Daily Archives: July 10, 2008

Intel (INTC) CEO Happy Talk Takes Shares Up

Late in the day, Intel’s (INTC) CEO said that the company was cutting its way through the recession like a hot knife through butter. The stock promptly jumped and ended the day up over 4% to $20.62, still fairly near its 52-week low.

According to Bloomberg, “Seventy-five percent of our sales are not in the U.S. and global business seems very strong still,” Otellini said in an interview at Allen & Co.’s media conference in Sun Valley, Idaho. “There may be some patterns in the U.S. that may be concerning to some people, but we haven’t seen them at this point.”

Since no one else thought the business was doing this well, Otellini better not be fooling around.

Douglas A. McIntyre

Posted on: July 10, 2008 – 3:29 pm in Semiconductor,

The 52-Week Low Club (LEH)(FNM)(FRE)(SBUX)(AMD)

AMD (AMD) Little hope that they PC and server businesses will lift revenue and the debt load looks bad in a credit crisis. Down to $4.75 from a 52-week high of $16.19.

Starbucks (SBUX) The market still belives that premium coffee sales get hit hard in a recession. Drops to $14.22 from 52-week high of $28.60.

Freddie Mac (FRE) Rumors the company will become insolvent. Sells down to $6.75 from 52-week high of $67.20.

Fannie Mae (FNM) Hit by same rumors. Collapses to $11.70 from 52-week high of $70.57.

Lehman Bros. (LEH) Rumors that a key client quit the firm. Drops to $15.63 from 52-week high of $74.09.

Douglas A. McIntyre

Posted on: July 10, 2008 – 3:01 pm in Uncategorized, , , , ,

Starbucks (SBUX): The Dark Empire Hits A 52-Week Low

Howard Schultz, the CEO and founder of Starbucks (SBUX) is, by any measure, a fabulously wealthy man. He owns 4.4% of the company’s shares. SBUX has a market cap of just over $10 billion, so Schultz has lost about two-third of the value of his shares in less than two years.

According to the SBUX proxy, Schultz made $1.19 million in salary last year and had "other" compensation of just over $861,000. Of that, $496,000 went to security. Since Schulz has a large number of sullen employees, the investment may be wise.

Schulz was paid very well for a man who was not the company’s CEO during the year. But, rank has its privileges .

Starbucks recently fired 12,000 full-time and part-time workers. Among them are a number of poor souls who were paid modestly for helping Mr.Schultz build his empire, and his fortune. Some rich CEOs would elect to take an annual salary of $1 to show some sympathy toward shareholders and employees.

There is a fiction that Schultz was "out of town" during the years that Starbucks expanded too quickly for its own good. For a man on vacation, he was paid well. The reality is that it would be highly unlikely that the management team that he sacked when things began to go badly operating entirely without his hand on the wheel, even if it was joined by several others.

Starbucks stock is still selling off because Wall St. does not believe that Schultz has either the vision or operational acumen to get the business right. He is not a straight shooter, which is one thing that the financial community loathes. In his recent memo about job and store cutbacks, the first two paragraphs were PR gibberish with things like Pike Place Roast, Mystarbucksidea.com, and Health and

Wellness

offerings. Who care?

Health and Wellness will not do anything to bring back shareholder losses or the jobs of the blindly faithful who were pushed under the bus.

Other than that, Schultz tenure are CEO is going fine.

Douglas A. McIntyre

Posted on: July 10, 2008 – 11:41 am in Food,

AMD (AMD) Hit 52-Week Low As Market’s Weak Are Buried

One of the hallmarks of a bear market is the the financially weak companies get their brains banged out. AMD (AMD) fits right in. Today it dropped to a new 52-week low of $4.75. The stock traded at over $40 in early 2006.

Over the last three years, the shares in rival Intel (INTC) are down about 20% and AMD is off closer to 80%. The chip sector has not bee kind to investors.

AMD is faced with a double threat. First, it is still having trouble competing with Intel, which is viewed as having better products and the ability to weather a price war due to its strong balance sheet. Perhaps as important, AMD has heavy debt load during a period when debt is anathema in the market.

All of the companies which supply components to PCs and servers are likely to be hurt if the recession cuts into computer sales. If the dry spell is a long one, AMD may not see the recovery.

