My Australo-informants at Macquarie in Hong Kong have revised their predictions for 2009 and 2010 GNP growth in the Pacific Rim. They call their report The New Reality.

Their most dramatic forecast is that China growth next year will hit 10.3% vs an earlier growth figure from the same analysts of only 8.9%. Hong Kong and Taiwan growth was also adjusted upward but very modestly. The drop in GNP in Singapore for 2009 was reduced to minus 1.5% from minus 2.5%. But what really intrigued me is the China forecasts.

Monday, the respected Claymore fund group launched a new exchange-traded fund for China. It aims to cover all accessible Chinese stocks regardless of size, traded as Global, American, or International Depositary Receipts; H shares or Red Chips in Hong Kong; or N shares in the USA. Unlike Jim Rogers, most of us cannot figure out how to invest in Shanghai or Shenzhen directly. Claymore Alpha China ETF has ticker symbol YAO.

While aimed at all market cap sizes, YAO limits itself to stocks with over a half billion market capitalization. This means the usual Chinese state-owned mastodons dominate the share list. Moreover, the fund (with a lowish 0.8% fee) engages in passive index investing. That means if a share held by the ETF gets into trouble, it will continue to be held unless it is de-listed or bankrupt.

Everything which glitters is not gold.

A rumor triggered the rise in gold prices to $1040/oz Tuesday and it was nonsense. The gossip was that Middle Eastern countries wanted to price oil (black gold) in terms of yellow gold rather than the dollar. This has been said by Hugo Chavez but never taken seriously by OPEC.

Today we will report on China and gold because that is where the headlines are. But we will also report on Portugal and Japan where they are not.

China will allow some foreign companies to list in Shanghai and we already figured that banks active in China will grab slots in the market, among them Asia hands like HSBC (HBC) and Standard & Chartered (SCBFF.PK).

The December gold future price has risen to over $1000 and this may mean that the precious metal will again trade in quadruple digits on spot markets, as it did half a year ago, however briefly. This reflects the moves by the world's biggest coupon clipper, China.

There are various theories around the price of gold, most of them conspiratorial nonsense. Believing in plots is a tempting way to handle world complexity. You get a simple answer to why things do not work out as you think they should, with a ready-made if vague villain. Now that the Cold War is over, evil puppeteers range from Pres. Obama to the Bilderberg Group, from central banks to the ghost of J.P. Morgan. The opposite side in the Gold War...

From Cambridge MA fund flow trackers EPFR Global report:

China’s resilient growth has been a key driver of flows into emerging markets equity funds in recent months. During the third week of August, however, doubts about the quality of the loans doled out at breakneck speed by Chinese banks during 1H09 prompted investors to book profits and take some of their recent gains off the table. EPFR Global-tracked China Equity Funds had their worst week since early 1Q08 while outflows from Asia ex-Japan and Global Emerging Markets (GEM) Equity Funds hit 24 week and year-to-date highs respectively.

Analyzing data from the World Gold Council, Canadian brokers Desjardins help explain why the gold price has stalled below $1000 per ounce, despite recent economic upheaval. One would have expected investors to flee into the precious metal in a crisis. Gold after all is an alternative to paper money which is being created ad lib by central banks and governments around the world.

But instead, gold just sits there. The failure of their predictions has led the community of gold bugs into warnings of evil conspiracies by nefarious cabals. But it may be that the failure of gold to take off is linked to its use as an industrial metal or a combination of store of value and mark of conspicuous consumption.

I would rather be a lender than a borrower in today's market especially if I can get double-digit yields.

Meanwhile credit cards are dangerous. One big risk is that identity thieves can do a lot with your data. A Florida-Russia trio of hackers managed to steal the credit card details of about 130 mn people. Although the leakage was in the U.S., 10% of the victims were British and about as many others from other foreign countries. That's one danger.

In 40 years, it will be the turn of Afghanistan and Iraq to become hot investment destinations for Americans. And there will be a closed end fund investing in Venezuela. But now, the push is to Vietnam. The French, after Dien Bien Phu, had absolutely no interest in getting back into the Saigon bourse. They confined their interest in 'Nam to a consortium drilling for offshore oil into which Total invested.

But G.I. Joe always likes to return to his messes with money and with hopes to make out well despite the shambolic departure the last time around.

From Kuala Lumpur, in an interview with Bloomberg, Templeton's emerging markets expert Mark Mobius warns that “probably this year” there will be a 20 to 30 percent correction in stock markets.

