Watch Out For China

The stimulus package China put into place this week is designed to maintain the growth in its economy. We wrote a few weeks ago that China has been the engine for growth for many U.S. companies' export sales. Of course, Europe has also helped with driving exports but China and other parts of Asia have been growing faster than most countries around the world. If the U.S. and Europe are in recession, global companies must be pinning their sales expectations on China. It looks like China is slowing and thus the stimulus package is attempting to keep the Asian growth booming. Investors may start to ratchet down the growth expectations for China which could create another pitfall for the stock market. Watch out below.

The stock indices were weak again yesterday but the volume was limited because of the Veteran's Day Holiday. Fannie Mae and Freddie Mac announced a new plan to restructure mortgage loans by lowering interest rates and extending maturities. This may curtail the foreclosure rates but it is just another tea leaf which is helpful to our vast economic troubles. Citigroup also announced a plan to keep people in their homes.

Perhaps we are getting closer to the bottom of the market but our fear seems to be increasing this week as earnings continue to be bleaker than anyone has predicted. The Las Vegas Sands Casino raised $1.5 Billion yesterday to feed its cash needs as it was about to breach loan covenants. The company leveraged its future on the growth in McCau but weaker financial results and the impending debt concerns led to the suspension of some of the construction projects and the necessary sale of fresh equity. This company is still highly leveraged and bankruptcy concerns are still valid.

Russia looks to be a house of cards as its economy is being brought to its knees with the collapse of oil prices and commodities. What is going to happen with the rest of the emerging market countries? It isn't likely to be pretty. There isn't much good news to report and certainly the push in Congress to bailout General Motors won't help. These are scary times so keep preserving liquidity and only buy large liquid stocks with limited debt requirements.