Meaning, how was China ever set to lead the world into recovery when China itself is still so dependent on exports to a weak global economy? How can Chinese business activity truly be picking up with electricity usage falling, rather than rising?
And how could a stimulus plan slapped together by Beijing bureaucrats really solve the issue of internal domestic demand –

China’s biggest hurdle and a challenge that simply will not succumb to short-term fixes?

There is a big bullish story in China. But as with other emerging markets, it is a longer-term story, hinging on the day when these countries truly make strides towards weaning themselves from the economic crutch of exports to the West. We are closing in on that point, but are not quite there yet.

Another important lesson is recognizing the difference between trading and investing, and not getting caught in the no man’s land between the two.

A good working concept here is “the Mountain and the Valley.” Here’s what I mean:

Imagine a great, vast mountain off in the distance. You don’t know exactly how far away it is, but you know it’s there, waiting to be scaled. Meanwhile, in between you and the mountain is a fog-covered valley. You don’t know what kind of ups and downs will be in that valley, but you know the trip across won’t exactly be smooth.

The difference between trading and investing is, investors tend to focus on the mountain and more or less ignore the valley. They keep their financial and emotional risk low enough to handle the ups and downs without losing their cool. Deliberate staying power and long-term conviction are the operative phrases here. With those two things, many hard asset and emerging market investors will be able to look past the volatility of recent days and ultimately do just fine.

In contrast, the trader is very aware of the ups and downs of the valley. Rather than ignoring that volatility, the trader focuses on it. The trader’s advantage is thus speed and flexibility – an ability to buy and sell a position repeatedly as need be, get a sense of how the terrain is going, and move quickly and fluidly when the timing calls for it.

So which one are you? Steadfast and true, or flexible and fluid? The two temperaments are rather different. Some versatile folks are traders and investors at the same time, but even then, not often with the same positions (or even the same brokerage accounts).

In closing, do emerging market equities and hard assets still offer excellent long-term investing opportunity? Absolutely, without question.

In the eyes of the investor, this week is just another dip in the valley. But in the eyes of the trader, China’s stumble – and the demise of the bear market rally – have created a shift in the near-term landscape worth exploiting. 

Justice Litle is Editorial Director, Taipan Publishing Group
Courtesy: www.taipanpublishinggroup.com

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