Market Trend #4: China Is Debt-Crazy
The complexion of economic growth in China has to change. From the chart, you can see the market trend of debt around the world rising since the early 1990s.
Click to EnlargeIn the U.S., however, private debt has leveled off. China’s the red line, and private sector debt there has just gone crazy.
Fortunately, China’s government debt is still fairly low, so the government has enough resources at its disposal to prevent a total economic meltdown. But I expect a big shakeout in China’s industrial complex, especially businesses engaged in construction, mining, metal bending and other activities several stages removed from the end consumer. These industries are headed for a bust. Once the dust settles, the Chinese consumer will come back more strongly than ever.
While direct-to-consumer Chinese companies will do just fine, many of the best profits will come from U.S. and European multinational companies that sell to the Chinese consumer.
Coca-Cola (KO) and Procter & Gamble (PG) are both big players in China. Both, of course, are steady-Eddy diversified dividend payers that will continue to pay you 2.8% and 3%, respectively, regardless of whether the Chinese consumer rebounds this year or two or three years from now. Moreover, these companies have proved their ability to grow the dividend year after year, decade after decade, through thick and thin.
As I say—it’s a bet, not a gamble.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won nine Best Financial Advisory awards from the Specialized Information Publishers Foundation.
