Don't Be a Victim of 'China-Phobia'

"My American pride took a real hit on this trip," a friend told me on our most recent trip to China.

"What was it that got you?" I asked him. It was his first time visiting the country.

"It wasn't one thing. It was... everything," he said.

"We are in what is supposed to be a third-world, communist country," he explained. "So my expectations were low. But Beijing and Shanghai are like stepping into the future. And I just did not expect that, coming from America."

I think his sentiments get right to the heart of the matter...

Americans feel that China is the first real threat in decades to our belief in American dominance.

We fear what we don't know... and what we don't understand.

We fear China. We have sort of a "China-phobia." It's some mix of fear and respect.

And hey, if most Americans feel this way, that works out for us as investors – because investing is all about fear and greed...

"Be fearful when others are greedy, and be greedy when others are fearful," billionaire investor Warren Buffett says.

Right now, most American investors are fearful of China. So we want to be greedy (once we have the uptrend too, of course).

Investor fear about China means folks ignore big important news. Like they did a little more than a month ago... when global index provider MSCI announced its latest plan for including even more Chinese A-shares in its benchmark indexes.

The MSCI story is the big reason behind the opportunity in Chinese stocks. This year, for the first time ever, MSCI started to add stocks trading in mainland China (called "A-shares") to its indexes.

Now, MSCI wants to increase its weighting in Chinese A-shares next year by a factor of four. (That's right... a fourfold increase.)

This was big news. But no one cared. No one was paying attention.

MSCI's latest change could mean around $66 billion worth of inflows into Chinese A-shares next year.

Our timeline for making money based on this big idea has moved up due to this major update from MSCI. And the long-term opportunity is stronger than ever. Hundreds of billions of dollars will flow into Chinese A-shares as this story plays out.

Yet even though news like this keeps coming out... most Americans don't want to hear it.

It's China-phobia – pure and simple.

If you own any China investments, you probably know exactly what I mean... especially if you've tried telling your family and friends about your investments.

Americans just don't want to hear about the opportunity in China. And as investors, we need to be greedy when others are fearful.

Of course, we need to follow the trend too. Chinese stocks have been falling for most of 2018. And as I've said here in DailyWealth, we need to wait for the uptrend before putting new money to work.

But when it comes, don't let China-phobia fog your vision.

The long-term opportunity in China is massive. It's a trend you need to own once the current bust turns into a boom.

Good investing,

Steve

Further Reading

"It's the start of something we will never see again – a change that will send a wave of money flowing into China-traded stocks," Steve says. For a closer look at his long-term China thesis, read more here: On the Ground in Beijing: The Big News.

"We could be getting close to a low," Steve writes. "China's plunge-protection team is here..." Learn what China's government is doing to stop the bleeding in its stock market – and what it means for your investments – right here.

Market Notes
HIGHS AND LOWS

NEW HIGHS OF NOTE LAST WEEK

McDonald’s (MCD)… fast-food giant
Denny’s (DENN)… chain restaurants
SodaStream (SODA)… do-it-yourself soda
Hormel Foods (HRL)… “selling the basics”
Keurig Dr Pepper (KDP)… “selling the basics”
McCormick (MKC)… “selling the basics”
Church & Dwight (CHD)… “selling the basics”
Burlington Stores (BURL)… “everything” stores
Ross Stores (ROST)… “everything” stores
Tractor Supply (TSCO)… “rural lifestyle” retailer
New York Times (NYT)… media
Verizon (VZ)… Internet “toll bridge”
American Tower (AMT)… telecom “picks and shovels”
Merck (MRK)… prescription drugs
HCP (HCP)… health care REIT
Welltower (WELL)… health care REIT

NEW LOWS OF NOTE LAST WEEK

General Electric (GE)… debt-ridden industrial giant
Caterpillar (CAT)… heavy machinery
Deere (DE)… heavy machinery
Toyota Motor (TM)… cars and trucks
Avis Budget (CAR)… rental cars
Carnival (CCL)… cruises
Royal Caribbean Cruises (RCL)… cruises
Wynn Resorts (WYNN)… casinos and resorts
Caesars Entertainment (CZR)… casinos and resorts
DISH Network (DISH)… “cord cutting” victim
Navient (NAVI)… student loans