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Outside the Box
Dec. 30, 2010, 12:01 a.m. EST
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Our world after the banking crisis
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Waiting for Hu "” and faster yuan appreciation
By Hilary Kramer
NEW YORK (MarketWatch) "” The new year is almost here, and evidence that we are about to see better economic growth, corporate profitability, and yes, higher stock prices in the new year is piling up.
A warning: Markets like this one are tricky to navigate, full of dead ends for the unprepared investor.
I've identified nine game changers that will affect your money in 2011. Read on to find out which trends will move the markets and help you profit, where you should "” and should not "” put your money, which sectors will be hot, and just how high the indexes will go.
Markets around the world breathlessly watch China to see how the country is managing inflation, fearing that the Chinese juggernaut will slow too much. Well, yes, growth probably will slow "” but most analysts expect that. A fall from 10% annual growth to 7% to 8% in the coming years is already priced in, not to mention that an economy that is growing at that rate is doing just fine.
The financial crisis has seen off a bank or two. Has it seen the end of fire-and-forget philanthropy as well? As government cuts loom, charities need support now more than ever but financial firms are also asking for more in return.
The true risk with China is that too many investors are playing yesterday's winners. Entrepreneurialism, higher wages, insatiable energy consumption and a middle class that keeps growing and purchasing are unstoppable trends in China in 2011.
The smart way to make money in China these days is by going after the companies that will profit from those trends, like China Nepstar /quotes/comstock/13*!npd/quotes/nls/npd (NPD 3.35, -0.01, -0.30%) , a drugstore chain. Read about three risks to avoid when investing in China stocks on InvestorPlace.
Gold will hit $2,000 an ounce in 2011, but that's not where you should put your money, no matter what Wall Street wants you to think. The real story is scrap metal, steel and coal.
Demand for scrap metal remains strong in China, India and Turkey, with international scrap prices recently crossing the $400-per-ton mark. China's already using more coal than the U.S., Europe and Japan combined, and their need for coal is only expected to keep growing. And the demand for palladium and platinum is so great that thieves are actually stealing catalytic converters from cars to get at the precious metals contained in them.
Two low-priced stock picks I like now amid high commodity prices are Metalico Inc. /quotes/comstock/14*!mea/quotes/nls/mea (MEA 5.63, -0.05, -0.88%) , a scrap-metal recycler, and L&L Energy Inc. /quotes/comstock/15*!llen/quotes/nls/llen (LLEN 9.37, +0.34, +3.77%) , an American coal company operating in China.
We're finally starting to see true growth for companies on the revenue line and not just profit from cutting expenses. That will make for strong earnings seasons in 2011, particularly since equities are undervalued vis-á-vis their earnings potential.
Buoyed by this growth and money rotating away from bonds and into stocks, the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,585, +9.84, +0.09%) will hit 13,000 and the S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,260, +1.27, +0.10%) will cross the 1,400 mark by the end of 2011 "” roughly 13% gains for both indexes from current levels. Savvy investors who get in on stocks now will profit from all the growth to come in the next year. Read about six stocks that could double in 2011 on InvestorPlace.
At last, there looks to be some movement over at BJ's Wholesale Club, and that should make investors happy, writes Angela Moore.
10:06 a.m. Dec. 29, 2010
"China manufacturing index hits three-month low in December http://on.mktw.net/ePsS8Q" 9:36 p.m. EST, Dec. 29, 2010 from MarketWatch
"Hong Kong shares open higher, with resources rising; Hang Seng Index up 0.5% http://on.mktw.net/fvxWOd" 9:04 p.m. EST, Dec. 29, 2010 from MarketWatch
"Japanese stocks slip in early trade, with autos weak; Nikkei Average down 0.4% http://on.mktw.net/hvzac7" 7:08 p.m. EST, Dec. 29, 2010 from MarketWatch
"U.S. stock gauges close with modest gains, while silver ends near highest level since 1980 http://on.mktw.net/hvI0Ba" 4:04 p.m. EST, Dec. 29, 2010 from MarketWatch
"M&A pace set to pick up in 2011: analysts http://on.mktw.net/gy738Z" 3:48 p.m. EST, Dec. 29, 2010 from MarketWatch
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