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Thursday, September 22, 2016
How do you know for sure when everyone has given up on an investment?
One simple answer is this: When the folks whose livelihoods depend on that investment recovering have given up... that's a true sentiment bottom.
I believe that's where we are in China today. And it's a major reason why I'm buying China right now. Let me explain...
I'm not sure a market can be more hated than the Chinese stock market is today...
I visited China back in June. We had several whirlwind days of meetings with everyone from institutional brokers to retail asset managers.
My goal going in was simple: to figure out what I could be missing... and to make sure the opportunity in China was really as good as I thought it was.
I went into these meetings sharing my positive thesis on China. I expected folks would be excited to see me – an American enthusiastic about China's prospects.
The reality was different...
I was the most optimistic person in nearly every meeting we had. The folks we met with were generally dejected... They basically "parroted" the American view that China's prospects weren't good.
In short, these folks who needed a stronger Chinese stock market, personally, couldn't even muster up a "Yeah, Steve, you're right." They had no enthusiasm. They were completely defeated.
And on the surface, they had solid concerns. But here's the thing...
None of their objections held up.
They worried about what you would expect them to worry about. They worried about things like global growth and how the Chinese government might handle stock market volatility.
But to me, all of these worries were really just excuses to be pessimistic.
You see, Chinese stocks have lost a lot of money over the past year, and the mood was gloomy.
For example, China's A-share market fell roughly 50% from mid-2015 to mid-2016. (The A-share market is China's "locals only" stock market.) That decline has created incredible opportunity in China. But no one on the ground can see it.
Recommending Chinese stocks after this 50% fall has been like pitching someone on the opportunity in U.S. stocks in 2009 – or real estate in 2011.
Sure, those were the best times to buy... But no one who had just experienced the bust was willing to listen.
That's what I saw on the ground in China... Even the Chinese don't believe in their market.
This is fantastic. It's exactly what I love to see before investing. When everyone expects the worst, it doesn't take great news to turn things around.
Even folks whose livelihoods depend on a Chinese recovery don't expect it to happen. And that's what a true bottom in sentiment looks like.
There are plenty of other reasons why I'm interested in China. But this might be the most hated market on the planet today. And that's a major reason why I'm buying.
On Tuesday, Steve predicted that one little-known Chinese company could soon become the largest in the world... and explained that it's growing as fast as a tiny startup. Get the details right here.
"Late last week – out of the blue, and with NO media publicity or fanfare – we saw the first proof that what I've been writing about is coming true, and SOON," Steve writes. Read more here: My Big China Prediction Is Finally Coming True...
THE WORLD'S MOST HATED COMMODITY IS QUIETLY SOARING
Today's chart looks at the "stealth" bull market in the world's most hated commodity...
Regular readers are familiar with the extreme "boom and bust" nature of natural resource markets. (You can read our educational interview on the idea here.) For years, the coal sector was in "bust" mode. Many coal stocks fell 80% or more from their 2011 peaks. But today, coal stocks are in an uptrend. After bottoming in January, they have quietly soared to new highs lately.
You can see this trend clearly in the price action of the VanEck Vectors Coal Fund (KOL). This fund holds a diversified mix of the world's biggest coal stocks. That makes it a great gauge of what's happening in the coal sector.
And as you can see below, coal stocks have soared this year. KOL shares are up about 110% since January and hit a new 52-week high earlier this week. For the moment, coal stocks are in "boom" mode...