Investing in China

Dear Cabot Wealth Advisory Reader,

Some of my readers are very good writers, and today I want to share one of
their letters with you.

"Timothy,

"I work in the offshore oil industry--my specialty is making the rigs
designed for ultra deep water work right. I work all over the planet, but
spend a lot of time in Korea and Singapore where we build them. We are
starting to build the big rigs in China, where construction will move over
the next decade.

"I travel business class, and frequently sit next to business people
headed to China.

"You are spot on. China is like a cage of tigers in the middle of a flock
of sheep, with one more bar to chew in half. They are going to EXPLODE
out of the cage.

"Here is what I am seeing.

"Ten years ago we had bare hulls built in China, then would tow the hulls
to the USA to outfit with machinery. On each of the hulls I saw, we had
$50,000 rework of bad welds. That's probably 10% of the rework we would
have to do if we built the hull in Finland or the USA.

"Today we are building more of the rig in China, and a few brave souls are
doing the whole thing. The Chinese haven't a clue how to build such a
complex machine, but they are HUNGRY, and I expect them to learn in two to
three years, not the 10 years required in Singapore and Korea.

"I flew to Shanghai with a former Electronics Arts guy who has a startup
computer games company in China. Short version, he is struggling to keep
up with sales growth, but not struggling to assemble talent. His biggest
worry is training his programmers to develop new media as fast as the
Chinese demand better games.

"In October 2009, my CEO told me I had to teach a course on ultra deep
water for 14 employees of CNOOC (I work for Transocean). Our goal is
convincing CNOOC to have us build some $900 million drill ships for them.
As I do nothing by halves, I contacted the guy who was coordinating the
Chinese employees and asked him to fill me in. His comments were that
they were junior staff, petroleum engineers, not very clever, over here to
see what we have and report back. I reviewed my teaching material and got
ready.

"Day one we introduced ourselves. I have lived and worked in Asia for 30
years, so I know a bit of the culture. And as Xie and Wu and Han and Du
walked in, the other 10 acted like eunuchs of the Imperial Court! The top
four sat across from me, slightly separate from the rest. Hmm. They
introduced themselves saying, "We are involved with drilling for CNOOC."
Hmm. When I did the introductions, I asked them to describe where they
had drilled. After hearing their answers, I switched tracks and taught at
my highest level.

"That night I spent four hours researching and found these guys had "grown
up" developing some of the toughest oil fields on earth. I made up some
nice looking certificates and brought them to class.

"Day two I started by showing the certificates and telling them I would
award achievement certificates if they passed my test, and that I needed
names and titles to put on the certificates. That's when I learned Xie
was President of CNOOC, the next two were Assistant Presidents, and the
fourth guy was head of drilling for the entire planet! The other 10 were
the cream of the younger management. Turned out I had 3 millionaires in
the class--in Chinese currency, but millionaires nonetheless. All 14 had
started out in dirt-floored huts. Subsequently, I became friends with
them, as I treated them with the respect they deserved, not as "don't know
anything, here to learn" rubes.

"They are taking this knowledge back to China and will launch their own
deep water drilling industry. They will argue with their government to
buy the first two rigs from us, but only two. The rest of the training we
are giving them has served to convince them that China isn't far behind
after all. They explained to me several things.

"1. They grew up in huts with dirt floors, 10 to a room. They now live
on Berber carpet, five to a room. Their grandchildren will live like we
do.

"2. They couldn't see the sky as children, today it's clear most of the
time, and their great-grandchildren WILL NOT breathe smog.

"3. Rivers that were green and yellow are crystal clear, though you can't
drink it, and fish don't survive, but their great-grandchildren WILL CATCH
TROUT in those streams.

"4. They are going to buy two rigs from us, then build 200.

"You are spot on, and I am looking east. As the US sinks further into
corruption, and Obama not only fails to correct Bushanomics, but also
layers another set of crooks on top, I think our economy is doomed to
become like the citizens of the matrix, quiescent and drained.

"China and Vietnam are rising and soon, Africa will follow. Africa is
another place I visit that is growing exponentially better by the hour,
but nobody notices because they are so far down that doubling performance
still leaves them near zero. However, look for Nigeria to turn the
corner, with Angola close behind. We are struggling to work in both
countries because the corrupt governments are increasingly coming under
pressure from the population, who are staring in through the gates and
wanting their chance.

Best Regards,
L.W."

To me, this letter is just one more piece of evidence to support the idea
of investing in China.

Yet many people remain afraid to invest in China.

Some say the stocks have come too far, that they're too high.

Some distrust the accounting of Chinese companies.

Some criticize the country's human rights record.

And some simply some fall back on the old refrain that it's wrong to deal
with communists, ignoring the fact that China has in fact evolved into
something far more effective at improving the lot of its citizens.

Whatever the reason, my message to you today--if you're not investing in
China--is to overcome your fear. Read the writing on the wall. China is
where the growth is, and China is where the growth is likely to be in the
years ahead.

I recognized at least some of this growth potential when I began
publishing Cabot China & Emerging Markets Report back in 2004, and I'm
happy to report that it's paid off very well for subscribers who've
followed our advice.

In fact, if you'd followed every recommendation of editor Paul Goodwin
over the past five years, your account would be up a hefty 164%! In the
same period, the S&P gained just 2.1% ... and that includes dividends!

Paul's performance was so good that Hulbert Financial Digest ranked his
newsletter the #1 performer over the past five years.

Some of the credit for this remarkable achievement goes to Paul; he's a
smart guy, and he's done a remarkable job of adapting the time-tested
Cabot growth investing system to Chinese stocks traded on American
exchanges as American Depositary Receipts.

But a lot of the credit goes to China, a juggernaut of economic growth
that shows no sign of slowing down.

Now, I'm not saying the road ahead is paved with diamonds. Doubtless
there will setbacks in China's growth, just as there were occasional dips
in the long rise of housing prices, and occasional bumps in the long fall
of interest rates. But I'm saying that the Chinese era is in its early
stages, and if you truly want your money to grow, you've got to have a
decent chunk in the best growth stocks of China.

So, if your goal is profits ...

If you're ready to apply the lessons of a time-tested investment strategy ...

If you're ready to invest in the leading stocks of China ...

And if you're ready to take advice from the leading expert in the field, I
invite you to join Paul Goodwin's grateful subscribers by taking a trial
subscription to Cabot China & Emerging Markets Report.

Give it a try today. With my money-back guarantee, you've got nothing to
lose and everything to gain!

http://cabotmail.net/t/864217/18273018/622/0/

Best wishes for all of your investments,

Timothy Lutts
Publisher

P.S. If you're afraid of investing in China, consider this. Many things
in life are scary until you try them ... like swimming, kissing girls and
eating sushi. But after, they become some of life's greatest pleasures.
So don't delay, try Cabot China & Emerging Markets Report today!

http://cabotmail.net/t/864217/18273018/622/0/