The Latest: Bear Stearns, the Fed and Global Markets

Robert Hsu, March 20, 2008

Dear Fellow Investor,

The financial crisis in the United States came to a head this week, sending international and domestic markets reeling in early trading on Monday. The markets took a hit following the collapse of Bear Stearns and JP Morgan's buyout offer for the struggling financial company.

JP Morgan announced that it would purchase Bear Stearns for $236.2 million, or $2 a share. It's hard to believe such an offer was even considered -- let alone accepted. Bear Stearns is one of the world's largest banks, and prospered during even the toughest times for the American market and economy. It survived the Great Depression and the 1970's bear market, just to name a few.

So it was shocking that this once-great company collapsed during the current credit crisis. Though, maybe it shouldn't have been such a surprise, based on all it's exposure to bad mortgages -- a problem that has caused financial institutions enormous write-downs, totaling $150 billion worldwide.

The latest stint of bed news sent shockwaves through markets and investors around the world as they feared the impact of a U.S. recession. Foreign markets fell hard in early morning trading on Monday before trimming back their losses later in the day. At Monday's close, Hong Kong's Hang Seng Index had declined 5.2%. The losses were much the same in India, where India's Sensex fell 5.1%.

My China Strategy subscribers have been kept abreast of all the United States' financial woes over the past eight months. And we've discussed in-depth the role that the credit crisis is playing in foreign markets, and why we've been avoiding equities that are prone to U.S. pressures. If you don't want to miss out on all the opportunities for profits in emerging nations, like China, subscribe to my China Strategy service today.

Up Next -- The Fed's Latest Rate Slashing

After such a rough start to the trading week for global markets, investors turned their attention to the next big news item -- the U.S. Federal Reserves' latest committee meeting. In anticipation of another rate cut, stocks retraced their steps and overcame their early morning losses on Monday afternoon and pushed even higher through Tuesday's close.

And the Fed didn't exactly disappoint.

The Fed slashed the key interest rate by three-fourths of a percentage point, though many were hoping for a full percent, the rate now sits at 2.25%. That's the lowest point since 2004. As you know, the Fed is attempting to keep the credit crisis under control and protect the U.S. from a recession by cutting rates and printing money at an astounding annualized rate of 22%.

But even this rate cut may not be enough to drag it out of its volatile state. What it comes down to is that despite all of the Fed's efforts, there still isn't an all-clear signal for American markets.

Despite the economic slowdown in the U.S., subscribers to my China Strategy service have continued to make money. I've stressed the importance of diversifying investments and avoiding market losses by investing in fast-growing markets, like China. We've bought companies that are profiting from demand that's not tied to the U.S. economy and companies that have assets in currencies that are actually appreciating. We're going to continue with this strategy until the markets tell us otherwise, but given my current global outlook, this will continue to be a winning strategy.

Now's your chance to take advantage of my in-depth insights on investing in China and the best-positioned companies set to benefit from the country's economic growth. Sign up for China Strategy today -- at the lowest prices that you'll see all year -- and I'll guide you through the snares and potholes of the U.S. financial and economic situation and set you on the path to profits.

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