International Investing

This turbulent economy is very stressful and confusing for many people.  The market is going through one of those phases where major stocks go up and down by a few percent each day with no real news coming in.

Many analysts have it wrong because their academic training was wrong in the first place.  It doesn’t seem to matter where I read my financial info these days. It’s all warped.  It’s very important to understand fundamentals but that’s not the whole story.

CNBC and the big media corporations are using old paradigms to evaluate what is going on.  That’s the problem.

So many “experts” will say the market is “irrational” because it doesn’t behave according to their view of what rational is in the first place.

I’m amazed how much things like US “jobless claims” “housing starts” and the “10 year treasury yields” have to do with day to day stock prices.  It goes to show that many people are focusing on the wrong part of the big picture.

The convoluted logic is something like this:  If the unemployment in the US is higher than expected, then more people won’t be able to afford things like iPhones and iPads.  That is true to some extent but it’s a shockingly small bit of what’s really happening.

India just sold 60 million mobile phones during the past 90 days.  That is about 3 times the entire population of Australia.  China is growing even faster and will continue to do so.  (I’ll explain why in a couple days.)  A very large chunk of the debt that US has belongs to the Chinese anyway.   That money didn’t just disappear.  As far as Apple is concerned, it doesn’t really matter.  The developed world, mainly the US and several European countries, are going through some huge problems, but the developing world is just going crazy buying up iPhones and other Apple stuff.  (Of course this applies to other tech companies too, I’m just commenting on Apple at the moment).

Expect them to continue to dominate because there is so much room for them to grow.  Millions of people every day all over the world are moving into the financial category where they can actually afford this type of luxury.  China is already selling the most cars in the world and those are a lot more expensive than tech gadgets.  In Asia, these tech gadgets are a major part of life and not really a luxury anyway.  Maids in Shanghai have cell phones and they will save up to buy their kids an iPad for their birthday.  It’s the way this world is going and that’s why companies like Apple keep beating analyst’s expectations.

If your neighbor lost his job, that’s too bad and a problem we really need to address, but don’t let that unfortunate fact make you conclude that the demand for Apple’s stuff is going down.  He might not buy an iPhone this year, but a lot of people on the other side of the world are going to be picking up the slack.  I speak mandarin Chinese and live in Shanghai for a lot of the year so I can really see it with my own eyes.

The US and Europe will continue to go through pain until this all gets figured out.  The stocks will bounce around, but quarter after quarter, Apple will keep posting massive profits.  When this market finally stabilizes, expect the stock to really move high.  It’s very safe too.  They add billions of USD to their already massive piggy bank every 90 days.