Just a few months ago, marketwatchers were still concerned about China’s inflation and “overheating”. Now, the pendelum has swung the other direction. We’ve been watching this stock for years. It is a value and emerging market growth play at once. It also has a good dividend yield. At 22 bucks, it’s cheap.

http://www.economist.com/node/21550280

I’ve noticed the Economist mag has subtley titled against equity and toward specifically emerging market debt. EMB is an example as well as corporate debt in Brazil.

What can we say? Buy excellent securities, build on the positions when prices are 10% below or more from your average price, and don’t stress because the volatility and confusion are here to stay. Read the Ft.com, read economist.com, listen to Bloomberg Surveillance over cafe on your Stitcher app, and most of all…use common sense. We see folks only fail when they allow fear to prevent them from building on positions when the world is “going to hell in a hand basket” or they get greedy by jumping in when elation pervades.

We still advocate a basic long term vision of rising equity markets in the emerging market universe, but the key is all about your average price. That is what must be managed with great discipline and patience.

The world was preparing for death by a thousand cuts for 2012 only a month ago. Here we are after a bizarrely fast rally all over the world. I just finished reading Foreign Affairs this Sunday morning. What defined the issue other than the case for bombing Iran as the least worse option was the general optimism. Gideon Rose reminded us what relative peace and prosperity we live in while the editors seem to think that all this clashing of ideas isn’t going to be so bad afterall?

The theme that I keep coming back to is that we are in a world where emerging markets are the future. Even the Western minded Council on Foreign Affairs and Economist mag are coming to that conclusion. The Foreign Minister of Australia, Asia’s only Anglo Saxon/Western bastion, announced Europe’s “early grave”.

The point is that the global economy probably has more legs in it than ever and we are simply confused by the changing landscape.

It takes the long view to survive the volatility though…

Ive been watching the news carefully regarding our Brazilians such as Gerdau and Companhia Siderugica Nacional SID. The markets have been too pessimisitic about them and dont forget they are some of the best dividend paying stocks around.

Build on these cheap prices.

Common sense must be king with respect to Europe. I mentioned in the last blog that “Europe” and the broader crisis that word has become for global financial markets and “China tightening fears” continue to headline the fear element. Europe seems to have emerged as the number one fear and the unthinkable, the dissolution of the EMU, is now thinkable. Again, common sense has to guide us to the answer. Will it be in Germany’s interest to allow the collapse? What will cost more, Union or Disunion? AS the Economist magazine noted in their leader, Merkel has to spell out to the German people.

I am posting less these days. I feel like a movie reviewer who has to write about the same movie every day. Every government on earth took debt to spend out of the financial crisis of 2008 and interest rates in the developed world haven’t left zero. Emerging markets have experienced an aggressive rebound while interest rates have risen to tame the growth yet the two great fears (drum roll…..Europe debt cris/ drum roll…China tightening fears have caused sell off in EM equity prices, twice!

Some of our China stocks, like China Life are trading at three year lows? Go figure? We watched Geely Auto go from 2 to 5 back to 2 again? Go figure. The boring and highly profitable mining business of iron ore, dominated by Vale has been a gripping soap opera. Go figure?

Even Brazil has been a rollercoaster and the “Brasil story” never changed. Yesterday the Brasil central made a daring and enviable move to lower interest rates after having raised them all year. They manage their economy with the same grace and style as they samba.

They can’t get the job machine in the USA going and Merkel is struggling to keep the momentum politically to defend the most basic vision of the EU, monetary union.

I am still an optimist but many have good reason not to be. Two years ago I posted that these would be tricky years for investors. The risk free rate would disappear as it has and equities would be the domain in a world of low interest rates. Even I didn’t imagine the intensity of the volatility but I have always said that it isn’t hard to pick good assets. The key is your average price.

This has been a stunning week and will likely have an ugly finish. The pendulum will also probably overswing with all the fear. This is exactly why we don’t get invested from the start, but it’s time to show courage and use cash to build. The crisis is political and not fundamentally economic. We are formally entering global equity bear territory. Assets are truly becoming cheap.

I have been off the blog for almost two weeks due to a business trip in the USA. I met with a lot of people and it was just another affirmation that the global economy is truly shifting towards emerging markets and China for future growth. I also sensed that a growing number of Americans are becoming aware of that fact and are opening up to the concept of placing assets in foreign institutions and beginning to diversify away from the USD and US securities. It’s not rocket science to perceive that the situation in the USA is unsustainable. It happened to be another rocky week but if you are down on positions then limit orders should be occasionally ticking off. I also think it is appropriate to get more invested if you are heavily in cash. More positive hard economic data came out of China today and they are lowering the inflation rate. Also, Europe’s monetary crisis is coming to a head and should find resolution after all the brinksmanship.

Please note page 8 in HSBC s report
http://www.hsbc.com/1/PA_1_1_S5/content/assets/investor_relations/strategy_day/2011/110511_strategy_day_gulliver.pdf

The biggest bank in Europe which is now headquartered in Hong Kong, HSBC, is throwing all of their weight towards emerging markets.

No country on earth has ever bought so many cars in so little time as China. Little surprise then that the Shanghai motor show, which opens on Thursday, has in a few short years become one the largest events in the motoring calendar.

Strictly a second-rate affair until a few years ago, Auto Shanghai has become the place to be for automakers scrambling for a piece of the world’s largest auto market.