Douglas A. McIntyre

Posted on: July 10, 2008 – 10:55 am in Semiconductor, ,

Fannie Mae & Freddie Mac: Do GSE’s Fail? Or Merge? (FNM, FRE)

The financial sector is reeling yet again over woes from GSE’s.  In fact, there are now many traders betting that one or both are effectively worthless for common holders.  Both Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) are under severe pressure yet again over liquidity concerns. 

The Wall Street Journal has reported that the government doesn’t expect them to fail, but that the White House has discussed the "what if" scenarios if a failure were to occur.  A package from the Federal Reserve is also said to have been discussed.

But then something came out of Bloomberg that throws a wrench into this machine.  William Poole, a former president of the Federal Reserve Bank of St. Louis, told Bloomberg that Congress should recognize that the GSE’s are effectively insolvent after losses.  He also noted that the odds are higher that the U.S. will have to bail them out.

The ramifications on this issue are more than wide and more than far reaching.  We covered back in January how many of the financial firms (you could now include the GSE’s perhaps) might be forced to merge whether they want to or not and we identified the winners and losers in there.  Could Fannie & Freddie end up being one entity? By charter that might not be allowed but we still think those charters are pieces of paper that can have a pen and ink change.

But think about the ramifications if one of these or both of these actually failed.  If you thought a Bear Stearns meltdown would have caused a panic, "you ain’t seen nothing yet" sure comes to mind.  It isn’t that the lending institutions would be changed for future mortgages.  The ramifications for the entire financial system would be at risk.  Imagine if all the outstanding debt issuances, mortgage-backed securities, CMO’s, and other pieces of paper widened out to massive spreads over treasuries.  You would have write-down waves at banks, brokers, insurance companies, credit unions, every pension system, mutual funds, and private money managers.  It would effectively destroy more value in just about every portfolio that exists.

One thing has helped very briefly and that is comments out of Treasury chief Hank Paulson noting that Fannie and Freddie are both adequately capitalized. 

As of last quarter, Fannie Mae listed its total liabilities as $804 Billion.  Freddie Mac’s liabilities are listed as being some $786 Billion.  According to both, the total assets are higher than this, but anyone trusting the actual "values" right now might be a bit too trusting in the good old written word. 

Letting one fail would cause the likely fallout to cause the same at the other.  Go ask the public and go ask most Wall Street professionals what the real difference is between Fannie and Freddie.  The answer is going to be "I don’t know."

Shares of both companies are down significantly.  The only  bit of good news here is that Paulson’s comments did at least create a bid.  Fannie Mae shares are down 18% at $12.57.  Freddie Mac shares are continuing to slide though with its shares down 29% at $7.16. 

If there is a plan to save these or a plan to combine these or any plan at all, it better come fast. Either way, further regulation and de-leveraging seem to be about as certain as death and taxes.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 9:24 am in Financial Stocks, ,

GE Going For Partial Break-Up (GE)

General Electric Co. (NYSE: GE) is announcing the spin off of lighting and appliances and is exploring alternatives for its consumer and industrial units.  This report originally came out on Bloomberg but CNBC (a GE subsidiary via NBC) has now confirmed reports.   A press release has also been issued right after the open.

As a reminder, the conglomerate posts earnings tomorrow morning.  The current bias is for another cautious report and this spin-off or reorganization right before the earnings announcement may very well be meant to smooth out any reaction.  Whether or not this will be enough to add significant value is still an outstanding unknown but it is at least a start.  Many on Wall Street want Jeff Immelt to break this conglomerate up, and now that choice might be more out of his control than before when the stock was closer to $40.00.

As we’ve noted, this isn’t going to look anything like your father’s GE of old.  The primary focus right now is on a spin-off to existing shareholders, although we’ll find out in short order whether or not that is the preferred venue or whether or not a sale end up being the exit.

GE shares are up about 1% at $27.50 right after the open.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 8:40 am in Conglomerates,

Tyco Doubles Down on Buybacks (TYC)

Tyco International Ltd. (NYSE: TYC) has decided to re-join the stock buyback regime seen elsewhere now that it has been a year since its break-up.  The company has announced that its Board of Directors has authorized a new share buyback program to repurchase up to $1 Billion of the company’s common stock.

