (Nasdaq: BIDU), endured a quick one-week correction of 10%. It was hardly alone. Toronto-Dominion Bank (NYSE: TD), a recent favorite of The Canada Report contributor Tom Slee, retrenched as much, pushing its annual dividend yield above 5%.

The other Canadian value play reviewed this week, the Roger Conrad-endorsed RioCan REIT (Toronto: REI.UN, OTC: RIOCF.PK), gave back just 4%, its 10% yield too tempting to dump wholesale.

Who needs green shoots with hardy perennials on sale? And yet who doesn't need at least a few more signs that winter's done? In the garden, growth has its seasons. Markets are harder to time.

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