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Prediction:
The Yuan will rise (slowly) but surely as democrats who are predicted to sweep all branches of government in '08 start to make their power felt.
These means fewer treasuries will be bought and the cost of imports will rise. Unfortunately, we also have a housing bust and higher gas prices which are crimping the economy.
What does this mean? Stagflation. Perhaps not a recession (though certainly possible) but certainly a growth recession at interest rates which will be resilient to cutting.
What's the appropiate investment in this climate? Well, I'm a big believer in currency diversification, but if you wish to stay in all US dollars, then equities probably won't be the worst investment. As world wide currencies grow relative to the USD, companies should stay at least at par with inflation in terms of growth, if not better.
Try to avoid companies which rely on imports though. Companies that have high growth and are exporting to countries like China will likely have a bright future. Cisco and friends, though try to avoid over bought / high multiples if you can, also be wary of IP issues.
Microsoft is likely to do well in China, though their main businesses are under attack. I'd focus on companies like Adobe, though, again .. high multiples.
The Yuan will rise (slowly) but surely as democrats who are predicted to sweep all branches of government in '08 start to make their power felt.
These means fewer treasuries will be bought and the cost of imports will rise. Unfortunately, we also have a housing bust and higher gas prices which are crimping the economy.
What does this mean? Stagflation. Perhaps not a recession (though certainly possible) but certainly a growth recession at interest rates which will be resilient to cutting.
What's the appropiate investment in this climate? Well, I'm a big believer in currency diversification, but if you wish to stay in all US dollars, then equities probably won't be the worst investment. As world wide currencies grow relative to the USD, companies should stay at least at par with inflation in terms of growth, if not better.
Try to avoid companies which rely on imports though. Companies that have high growth and are exporting to countries like China will likely have a bright future. Cisco and friends, though try to avoid over bought / high multiples if you can, also be wary of IP issues.
Microsoft is likely to do well in China, though their main businesses are under attack. I'd focus on companies like Adobe, though, again .. high multiples.
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