I thought I would open your eyes to China. The current GDP growth is unsustainable. Light weights who agree with me are Marc Faber, Jim Chanos and Jim Quinn.

Mr. Quinn writes: "All of the signs of a coming crash are present. Hedge fund manager Jim Chanos, renowned for smelling out the Enron fraud before everyone else, had this to say about the Chinese real estate market: ‘I do see all of the signs of a credit-induced real estate bubble that I think is going to be a doozy.'

Supporting that view, it is worth noting that there is now 30 billion square feet of commercial real estate under construction in China. Annual car production has surpassed 10 million units, even though the average cost of a car is three times the average annual salary of a Chinese worker.

Additionally, the ratio of average home prices to average annual household income is almost 10-to-1 in China; in most developed economies, it is no higher than 5-to-1. Home prices are rising at an annual rate of 18%. Prices of new apartments in Beijing and Shanghai leapt by 50% during 2009. Total fixed investment jumped to 47% of GDP in 2009, 10% more than in Japan at its peak. The P/E ratio of the 300 largest Chinese stocks is 39. The Chinese small-cap index P/E ratio is 76."

China is weakening, Europe is floundering and the U.S. is next in line for a sovereign debt crisis. Only, the US will be one of epic proportions. Since the market is up 80% from the lows of last year, it may be a good time to ring the register.

What do you think?

Joseph Di Virgilio

Chief Economic Strategist

Portfolio Manager

Generation ALFA S.A.

Switzerland