The company expects to repurchase shares from time to time based on market conditions. This new buyback program is in addition to the existing $1 Billion buyback program that was authorized in September 2007.  That existing plan is nearing completion.

Tyco has also noted that up to this point in fiscal 2008, it has repurchased approximately 4% of its outstanding shares of common stock.  As far as the size of this buyout and how it compares to the company overall, it is a decent sized buyback.  Tyco had 2007 revenues of more than $18 Billion and its market cap is about $18.7 Billion.

Shares are actually up 5% this morning at $40.86 and its 52-week trading range is $31.01 to $51.89.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 8:16 am in Conglomerates, Stock Buybacks,

Marathon Shows Refining is Still Reeling (MRO, TSO, VLO)

Marathon Oil (NYSE:MRO) stock is indicated lower this morning in pre-open trading following release of the company’s interim update for the second quarter.  Shares of Tesoro Corp. (NYSE: TSO) and Valero Corp. (NYSE: VLO) have been under pressure on an almost daily basis that would currently give you the feeling that energy prices this high are impossible for these players whether they rise or fall.

Marathon’s production is expected to reach 372,000 boe/d, slightly above previous guidance, but slightly below the year ago production of 375,000 boe/d. Estimates for sold barrels is off by 22,000 boe/day. Production is expected to be 20% below earlier guidance in Marathon’s oil sands operations, but climbing prices for bitumen cover that up pretty well.Price realizations for oil and natural gas are up, but the company expects a $250 million after-tax write-down on its derivative hedges for synthetic oil sales.

But refining margins are the really bad news. Marathon expects second quarter refined products sales to be lower than last year by about 4%. Gross margins drop nearly 80% y-o-y, from $0.3925 in 2007 to $0.0850 this year. Derivative instrument losses on refined products adds another $190 million worth of bad news.

Then there’s Tesoro Corp. (NYSE:TSO), which hit a 52-week low yesterday. Tesoro issued second quarter guidance in June, aiming for a 10% reduction in their inventory by the end of the second quarter. The company hopes to reduce demands for working capital by reducing inventory. Hedges will cost the company $125 million in the quarter, and higher than expected energy costs will increase expenses by $0.30-$0.50/b. The news from Marathon didn’t help Tesoro, although its stock is up marginally after a nightmare Wednesday.

Finally, there’s Valero Corp. (NYSE:VLO). Yesterday the company announced a quarterly cash dividend of $0.15 per share. This morning, the stock is trading down again at levels challenging its 52-week low. Valero has not issued an interim update on its operations yet, but don’t expect any good news if and when it does.

As bad as things were for refiners last quarter, they’re only going to get worse this quarter. Watch EIA crude and refined products inventory reports. Commercial crude inventories are below the lower boundary of the average range for this time of year. Inventory management is the single best weapon refiners have for managing operational costs and cash flow. There aren’t many other arrows in their quivers.

Paul Ausick
July 10, 2008

Posted on: July 10, 2008 – 8:04 am in Oil & Gas, , ,

Dow Chemical (DOW) Gambles Inflation Will Stay With Rolm and Hass (ROH) Buy-Out

Dow Chemical (DOW) recently raised prices on a number of its products by 20%. It said that the price of the core commodities it used in manufacturing was simply up too much. Wall St. was not willing to buy in to the theory that Dow could keep the volume of its sales up while passing significant price increases on to its customers. Consequently, DOW sits near its 52-week low, trading at $33.96 down from a period high of $47.96.

But DOW has decided to double down on inflation in a manner which seems almost reckless. It will takeover  Rohm and Haas, paying $78 per share in cash. Berkshire Hathaway will put up $3 billion toward the $18.8 billion purchase price, but that does not make the move any safer.

ROH is also trading near its 52-week low, changing hands at $48.33. The premium DOW is paying for its shares is spectacular, especially in a tight credit market and a slowing economy.

DOW has only one rational reason for the move. It still believes that its customers and the ROH customers are willing to weather and pay higher prices for DOW’s chemicals and the building and construction, electronics, and packaging produces that ROH makes.

Commodities prices are unlikely to fail within the foreseeable future. That means that DOW does not have the "out" of a drop-off in its cost of goods sold.

That leaves one window and one window only. The world is heading into an inflation cycle and DOW can make money on that. Its customers need it too much.

Maybe.

