China and Greenspan upset markets:

The sell off in China over night has put North American combined with Allan Greenspan’s caution that the US economy could be in recession by the end of the year put investors in a selling mood. The Dow Jones Index at one point was down over 550 points. The S&P/TSX was down over 400 points the China sell off triggered investors to crystallize their profits.

The main theory seems to be that the economy in China may not be as robust as last year and that led to a sell off in the commodity stocks even though the commodities themselves were stable. The uranium sector got hit hard on the assumption that China will not follow through on the expansion of their nuclear power plants.

All of this is giving investors an opportunity to buy base metal stocks at much better prices than they were. The basic fundamentals have not changed in Asia only the stock market levels have changed. The market in China has been seeing an excessive amount of speculation over the past few months being fueled by the huge run up in prices over the past year. The speculators are generally unsophisticated and have been using leverage to increase their exposure, this always ends in tears and it will be no different this time.

North American investors have to keep the fundamentals in mind and realize that the markets have been going up steadily all year and have been due for a set back. The current sell off may extend for a week or two but over that time frame there are going to some very good buying opportunities. Investors have to ignore the shouts by the media that the end is near, they have never been able to call the top or the bottom of a market move before and I doubt they will be able to do it this time either.

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