China Syndrome

There has been great condemnation recently because China has been selling its goods on the world market at prices below what other countries, especially the U.S., can produce. It has been called exporting deflation.

The major reason for these extremely low prices has been their labor costs which I am told are about $100 per month for ordinary factory workers. Even factories in Mexico are being closed and shipped to China because of the labor differential. These extremes in production costs are literally putting many, many companies out of business. When you look at the labels in almost any store you will note the product is made in some Asian country. As far as you, the consumer, is concerned you are buying a product at a good value. Political considerations aside there is no question this has been beneficial to retail buyers.

Is there any reason China should act otherwise? No, they are acting like any businessman. Yes, I realize it is a country, but countries do the same as businesses just on a larger scale.

Suppose you and I each own a hamburger franchise. I have a McDonalds and you have a Berger King across the street. We each sell our hamburgers for 99 cents. The competition is equal. You also own a huge cattle ranch and slaughter house/packing plant as well as a large bakery and you want to increase your retail food business so you pass along the savings you make from the meat production and bakery to the burger stand. You reduce the price to 75 cents and now make a profit of 20 cents per burger whereas I only make 10 cents and must sell it for 99 cents. When someone wants a hamburger where do you think they will go?

I can scream all I want about how unfair this is, but so what. He is not selling at a loss and even if I lower my price I can't go low enough to make a profit. I eventually will lose all my customers to him and will go out of business. Is that fair? Sorry, but fair doesn't count. That's business.

China is selling hamburgers (whatever) cheap, but they are of equal quality. Consumers want both quality and price (value) and don't care where it comes from. Countries are complaining that they are selling "too cheap". No they are not because they are making a reasonable profit. One of their production tools (cheap labor) is so good that businesses from all over the world are moving there to take advantage of it. If they don't they will be out of business. You can't blame them.

Over the next 10 to 20 years China can become the world's leading country because of their economic development. They don't have the overhead (translation - central government, entitlement programs, lawyers, labor unions, etc.) we do so they will be able to keep costs down. Eventually (many years) their central government will slowly evolve toward giving more to their people, but it is going to be decades. In the meantime, learn to speak Chinese.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

---

Fools Gold

The stock market has been in an up trend for... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Take The Time

You must take the time once a month to review... Read More

Stock Trading Success

The ABC's of Stock Trading SuccessStock trading success...why is it... Read More

Pathways

During our travel down life's path we come to many... Read More

Trading Tips No 6: The High Cost of Low Cost Stock Market Information

It has been said that low cost or even free... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Successful Trading ? Establish Your Risk Level

Before you embark upon a journey of trading stocks or... Read More

Political Investing

We have two candidates for president that have really different... Read More

Investing Basics - Stocks, Mutual Funds, Real Estate & Online Investing

Have you ever thought of investing? Do you have a... Read More

Oil Stocks CHK WLL - What Is Their Worth?

(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More

Expense Ratios

Mutual funds and brokers are always preaching not to buy... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Trading as a Business

What can I expect to make my first year of... Read More

Big Buildings Can Mean Big Economic Disaster

AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More

The Exclusive Club of Large Caps

Picture one of those clubs where only the real heavyweights... Read More

Selling Strategies - Setting a Stop Loss

Sometimes the best way of lowering exposure to risk is... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Market Timing

Every broker and financial planner will tell you that you... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

Enronization

Even if you don't own any of their stock or... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Buying New Issues

Has your broker been calling you recently with the "great... Read More

How To Make, And Keep, Money Trading Stocks

If you are serious about making and keeping money by... Read More

You Wont Like This

Why? Because I am going to shatter your conventional wisdom... Read More

How To Buy And Hold

One of the most believed bits of conventional wisdom from... Read More

Risk Control

Everything you invest in has risk so you want to... Read More

Zero Sum Game

Most people think the stock market is a zero sum... Read More

Wall Street Paradigm

In 1960 an engineer working for a watch company in... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More

Making Outsized Returns in the Stock Market - Using the Dow Theory

The Dow TheoryCharles H. Dow... Read More