Douglas A. McIntyre

Posted on: July 10, 2008 – 7:17 am in Mergers and Buy Outs, ,

Wachovia Initiates Alternative Energy (CPST, ELON, FCEL, ITRI)

Wachovia has initiated coverage of some alternative energy stocks this morning.  There may be other calls so we’ll follow up with more later depending on the length and details.  Here are the ones we saw so far this morning:

  • Capstone Turbine (NASDAQ: CPST) Started as Outperform at Wachovia.
  • Echelon (NASDAQ: ELON) Started as Outperform at Wachovia.
  • FuelCell Energy (NASDAQ: FCEL) Started as Market Perform at Wachovia.
  • Itron (NASDAQ: ITRI) Started as Outperform at Wachovia.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 7:05 am in Alternative Energy, Analyst Calls, , , ,

Top Analyst Downgrades (CXR, ETM, ROCK, LUX, MAN, NVLS, VSE, ZUMZ)

These are some of the top DOWNGRADES we are seeing from Wall Street analysts this Thursday morning:
Cox Radio (NYSE: CXR) Cut to Sell from Hold at Citigroup.
Entercom (NYSE: ETM) Cut to Sell at Citigroup.
Gibraltar Industries (NASDAQ: ROCK) Cut To Sell From Neutral at Goldman Sachs.
Luxottica (NYSE: LUX) Cut to Hold at Deutsche Bank.
Manpower (NYSE: MAN) Cut to Neutral at Banc of America.
Novellus (NASDAQ: NVLS) Started as Sell at Banc of America.
VeraSun Energy (NYSE: VSE) Cut to Sell at Piper Jaffray.
Zumiez (NYSE: ZUMZ) Cut to Market Perform at William Blair.
Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 7:03 am in Analyst Calls, , , , , , , ,

Top Analyst Upgrades (AMAT, BP, CPST, EGLT, ELON, ITRI, KLAC, NSC, PQ, PCLN)

These are some of the top UPGRADES we are seeing from Wall Street analysts this Thursday morning:

  • Applied Materials (NASDAQ: AMAT) Started as Buy at Banc of America.
  • BP plc (NYSE: BP) raised to Overweight from Neutral at HSBC Securities.
  • Eagle Test Systems (NASDAQ: EGLT) started as Buy at Banc of America.
  • KLA-Tencor (NASDAQ: KLAC) Started as Buy at Banc of America.
  • Norfolk Southern (NYSE: NSC) Raised to Overweight at JPMorgan.
  • PetroQuest Energy (NYSE: PQ) Raised to Buy from Neutral at UBS.
  • Priceline.com (NASDAQ: PCLN) started as Buy at Stanford Research.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 7:01 am in Analyst Calls, , , , , , , , , ,

Wal-Mart (WMT): Huge Jump In US Sales, The Middle Class Feels Poor

Wal-Mart (WMT) officially has back its swagger. Same-store sales at the world’s largest retailer moved up 5.8% in June, well above industry estimates.

For the period, revenue jumped almost 12% to $25.2 million, lead by international revenue which rose almost 17% to $9.9 billion.

Wal-Mart said "Because of our improved sales results during the quarter, we have updated our guidance estimate for earnings per share for the second quarter of fiscal year 2009 to a range of $0.82 to $0.84."

The news is a clear sign that, while the economy is slowing, Americans are still shopping, but only at the cheapest places. Over the near term, Wal-Mart should continue to do extremely well while retailers like Macy’s and Nordstrom deal with the hardest year in over two decades.

Wal-Mart is no longer only for the poor. It is for those who feel poor despite their middle class roots.

Dougalas A. McIntyre

Posted on: July 10, 2008 – 6:43 am in Retail,

Chemicals on Fire After Rohm & Haas Merger With Dow (ROH, DOW, BRK.A, APD, CE, EMN, ASD, HUN)

Rohm & Haas (NYSE: ROH) has agreed to be acquired by Dow Chemical (NYSE: DOW) in an $18.8 Billion dollar merger ($15.3 Billion in equity value).  The terms to shareholders value the company at more than $78.00 per share in a cash buyout. 

