It’s been a rough few years for the US economy. After the financial crisis the structural reforms and government intervention started comparisons between the US and slow-growth, socialist-leaning countries like France. Perish the thought!

But years after stimulus and “recovery” the overall US economy has not added many jobs and just doesn’t feel very robust. Some look abroad to China and feel that their sheer size, growth rate and seeming invincibility will make them the global economic power in the fullness of time.

Big corporations are the problem, not the solution. When it comes to job growth it turns out that small and medium sized businesses create about 120-140% of the new jobs in the US. That tells you something about what big corporations are up to. They are reducing payrolls and moving jobs to “more efficient” providers abroad.

The burdens on small businesses though have made it harder to hire. Healthcare costs are substantial and the economy isn’t strong enough to support speculative hiring. Today thousands of college graduates bemoan the lack of $85K annual jobs that will train them to do something useful and wait around for “things to improve.”

Mayor Bloomberg has hit on a perfect opportunity for the US to get back some of the mojo that built the country and made it great. Immigrants have been the key to growth since the US came into being. Our policies are stupid and self-defeating. He lays out a set of proposals that offer the greatest bang for the buck than anything else we have seen in recent memory.

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Changing our policies would allow the best and brightest to come and remain in the US to get a college education and start new companies that will provide the new products and services, jobs, taxes, and investment opportunities that we need. More companies, more jobs, more demand for housing, more prosperity – all for little to no cost for the country.

There’s lots of attention on QE3, near-term job growth, health care, inflation and quarterly numbers. But the real long term growth engine for the US, the thing that makes it different than every other country in the world, is the strength that comes from immigrants that come to build a better life and in turn our economy and country.

Every day the news is filled with the equivalent of whining over entitlements. Meanwhile so many smart, talented and hardworking people in the world have neither freedom nor opportunity. Their attitudes, efforts and impact is sorely needed in this economy right now.

It’s worth taking the time to read or listen to the entire Bloomberg message and also see lots of the information that backs up the merits of the proposal.

[Disclosure: None. I'm not a particular fan of Bloomberg and a registered independent. I like fact-based legislation that still remembers the positive traditions, honor and character of the country. What Bloomberg is talking about here is a great example.]

Related articles

• Hell Yes, Mayor Bloomberg. I’m With You. (techcrunch.com)

Last week we published our March Thought Leader Interview with Arthur Kroeber, an expert on China and Managing Director at Dragonomics Research & Advisory. It offered some real insights into China from political, economic, technological and practical perspectives.

In addition to several ideas that I expected I found some surprises and excellent long-term considerations including:

1. China already has the cleanest coal burning technology and will extend their lead because that have so much coal.
2. There’s really not much business at stake for Google in China, it dwarfs what they have to lose from a lost of trust if they don’t do the right thing there.
3. A very big looming question is whether or not the government can make the trade-off between control of the financial system (which they rely on to control the country) and greater efficiency and long-term growth.
4. Electric vehicles seem like they would be a natural fit for an increasingly urban China but lack of any garage or home charging space means that most of the growth will be in the form of public vehicles.
5. The real technology know-how continues to exist only in Taiwan and this is likely to be true for a long-time to come.
6. Demographically China will begin to see the number of new workers decline each year. It will still be a big number but it will put upward pressure on wages (increasing consumption) and drive increases in efficiency.

There is plenty more where that came from in the report and as usual the picture of China from afar is way too simplified to be useful. Only by digging in and seeing the details can any useful predictive picture emerge.

R2 Members received this report via email last week and it is available online in our research library.

Research 2.0 basic membership is free subject to approval. Sign up here to join. Additional fee-based research and services are also available.

[Disclosure: None.]

We were not fully prepared for the sharp sell-off in Baidu stock on Tuesday when BIDU opened up in the $360 range, down from the $430 level where it closed on Monday.  As the Google of China the stock has a short and compelling positioning that many would say make it a “must own” kind of name.  Of course it trades at a high valuation based on conventional metrics.

This was a perfect time to put our Intrinsic Value (IV) model to work.  Our IV for 2010 came to $496 which is what we tend to use to capture a one year return view on a stock.  With current trading around our 2009 value of $372 it was a perfect opportunity to add shares to the model portfolio.

After we completed the work and added in some other factors our conviction level became quite high.  BIDU has a TEV a bit above $14B.  Compare that to Google with a TEV of $153B.  Of course Baidu is at an earlier stage of development but they continue to dominate search in China.

Unlike other parts of the world China is not going to let Google get a majority market share there, not unless the revenue stays in China.  The Europeans have realized first hand how devastating it can be.  Today billions and soon tens of billions of advertising dollars will be flowing out of Europe and into the US-domiciled Google.  Nobody in Europe is happy about it and the concerns are getting more acute.

Although China is a puzzle of good and bad the fact is that Baidu is in a very strong position to grow into higher valuations even from our current IV of $496.  At current growth and profitability trajectories the shares will be over $600 in 2011.

Google has transitioned through some different versions of their online system before and even guided investors to very low “seasonal” results in some past summers.  Post these short-term cautions the stock has done extremely well.  These are companies that have massive secular growth trends firmly in their grasp.  When the IV is attractive these stocks should always be on the top of your “buy list.”

Although the shares have bounced we are not suggesting we know where they will trade in the short term.  Only that the company is worth $496/share in the next 12 months and $650 per share in the next 24 months.

[Disclosure: Our Research 2.0 model portfolio added BIDU as a position yesterday.]

Recent inputs regarding investor interest in Shanghai property shows it’s again running very high.  There are some key structural reasons this is probably a good time to be considering taking some positions here:

1. The Chinese are now making it easier to buy property.  A recent offering calls for investors to come up with a 30% downpayment to receive a 4% loan for the remaining 70%.  The 3% deed tax and 0.05% stamp duty is now very low.  The capital gain tax has been reduced (for resales within 2 years) to 5% of the gain versus what had been 5% of the entire amount.
2. Recent policy changes to allow the local currency to appreciate gradually adds an additional kicker to returns to external investors that makes this even more attractive.  Although exchange rates are unpredictable, most feel that the RMB has been kept down structurally and will tend to trend up over time versus other major currencies.

Caution on China is always a good idea and we know that there is still inventory to be worked off in a number of major cities there.  However the global investor appettite for this asset class looks like it will be aided and abetted by changes in deal terms and exchange rates.

Many investors have gone to China or Hong Kong to cash in this trend over the last decade or so.  Those of us wanting to exploit this trend in a less wholehearted way might look to the new Claymore China Real Estate ETF (TAO) for a simple way to have exposure.  We can’t speak to the quality of this ETF but in a market offering few such choices this one is at least available.

[Disclosure: At the time of this writing we hold a few shares of TAO in our own and managed accounts.]