Stefanie Kammerman, the Stock Whisperer, to tell you the Whisper of the Week: GLD and SLV in my week...
Navellier Looks Beyond the Selling Panic
02/28/2007 12:00 am EST
We got a Shanghai surprise as the stock market in China was hit very hard Tuesday. The Shanghai Composite fell nearly 9%, its worst fall in a decade. The equivalent on the Dow would be a drop of over 1,000 points. Some of our Chinese/Hong Kong stocks, such as LJ International(JADE), Qiao Xing Universal Telephone (XING) and CDC Corp (CHINA), were hit particularly hard.
The sell-off is a lot like the one we saw last May. Then, the Dow Jones Industrial Average dropped 2.4%, and the Standard & Poor’s 500 dipped 3% (compared to today's 3.2% and 3.8).
In any case, I want to make it clear that I think this sell-off is "much ado about nothing." Basically, there's a lot of foreign investment in China that decided to take some of the money and run. There were rumors that the Chinese authorities were trying to crack down on the speculation in their markets—that seemed to work no better there than it did anywhere else. Remember how Alan Greenspan tried to curb the tech bubble in the late 1990s?
Speaking of which, Mr. Greenspan is probably partly responsible for the sell-off in China. He made a speech Monday in Hong Kong and said the US economy could enter a recession by the end of the year. The good news, of course, is that he has a terrible track record when it comes to forecasting the economy.
All that happened is the Chinese bubble finally burst. Part of the problem is that markets in China were closed last week for Lunar New Year celebrations. Some of the damage is spilling over to other markets, such as Europe, emerging markets and now, the United States. Tuesday's weaker-than-expected US durable-goods report didn't help.
We're in the midst of a selling panic. Eventually, trading volume will dry up, and our high-quality stocks will be some of the first to rally. Please be prepared for the market to dip and retest its low point over the next few days; it will likely be a bit rocky in the near term. Once the selling panic fades and volume decreases, we'll have an excellent buying window. For now, the important thing is to keep cool.
There was some good news Tuesday. For example, existing home sales rose 3.0% to 6.46 million, well above the consensus. Also, the Consumer Confidence Index (CCI) rose to 112.5 for February, which is a five-year high.
Between Greenspan's yakking, the worse-than-expected durable goods report, and the news of the attack near Vice-President Cheney [in Afghanistan], many investors have decided to cash out of this market. I want to assure you that there will be some terrific buying opportunities for us just ahead. For now, please don't get caught up in the sell crowd.
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