Interestingly enough, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) and the Kuwaiti Investment Authority are investing in the deal.  Rohm & Haas is more diversified than mere chemicals but a 74% premium deal has interest likely falling into other key chemical players and ones to watch would be Air Products (NYSE: APD), Celanese (NYSE: CE), Eastman Chemicals (NYSE: EMN), Ashland (NYSE: ASH) and in particular Huntsman Corp. (NYSE: HUN).

The deal is subject to shareholder approval, but this is likely a done deal so long as no anti-trust issues crop up.  The 52-week trading range is $44.13 to $62.68 and shares have never traded that high, so it seems no  one will fight this.   

There are more than 30% of the shares owned or controlled by Haas family trusts and they have indicated their support of the merger.  Rounding up the other votes should be easy at this point.

Jon C. Ogg
July 10, 2008

Posted on: July 10, 2008 – 6:38 am in Conglomerates, Mergers and Buy Outs, , , , , , , ,

Turner Broadcasting Hooks Up With Yahoo! (YHOO): A Meaningless Gesture

In another in a string of fairly useless announcement, Turner Broadcasting System and Yahoo! (YHOO) have entered a multi-year strategic alliance that will allow the two companies to collaborate on advertising and sports-related content.

Turner will exclusively represent online advertising sales for the NBA, golf and NASCAR pages of Yahoo! Sports. Additionally, Yahoo! Sports will gain access to basketball, golf and NASCAR content from NBA.com, PGATOUR.com, PGA.com and NASCAR.com, league sites managed by Turner.

Douglas A. McIntyre

Posted on: July 10, 2008 – 6:26 am in Internet,

Dow Chemical (DOW) Buy Rolm and Hass (ROH) For $78 A Share

Dow Chemcial (DOW) will buy Rolm and Hass (ROH) for $78 a share or $18.8 billion.

Reuters writes that Dow will make the purchase to broaden its product offerings in the paints, coatings and electronic materials.

Hard to imagine paying that premium in this economy.

Douglas A. McIntyre

Posted on: July 10, 2008 – 6:11 am in Mergers and Buy Outs, ,

Toyota (TM) To Up Its Prius Production, Go For The Kill (GM)(F)

Toyota (TM) is planing to sharply cut its SUV and pick-up production in the US. It can see the writing on the wall as well as anyone. Don’t build what you cannot sell.

But, Toyota is doing something much more important as its reorganizes its system for building cars in the US. It will ramp up production of its wildly popular Prius hybrid. The car is in extremely short supply as desperate consumers try to find cars that use less gas.

Toyota will manage all of this by taking its huge plant in Mississippi and converting it away from SUV production. According to The Wall Street Journal, "sometime in 2010, the company will produce there the Prius, a fuel-sipping, gasoline-electric hybrid that can easily go 40 miles on a gallon of gas".

The news is good for Toyota and especially bad for US car companies. GM (GM), Ford (F), and Chrysler are trying to get their own fuel-efficient sedans to market.

Detroit has probably gotten some benefit from the Prius shortage. At least there was some chance that customers would look beyond the Toyota showroom if there was no Prius to be found. With increased production, that problem may go away.

And, that should reduce foot traffic even more to dealers selling US cars.

Douglas A. McIntyre

Posted on: July 10, 2008 – 5:34 am in Autos, , ,

Yahoo!’s (YHOO) New Search Tools And The Conflict With Google (GOOG): The Enemy Of My Friend

The enemy of my friend is my enemy. Or, the enemy of my friend is my friend. Or, the enemy of my enemy is my enemy.

Yahoo! (YHOO) is finding out that being friends with any other large internet operation is not terribly good for its future. The search company launched a new product which will make it easier for software firms to use Yahoo!’s platform to create search functions of their own. According to The Wall Street Journal, "Yahoo hopes the service will increase the number of searches done through its service and generate more advertising revenue, since sites that incorporate the tool will eventually run Yahoo search ads."

The entire program is an effort to take search market share and ad dollars from Google (GOOG). That is the same Google which is supposed to set up a partnership with Yahoo! to use its Adsense program to improve the embattled portal’s revenue. By some estimates this arrangement could add several hundred million dollars to Yahoo!’s earnings and help it make the case that it should not sell itself to Microsoft (MSFT).

All of that may make Google think twice about aiding Yahoo!, but it probably won’t.

