The global economy is slowing down. That's what investors are told over and over and, after a while it can seem like every economy is grinding to a standstill.
But Shelly Kraft of Stock News Now (SNN) doesn't agree. We met up with Mr. Kraft at a recent Cambridge House event and he spoke glowingly about a recent trip to China and why he still believes that China's economic engine is going strong.
"We just returned from a big trip in Beijing where I was a speaker at a conference," he said. "Let me tell you: China is bigger and better than ever. I can't speak more highly of a country that has come so far in so short a period of time." And then he added: "We have to be very aware of our friends in China because they are an up and coming nation in the microcap world."
We wondered how he could be so positive in spite of the kind of news that most investors hear all the time. He explained: "In the last issue of our magazine, I wrote an article and asked, 'When did I become a contrarian?'. So many people are down on China and so many companies have issues [from American customers] because they are Chinese companies. There was a period of time when investment bankers from the US did deals in China and a couple of deals when upside-down. It was a situation of: A couple of bad apples ruin the whole barrel." So increasingly, people have started to turn away from Chinese businesses. But Mr. Kraft explained that collective bad news is good news for him: "As I said in the article, when enough people start to dislike something, I really start to like it and that is what happened in the microcap world of Chinese publicly-traded companies."
Next, we asked him what made him so positive about China. He gave us a couple of reasons. First, he talked about the massive, rapid infrastructure projects he sees: "One of the cities that we visited in China was Langfang, north of Beijing. They are building the city. In that city, they expect to have a population of 30 million. Further to that, you imagine that they are building the largest airport in the world, with 8 runways. It will have international trade and bring in millions and millions of visitors per year. This is just one city in China."
Second, he sees the growth rate reduction in China as not being as bad as people are making it out to be: "The growth rate from China is expected to be a reduced growth percentage. Even if China's GDP goes from 6% to 5%, the size of the 5% is still huge (considering the fact that we're talking about the second largest country in the world – second only to the US). I think that's a livable number and they're ready for it. Their building continues. I think Chinese growth is going to continue."
Next, we talked about the North American companies and how investors are seeing them in light of the frequent bad news. "There is a very big curtain placed upon exploration companies in North America in general, and the difficulty they are having in their valuations and stock price and investor interest and liquidity," explained Mr. Kraft. "You go to a conference like the Cambridge House conference and there is an underlying concern [in the air]. Every company is talking about how their stock is undervalued or how what they have in their 43-101 is not fully valued in the stock price. From my viewpoint, it's probably leading to some of the mergers and acquisitions going on right now. Some of the juniors are being acquired by the majors. It's low-hanging fruit [that the majors are acquiring]. If the majors are selling their resources, they need to replace their resources so now they have an opportunity to buy [a junior resource explorer and its deposit] at a lower price than in the past."
Last, we talked about how investors can better understand the market and what opportunities to look for in the future. His answer might surprise some! "It's hard to predict the future," he said. "I listen to the same speakers as everyone else does. One guy seems smart and he says one thing. One guy seems smart and he says the opposite. At the end of the day there is so much information and [investors] have to make a decision about what you think will happen."
He went on to explain the resource market and how investors could understand it a little better: "There will always be a resource market. It will grow in demand. As far as economies around the world go, they are cyclical. Nothing lasts forever – up or down. You can't pick tops or bottoms. As a trader, you have one viewpoint; as an investor, you have another road to take; as a company CEO, you have to keep running your company and raise capital."
Then he wrapped up with a brief explanation of a new way that companies are raising capital – something that investors might want to watch for in the future. "In the United States right now, the big buzzword is 'crowdfunding'," he said. "Private companies are raising money with crowdfunding… some are raising money through donations but even regulated companies are reaching investors as a start-up, ramp-up, or pre-existing company that hasn't been public yet. Ultimately, crowdfunding is where companies go to meet investors and where investors go to meet companies. It's really catching on in the US. Go StockNewsNow.com website and look up crowdfunding, and read the [recent] issue of the Microcap Review magazine, which is almost dedicated to crowdfunding and the Jobs Act."
Investors have a lot to take away from Mr. Kraft's interview. He's excited about China, even though the news media is largely negative about it, he sees mergers and acquisitions as an opportunity in the near future, and he assured investors that the resource market will grow in demand but they should start looking in new places for their investment methodology.