I have been writing about a double-dip recession or a W-shaped recovery. Friday's unemployment figure may support my thesis. A W-shaped recovery basically shows the way of economic recovery. The first leg of the recovery is not sustainable and may fall back to a recession. Then a "real" sustainable economic growth comes on the second leg. But that growth is due to genuine organic growth based upon a stronger economic foundation, like a stronger U.S. dollar. I believe we are not even at the first leg of the recovery yet.

Friday morning's June unemployment report showed a loss of 467,000 jobs, which is far worse than expected a loss of 363,000 jobs. The unemployment rate rose to 9.5% from 9.4% in May. The stock market reacted by losing 223.32 in the Dow (2.6%). The S&P 500 fell 26.92 (2.9%). Basically there was no where to hide as the NYSE has 2,885 declining issues vs only 754 advancing issues. Thus, Friday was a broad based selling day.

China's government implements billions of dollars stimulus in its domestic economy. There is no doubt that China is an export-oriented economy, which has been negatively affected by global recession, especially by belt-tightening US consumers. With the US consumers saving more money and spending less, China exports are down significantly. To maintain China's economic growth, the China government has put in billions and implement policies to stimulate domestic demand. Of course, some economists maintain that China's domestic economy cannot replaced US consumers. I will not argue that when talking about China economy as a whole. But no doubt that China local economy is doing fine relative to the rest of the world. The reduction in exports have greatly affected multinational companies, but the domestic stimulus have help small China companies.

For example, China Architectural Engineering Inc (CAEI), a small construction company has received projects to help building the world's longest automated rail system in Zheijiang. The projects are amount to $500 million. The stock price went up 77% to $2.27 with more than 19 million shares traded yesterday, while the average volume is only about 900,000 shares. This little China company now received great attention from investors. Of course, I am not suggesting to buy into the stock now since the stock has a great run up.

China Natural Gas (CHNG) has registered with the SEC that it intends to sell up to $60 million of common stock, preferred stock, warrants and units. The company intends to use the proceeds to finance growth, including a possible acquisition and expanding facilities.

In other words, CHNG needs more money for expansion. The announcement timing was bad - the market was down. So the stock went down along with the market on Monday. Of course, investors are concerned about potential earnings dilution with more stock outstanding. This caused some investors to sell.

Lately, there is lots of news about whether we are facing inflation or deflation. In the currency market, investors believe we are having hyperinflation, not just inflation. Thus, the US dollar keeps going down, and the long-term T-bonds yields have been going up and commodities prices are heading up. However, at the same time, the US production is low, the housing market is still not turning around, and the most important real wages are not going up. In this environment, it should be deflation, especially when consumers are not spending money.

Warren Buffet made the first purchase outside the US in BYD Co (BYDDF.PK). Buffet purchased $232 million in the company. In addition, Volkswagen AG (VLKAY.PK) is planning to partner with BYD to produce hybrid and battery-powered vehicles. Volkswagen recognized that hybrids and electric vehicles are the future in the auto industry, especially when foreign automakers want to enter into Chinese market. Wang Chuanfu, Chairman of BYD confirmed that he has hold talks with Europe and US carmakers about supplying batteries.

Background

China Natural Gas (CANL.OB) has been approved to be listed on NASDAQ starting June 5, 2009. The stock symbol is expected to be changed back to CHNG. The stock has a good run up (more than 30% in 2 days) after the news is announced. I expected there will be more institution buying in the future. Thus, I suggest this stock for long-term investing.

China Natural Gas had a 2:1 reversed stock-split and changed its symbol from CHNG to CANL. The purpose of the reverse stock-split is to artificially bump up the stock price for NASDAQ listing. If you have bought the stock as I suggested in my last article, you would have made a good profit. But I would not sell it at this point. As China's economy continues to grow at a respectable rate, I would hold the stock for long-term (over 24 months). Also, I believe institutions, like mutual funds will buy the stock since this is one of the few China natural gas company listed in US. So, if mutual funds want to hold a China natural gas company, they will buy this stock.