Google understands that it Yahoo! uses Google’s search platform, over time Yahoo! will be tempted to abandon its own development to save money. Google also understands that Yahoo! may well be bought by Microsoft or that Yang & Co. will buy AOL which will be an integration nightmare. Both anecdotal and rigorous research show that big M&A deals rarely work.

Google can sit back and watch Yahoo! fall apart one way or another. Or, it can form a partnership with Yahoo! which will make most of the smaller company’s software redundant.Yahoo! can go after Google all it wants to.Its opportunity to make that work is in the past.

Douglas A. McIntyre

Posted on: July 10, 2008 – 5:21 am in Internet, , ,

Apple (AAPL): The iPhone’s Grandiose Plans

Steve Jobs sees that smartphones, especially the Apple (AAPL) iPhone are the future of computing.  Who needs a PC when a handset will do?

To get to Mr. Jobs goals, Apple "will open its App Store, an online bazaar that will attempt to do for mobile applications like games, reference guides and other software what Apple’s iTunes Store has done for music," according to The Wall Street Journal. Jobs calls his new phone a "computing platform."

Apple may have gone a bridge too far. The obvious reason is that companies which have much wider handset and mobile software distribution than Apple can ever hope to have will continue to push their agendas. Even if Jobs can sell 20 million iPhones a year, Nokia (NOK) sells over 400 million and it is pushing rapidly into the software and content businesses.Nokia controls its own open system, Symbian, which is the most widely used mobile software platform in the world.

Chasing Nokia are relatively formidable companies including Microsoft (MSFT) and Google (GOOG). None of these companies wants to be stuck on the PC if handsets become the next computers.

The trouble for all of them, and for the Apple initiative in particular, is that mobile devices will never be the next PCs. Wall St. only has to look at the current versions of the insanely popular Mac. With each generation it gets more computing power, more memory, and more storage. Monitors tethered to the Mac are now the size of wide screen TVs. Consumers want bigger screens for gaming, movies, and business applications.

The PC is "always on". In other words, it is forever connected to the internet. Take a handset outside its cellular service area and its is no better than a brick with a keyboard.

The mobile device will be useful for e-mail, music, modest web access, and phone calls. It will never match the power or utility of the PC. 3G and WiMax PC connectivity will make the computer’s case even stronger.. Google is finding that out with its Android mobile platform. Microsoft has never had more than modest success in the wireless world.

Now Apple can find out that the iPhone is not a Mac, or a PC of any sort.

Douglas A. McIntyre

Posted on: July 10, 2008 – 5:02 am in Consumer Electronics, , , ,

China’s Export Machine Gets It Ears Boxed

"Strong wind does not last all morning; strong rain does not continue all day"–Lao Tsu, Tai Te Ching

China’s mighty export machine, the envy of the 21st century economic world, is starting to slow. The effects have already moved well beyond the mainland’s shores and they are only just beginning.

According to The Wall Street Journal, "China’s exports in June grew 17.6% from a year earlier, slowing sharply from the 28.1% increase in May and below market expectations." The reason seems to be a poor economy in the US which is likely to spread quickly to the EU and Japan. In other words, China’s problems will get worse.

China now has troubles which are fraternal twins. Inflation has stepped up sharply. Depending on who is measuring it is in the 8% range, but food costs are rising much, much faster.

As exports slow, the rate at which Chinese middle class wages will rise is also likely to get hit. When companies are selling less, they cannot pay their people more. That leaves the central government in a bit of a bind.

If the combination of a slowing economy and rising energy and food costs may hurt the US, they could hurt China worse. The mainland’s financial dynamics are a caricature of America.

Exports are the meat and potatoes of China’s opportunity to become the world’s largest economy. The excess capital that goes into its sovereign funds and invests in advances in technology and industrial improvements are all driven by the money which comes into the nation for its goods.If the money flow lessens, the entire system is compromised.

There is a temptation to compare China to the Japan of a generation ago. Japan was on its way to becoming the world’s largest economy. Its stock market was rocketing up, and with it the value of real estate. Exports were the fuel of the entire system.

China’s ability to increase GDP is based less on what it consumes within its boarders that what it sends abroad. The cycle to change that will take a long time. The wealth inside its borders is not great enough. And, the process to correct that is becoming arrested.

Douglas A. McIntyre

Posted on: July 10, 2008 – 4:44 am in China