One more major financial institution to fall? We will see.
10:25 p.m. 06/15/2008 By Peter Brimelow Provided by Marketwatch
Chinese stocks are still staggering downward, but a China service is by far the best performing investment letter. How?
The Shanghai Composite is down 50% from its 2007 peak. And, after a rally in April, it has just lurched downward again.
Yet Cabot's China & Emerging Markets Report (CCEMR), which we named Investment Letter of the Year for 2007, continues its remarkable run.
His diagnosis: "Global markets, both emerging and developed, are nervous because there is still an enormous bowl of bad mortgage-backed debt on the table and eventually someone is going to have to eat it. You can't feed it all to the dog. And if too much of that bad debt winds up on the plate of a big financial house like Lehman Brothers (LEH) (which has already announced a $2.8 billion loss for the second quarter), the results could be very bad indeed. The collapse of a financial major would be a real rat in the global punch bowl."
His cautious conclusion: "As usual, we have no predictions. The U.S. economy, no longer the high-revving engine of the global economy, may escape the threat of recession, which will raise housing prices enough to allow the holders of bad debt to get rid of it at tolerable levels. The positive results would be felt around the world. We can all hope; meanwhile we keep watching our charts."
CCEMR has radically reduced its portfolio. Currently, only these stocks are rated as buys:
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