I have been recommending China Natural Gas (CHNG.OB) for a while. I recommend the stock for 2 reasons:

1. The company has great business fundamental and good long-term potential growth. Recently, CHNG has acquired another company for growth. The fundamental of the business continues to grow.
2. The company is applying for NASDAQ listing, which may enhance the value of the stock. The reason is that mutual funds generally cannot own stocks that are listed in bulletin board. So, by listing on NASDAQ can attract some institutional buying. However, this is not the main reason to buy this stock. You always buy stock based on good potential and has sound fundamental.

Lately, the stock has been traded down because the company missed its deadline for listing. A lot of investors bought the stock in anticipation of the institutional buying driving up the stock price. Now, the same investors sold the stock because CHNG still has not been listed on NASDAQ.

China Natural Gas (CHNG.OB) is a leading provider of pipeline natural gas to both commercial and residential customers in Xian, China.  Yesterday, the company announced another great quarterly earnings report.  Here are the highlights released by the company:

Financial Highlights for 3Q 2008:

Monday, China Natural Gas (CHNG.OB) made some encouraging announcements.  The company's potential growth is on track with the regulatory support.  The company has just signed an exclusive agreement with the local government, Town of Tangyu in Lantian County, Xian City, Shaanxi Province.  CHNG will be providing compressed natural gas (CNG) and piped natural gas to the entire town.  The service is expected to start at the beginning of the fourth quarter.  The company estimates there are 50,000 customers (residential and commercial) with a potential annual demand of 8.5 million cubic meters of natural gas.

In China, there is a continuing favorable trend in using natural gas in both retail CNG stations and auto-conversion business to improve environment.  For example, in September 2008, the Dongguan City Government announced the "Notice of Governmental Support for the Development of Natural Gas Vehicles."  The announcement is to support the development of CNG filing stations and CNG-powered vehicles.  The city government will actually provide subsidy for every taxi converted to natural gas/gasoline hybrid vehicle. 

When WB was in financial trouble, the FDIC orchestrated an auction for WB's assets.  When you thought Wachovia (WB) deal was done with Citigroup (C), now Wells Fargo (WFC) surprises investors that it also wants to buy WB for $7.00.  Because of the new bid from WFC, WB stock price closed at $6.21, up 58.8%.  Should you buy or sell WB stock now?

The market obviously thinks WFC will acquire WB; investors bid up the stock price close to $7.00.  Obviously, the shareholders will prefer the WFC $7 deal.  But this is far from sure especially if you look at from the legal perspective.

Based on CNBC, the stock is worthless when AIG (AIG) issues warrants to the government in exchange for the bridge-loan. Based on my simple Finance 101 calculations, AIG stock is not worthless and should be a buy as a long-term investment.

When I first read the deal, it does not make much sense – $85 billion loan for 80 % stake. How can you provide a loan for equity? The government gets the best deal because the loan needs to be repaid. So, the government will own 80% of the company without any investment in the company. I think any private equity firms would jump into this kind of deal. But will it be similar to convertible debt? If so, why don't they just call it convertible debt then?

The big news yesterday was, of course, the bailout plan for Freddie Mac (FRE) and Fannie Mae (FNM) over the weekend. The world stock markets celebrated the Freddie / Fannie bailout before the US stock market opened Monday morning. Except for the Chinese market, global stock markets were up significantly. The Dow was up more than 300 points at the open and then gradually faded away. The market had some momentum toward the closing and ended up close to a 300 point gain. The question is then: will the upward momentum continue?

Some say this is the catalyst the market needs: removing the uncertainty for both FRE and FNM. At the same time, we all know that the mortgage crisis and the financial sector cannot be cured in one day. The underlying problem may be deeper than everyone has thought.

China Natural Gas (CHNG.OB) is a small natural gas utility company in Shaanxi Province, PRC. It is a Delaware registered company that transports, transmits and distributes natural gas to residential, industrial and commercial customers in China.

CHNG also operates natural gas filing stations in Xian. Yes, there are cars using natural gas instead of gasoline in China. According to the Chinese government (2006), Xian has 5,000 buses and 20,000 taxis using natural gas as fuel. CHNG is opening up more natural gas stations all over the region. It just opened 4 new stations in this December. Of course, CHNG has a “monopoly” license from the Chinese government as the sole natural gas provider in its region. Financially, the company has grown more than 200% in both revenue and earnings for the last couple of years. I have no doubt that the company has great growth potential. You can check out the company website here.