The Rest of the Story

Once the financial markets have stabilized and the mortgage debacle is brought under control, the Fed will have to make up for lost time by significantly raising interest rates in order to control inflation.

If you insist on owning bonds, keep your maturities very short. That will result in low yields, but you'll make up for it when the Fed puts the brakes on and interest rates begin to soar. Your short-term bonds will mature and then you'll have cash to reinvest at higher rates.

Traditional bond ladders and/or CD ladders may give you more current yield now than an all-short bond portfolio, yet still provide opportunity to reinvest at higher rates in the future.

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The Great Fall of China

Since October of 2007, Morgan Stanley's China Index is down 40%. This recent crash is due largely to economic weakness in the U.S., which means fewer exports from China. Despite the apparent risks, this could be the best time in years to scoop up Chinese shares.

The forward price/earnings ratio of stocks there has tumbled to about 14, about the same as in October of 2006, before the big rally got up a full head to steam.

China has one of the fastest-growing economies in the world, with near-term growth estimated at 9% to 10% a year. Over the next decade, wages in China will rise and the emerging middle class will spend more on goods and services, thus boosting corporate profits.

An investor can pick individual Chinese companies trading as ADRs or choose Chinese stock funds that offer diversification.

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Words To The Wise

Common sense is really not so common.

-Voltaire


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FAR OFF THE BEATEN PATH

Since January 2000, investments in the developed world have posted annualized returns of only 1%, while emerging markets like Brazil, Russia and China have returned 12% per year.

So-called "frontier" markets have done even better, gaining 20% a year in this century. Frontier markets are countries such as Nigeria, Kazakhstan, and Qatar. The fall of communism in Eastern Europe, debt relief in Africa, and the diversification of Middle Eastern economies all add up to a new landscape of markets poised for rapid growth.

Although there are few ways to easily invest in these little-known markets now, both Fidelity and T. Rowe Price have recently introduced funds that do invest in these areas.

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