Weekly Update 6/3/13 China

Over the past two decades, June has been a horrible month for equities, so it might not be a bad time to take some profits and build up cash to reinvest should the lazy days of summer give us an opportunity to buy stocks at a discount.

June is always a festive month in our house, as my daughter, Taylor, will be turning seven. This is also the time when I take a nostalgic look back at the long spring trip to China when we picked up our little princess.

Yup, time to reflect.

China adoption policies require “expecting parents” to spend two weeks in the country, so we had the opportunity travel to a number of tourist attractions. I can’t help but thinking back at how I tried to compare Beijing to New York, Chicago, and San Francisco. There were some commonalities, of course, between the major cities, but I remember wondering how much we take our lifestyles for granted here at home.

A popular outdoor mall located a couple of blocks from our hotel was teeming with Americanized teens noshing on buckets of KFC, but to get there, we had to walk through air so polluted that it felt like we needed a machete to cut through it.

Can you imagine not being able to see the sun—even on a sunny day?

On our second day in Beijing, our group traveled to visit the Forbidden City—the imperial palace from the Ming to Qing dynasties. Construction on the site started in 1406 and was completed in 1420. The Forbidden City is located adjacent Tiananmen Square, the large open area where the Chinese military suppressed dozens of student demonstrations. Perhaps the most resonant image of that tragedy came from the video of the young man who faced down a line of tanks, stopping them in their tracks.

The Forbidden City is a remarkable historical site, but it was cold and snowy. We were freezing and needed a hot cup of coffee.

Lo and behold: Starbucks! In the middle of the Forbidden City!

Other than the Great Wall, the Forbidden City is probably the most visited historical attraction in China. And wouldn’t you know? We could enjoy it while sipping a Grande Carmel Macchiato!

We also had the opportunity to visit a Beijing suburb and meet with a real “middle class” family.

Three generations were squeezed into a small cinderblock building that looked like a garage. The first thing that hit us as we exited our bus was the stench of the open cesspool. The people were wonderfully giving, offering food and tea, but none of us took them up on their generosity.

I can assure you that no one reading this update would want to live in “middle class” China.

Things may not be perfect in the ol’ US of A, but trust me: we are still the envy of people around the world. There are no tanks in the streets putting down student demonstrations, middle class Americans can rely on indoor plumbing, and the sun still shines—even in Los Angeles.

So regardless of what may happen to the market in June, America is back, and the backbone of our country—our middle class—is starting to find stability. Consumer sentiment is rising, and for good reason. Now just imagine what we could achieve if our politicians could put special interests aside and find a way to compromise…

Consider taking some profits and move assets into equities as the market corrects. June, July, and August always provide opportunities because as the summer progresses, volume decreases (which increases volatility). Therefore, market declines tend to be exaggerated, giving investors the opportunity to build up equity at a reasonable cost.

Bottom line: I suggest you invest in America, which will be very rewarding over the next couple of years. What will I be buying? Exchange Traded Funds (ETF’s) including large cap industrials (DIA, XLI or VIS), the S&P (SPY or RSP), large growth (VONE or EWRI), mid-caps (RFG and IJH) and small caps (VB and VBK). I always recommend talking to your financial advisor prior to making any changes to your portfolio.

Speaking of rewards, twenty boys and girls will be a celebrating Taylor’s birthday at the Ferncroft pool, and best of all, she thought it would be a good idea to ask friends to make a donation to The One Fund instead of bringing a birthday gift.

Chinese or American—generosity still exists.

Have a productive week.

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The Update is written by Chris Leone and Ron Mastrogiovanni.

Ron Mastrogiovanni
HealthView Services, Inc.
150A Andover Street
Danvers, MA 01923

mobile: 617-875-9313
fax: 978-561-1857


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