A correction is normal after markets have risen 50 or 60 percent, Mobius says. The major market with the biggest growth this year has been the Shanghai composite, up 78% despite some profit-taking late last week. And Shanghai is the one worrying analysts, although Mobius says he does not think it is “in a bubble”.

Abby Joseph Cohen of Goldman Sachs (GS) has spoken bullishly, as is her wont. She now expects--based on earnings forecasts--that the S&P 500 will end the year at 1050-1100. Corporate profits for the index she pegs at $75.The top ranked macro forecaster thinks the “new bull market” began in March, and expects US GNP to rise about 3% annualized in H2.

The only negative she sees, and it is a big one, is the job market where she says in her CNBC interview “we are beginning to see improvement”. She says that "job losses are slowing and there is some job creation going on.” She adds that “labor markets are unlikely to turn all at once on a dime.” "many people are looking for strong singals on the economy and now we are getting them" quoth Abby.

Citigroup reports that in July the world outside the US was where to invest, as we tend to argue. The non-US DR index in dollars rose 10.10% that month vs a 7.41% rise in the S&P500, and in the year to date, the non-US index is up 22.52% vs a mere 9.33% for the S&P.

Best performers were Latin America and CEEMA (Central Europe and Middle East), both up over 50% YTD. Asia Pacific ex-Japan and Asia Pacific Emerging markets are up over 33%.

Piqued by the trio of ATM issues by one of our recommended companies, I joined a "Webinar" at which Bank of America Merrill Lynch (BAC) discussed the newly popular method of raising money by issuing new shares. Note that the mechanism is not new; just its use. ATM stands for At The Market. Merrill, or whatever you call it, is a big peddler of this fund-raising technique, and today's presentation was intended for shipping companies, which have been a big user of this system. In fact, the shipping industry is the major non-U.S. issuer of ATM stock.

U.S, issuers have mainly been banks, starting with Merrill itself, which did a test run before telling the world. Other banks including both Swiss giants are also getting into this technique but it is mainly a USA mechanism for now.

A series of Chinese actions over the last few days mark a resurgence of nationalism in Beijing. First there was the murky saga of the Yves Saint-Laurent auction at Christie's in Paris, over Manchu animal heads made in Europe for the Summer Palace, which are hardly Chinese treasures, and which the country could have bought before the auction for a lower price.

Then there was the standoff in international waters with a U.S. surveillance ship keeping an eye on Hainan Island. The U.S., which I trust in these matters, says China was violating international law.

The retailing sector is taking the lead in making adjustments for the current financial crisis. Because selling goods is such a hand-to-mouth business, often financed by manufacturers of whatever is being sold, the storekeepers are quick to react to a crisis.

Belgium's Delhaize Le Lion, a powerful supermarket chain, has simply stopped selling products from Unilever pending a price cut from the Anglo-Dutch firm, according to today's Wall Street Journal.

Today's further unlinking of indexes with individual stock performance increases my confidence in the stock-picking way we invest. The further breakdown in the link between the price of gold and that of oil further increases my confidence in micro-economic rather than broad-brush investment advice.

But having said that, I think there are lessons which can be drawn about the situation of companies in the same industry from the experiences of their rivals.

Several readers asked me whether the newly nationalized Royal Bank of Scotland (RBS) will continue to pay dividends to owners of its non-cumulative preferred shares (and those of NatWest which it acquired).

My answer:

Now for some good news out of China about Holsteins.

American Dairy (ADY), a leading Chinese producer and distributor of premium infant formula, milk powder, and soybean, rice, and walnut products, released a business update yesterday. ADY continues to increase its output to meet consumer demand for reliable, high quality, premium infant formula products. Feihe, its brand, was one of the few beneficiaries of the baby milk formula scandal in China. Its products did not contain melamine.

Because of the new importance of Canada in my life (it is where my interim webmaster hangs out and also where those awful geese which crash airplanes come from), I wanted to talk a bit about our neighbor to the north on this U.S. holiday, which saw European markets tumble.

CryptoLogic (CRYP), a Canadian developer of internet casino and branded gambling software, last week updated its forecasts. It now expects profitability this year and growth in future years. It slashed operating costs and took charges for restructuring and rationalization last year. This included outsourcing its poker network (with Gtech Corp.) and cutting its network server and overhead costs by 75%. Its targets are to cut operating costs by $13 mn by midyear and spend $3.5 mn in restructuring to save $20 mn in non-cash charges.