The global recession has hit China in a big way. Over 67,000 factories have closed in the last three months. An estimated 50 million Chinese workers are now unemployed, according to the usually overly positive government estimates. Protests or “mass incidents” are springing up all over the country.

The official Chinese GDP growth rate plummeted 30% in the last quarter. Independent data coming out of the manufacturing sector, however, suggests a much sharper decline. Chinese stocks have been surging up and down, just as they have in the U.S. There are ways to profit from this global market volatility. China certainly presents a unique set of opportunities.

Last month as the Dow dropped 20% and portfolios were battered, one investor was prepared. Nassim Nicholas Taleb, who founded the risk management firm Universa Investments, watched his portfolio soar 65% and 115%.

If Taleb’s name sounds familiar, that’s because his book The Black Swan: The Impact of the Highly Improbable spent 17 weeks on the New York Times Bestseller list.

We’re pretty much dead now. We cannot pay our workers’ salaries. We are about to be bankrupt.

- Mao Youming, Factory Owner, Shaoxing, China Oct 30, 2008

We’re rich. We have less than 4,000 people living here and we have millions of dollars in the bank.

- Town Administrator, Fox Township Pennsylvania

You won’t find Lynn Landgraff featured in the pages of the Wall Street Journal or BusinessWeek. However, she’s a good example of how some people are sidestepping the current economic turmoil. Lynn owns and operates a McDonald’s (MCD) in the small town of Greer, South Carolina. According to the Greenville News,

[Lynn] hired 65 people to work at her new store, and may be looking to hire about 10 more as business picks up during the holidays.

There is no question that this area is in a recession. We are the canary in the mine shaft.

- John Husing, California Economist.

After the recent wild fluctuations in the Dow, many investors have lost faith in the market and the banks. Bank deposits have decreased an average of $500 million a day over the last 90 days. Meanwhile, the stock market has shed around $8 trillion in value. Try wrapping your head around those difficult numbers.

One thing is for sure, people are sick of losing money. In the current climate, many investors have given up trying to make their capital grow. They are solely focused on keeping it safe. As it turns out, spooked investors are taking the notion of “safe” literally.

It’s difficult to tell whether the levels of irony are odd or even. America, the bastion of market capitalism, is on the verge of nationalizing its banking industry. The $700 billion price tag comes out to about $7,000 per American household.

The Bush Administration attempted to muscle the bailout package through Congress with a panicky threat, reminiscent of the build-up to the Iraq War:

The Dow is bouncing up and down like a yo-yo. Every chart looks like a ski slope. A few investors are profiting from these wild market mood swings, while others are seeking refuge in industries that feature non-discretionary items, like water.

Approximately 40% of the world population lacks adequate fresh water. In the next decade an estimated $800 billion is going to be spent globally to bring fresh water to those who don’t have it. With that kind of money flowing into a sector, you can bet now is the time to start paying attention to water.

In 2007 approximately 280, 000 Chinese children under the age of five died from preventable diseases caused by lack of clean drinking water.

According to the UN, contaminated drinking water causes five times the number of child deaths than are caused by HIV/AIDS.

Bill Gates can’t live without his.  Factory workers in Xiamen need it.  Nomads on the Sahara desert fought wars over it.

It’s more important than oil.

CIBC says this run is not over…not by a long shot.

Buried deep in a recently released 70-page report, analysts at CIBC, Canada’s 4th largest bank, states:

When the economy falls, the demand for escapist entertainment rises. History has proven this over and over again. During “The Great Depression” (1929 – 1939) 25% of American families had no income and 40% of factory workers were unemployed. In 1930 there were 200,000 evictions in New York City alone.

Despite this, movie box office receipts during the 1930s soared 22%. In many cases people elected to see a movie, rather than eat. That’s how desperately North Americans needed to escape (mentally) from the weight of their problems. And if you think things are different now, think again.

As money continues to flow out of the resource and energy sectors (it’s a correction folks - not the end of the Supercycle) investors are turning to tech stocks to rebuild their damaged portfolios. Last week I wrote about some tech companies that are thriving during the economic downturn by helping corporations cut costs (Tech Sector Provides Safe Haven).

Those tech companies have watched their shares outperform the markets in recent months. It’s been a great place to be while the rest of the market is falling apart. Of course, cost-cutters are not the only tech sub-sector doing well right now.

The Dow continues its downward spiral. The financial, housing, and retail sectors are in the tank. Even high-flying oil, gold, and agriculture stocks have been pounded in recent weeks.

A few commentators have started comparing the commodity correction to the tech crash of 2001. That’s an overstatement. The declines are not vertical and there will be a time to reinvest in commodities.

“Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.”
– Warren Buffet 

On Thursday, Goldcorp (NYSE: GG) announced that it is planning to buy Canadian junior, Gold Eagle Mines [TSX: GEA] for $1.5 billion.  Last week Kinross Gold Corp [TSX:K] made a friendly $1.2 billion all-stock offer for Aurelian Resources Inc. [TSX: AUR] .

With the gloomy financial news coming out of Wall Street, it may be tempting to bail out of all US equities and invest in a Russian ETF. But that would be a bad decision. A bear market creates buying opportunities.

We invest to make money but your portfolio can also reflect your moral and nationalistic ideals. A country is a family. Everyone matters. Never quit. Never turn your back. I recommend buying innovative American companies with a significant customer base in emerging markets (line your pockets while reducing the trade imbalance). The current landscape is littered with good bargains – like these five:

How hot is coal?

Goldsource Mines Inc. (GXSFF.PK) was searching for diamonds in Saskatchewan last May when they stumbled on a high quality coal seam and their stock soared 9,100% in 3 months.