“It’s a miracle,” they said. “Look! A brand-new 3-billion strong market,” they told us. “And 12% growth! Wow!”
Top it all off with an Olympic extravaganza, and China was an irresistible story.
But that’s all it was: a fairy story.
What you haven’t been told is that many companies in China are so corrupt, and so bankrupt, they make Enron look like a bright light of fiscal rectitude.
The press reports that the Shanghai A-Share Index is down 70%, but that’s not the real issue for you.
The real issue is this: U.S. firms have partnered with characters you’d hesitate to have to dinner. So catastrophic are these losses going to be that every U.S. company involved with these scoundrels faces a terribly uncertain future.
Exhibit One: Tao Shoulong, who ran China’s biggest textile dye operations. Tao’s factories spread across 31 football fields’ worth of real estate in Shaoxing.
One morning a few weeks ago, Tao burned his company’s financial books, disposed of his fleet of Mercedes S-600 sedans and vanished. He left behind 4,000 workers, debts of at least $200 million, 300 suppliers and 200 customers in the U.S. and Europe.
The farce was over for Tao, and by December 31st this year it will be over for 100,000 similar plants across China.
This 100,000 number, by the way, is what Beijing will admit to. So triple that.
Did You Know This?
Did you know that most of the glut of loans on China’s banks’ books are non-performing? That most if those of those loans are used for political purposes? That the banking system in China lacks even a basic centralized computer system?
Or that it was the Asia deals that brought down AIG? And it is the Asia deals that could bring Citigroup and another 25 blue chips to the brink of extinction in the next 90 days.
They all drank the China Kool-Aid, and they imported the resulting body count right back to your portfolio.
Toxic in 2009
The next 90 days will be momentous. Count on it. How you play it will determine your standard of living for the next decade. Don’t let the headlines distract you. The real news will not be televised, and the politicians are clueless.
My new report, Toxic in 2009, strips the covers off the companies that are most poisoned. If you like to short, this is your shopping list, but that’s not my thing. My thing is to get you the heck away from truly catastrophic losses. (Click here for details on how to get your free copy.)
You have 90 days. It isn’t very much time, but it is enough.
Own the Survivors
You may be wondering what stocks will thrive in this brutal environment.
Bluntly, there won’t be many — but they will do extremely well. They live within their means and never “enhance” their performances.
They have fat dividends, they have growing operating margins, their earnings are accelerating, and analysts are falling over themselves to revise their estimates upwards.
But above all — buy dividend champions that stick to the knitting. Stocks like…
STOCK #1: Procter & Gamble (PG)
A.G. Lafey, CEO of Procter & Gamble recently said, “The reason P&G has grown so consistently for so long is that we’re a company that sticks to the fundamentals. We build brands that improve consumers’ lives. We deliver superior value day in and day out. We manage cash and costs with unrelenting discipline. And we invest in innovation as the primary driver of profitable organic sales growth.” Could there be a better summary of a winning business strategy?
P&G has returned an average 16% to shareholders per year for the past 20 years. And, to hammer home the quality of P&G, I’ll mention that the company has paid uninterrupted dividends for 118 years.
The past 52 years have each seen dividend increases averaging more than nine percent.
STOCK #2: Union Pacific (UNP)
In the midst of an economic downturn, UNP is breaking earnings growth records. Price increases and lower fuel costs are creating near-term earnings power, but the long-term strengths of UNP are its irreplaceable 23-state network and connecting services to Mexico and Canada, which give Union Pacific competitive advantages that cannot be matched.
And Union Pacific is not stingy when it comes to “spreading the wealth around,” as Obama eloquently puts it. In July, UNP increased dividends by 26%, its second dividend increase this year.
And there are many more winning enterprises I can give you chapter and verse on in an economic report called The 26 Winners of 2009. This list exemplifies every principle of investing I hold dear and that has enabled my Intelligence Report subscribers to thrive and has enabled me to never, ever have a losing year in almost three decades.
You don’t have much time, but you definitely can get to safety. And safety is your first goal now.
Let Richard Young help you successfully navigate the upcoming shocks of the economy by joining Intelligence Report risk-free today. When you join, you’ll receive copies of Richard’s new research reports, Toxic in 2009 and The 26 Winners of 2009, plus up to 14 additional reports…absolutely FREE. Don’t face the next year without first consulting these two reports closely — and soon. Click here to get all the information today!
