When Americans first celebrated Memorial Day, our nation was split in two — North and South.

Similarly, our planet today is divided in two separate worlds — East and West.

They’re not at war. But in the never-ending battle for economic wealth and hegemony, the chasm between them couldn’t be deeper: China and much of Asia, growing by leaps and bounds; the U.S., sinking into recession.

Coincidentally, one year ago, Tony Sagami and I debated this very topic.

We both are American and both love this country. But we looked at the globe through two different prisms:

“By this time next year,” I said, “the housing bust and credit crunch will have struck with full force.”

“But in China,” Tony countered, “hundreds of millions of citizens will continue to drive up consumption, create massive demand for natural resources, and generate great opportunities for investors.”

At first, we thought we might be in disagreement. But it was soon obvious that we were talking past each other — truly telling the tale of two different worlds.

And from last week’s events, it should be equally obvious that this tale continues to unfold:

• On Friday, sales of existing homes fell for the eighth time in the past nine months. Result: The backlog of unsold single-family homes rose to the highest level in more than two decades.

• Meanwhile, the median price for an existing home dropped 8% compared with a year ago. And with the massive pile-up of homes still for sale, prices are bound to fall even further.

• The Bush administration still hopes that the $130 million payments now reaching consumers will save the day. But just the recent surge in energy costs has already wiped out the extra stimulus several times over.

Is it any wonder that U.S. stocks are falling? Is it any wonder that the U.S. dollar has failed to rally significantly and has already resumed its long decline?

Meanwhile, in the Chinese economy, we see precisely the opposite pattern: Rather than slowing, it’s actually accelerating.

In Sichuan province, the massive earthquake is a great human tragedy. But in the context of rapidly growing GDP, the disaster is more of a stimulus than a hindrance, as reconstruction projects swing into high gear.

Take China Communication Construction, for example, one of Tony’s favorites. It’s China’s largest builder of bridges, highways, dams and ports. Its largest shareholder is the Chinese government itself.

So Tony asks:

“Who do you think is going to be awarded the biggest share of government contracts for earthquake reconstruction?

“And how much cement do you think China is going to need? Well, it just so happens that the largest cement company in China — Asia Cement — just went public in Hong Kong. The company opened at a high of HK$8, up 62% from its IPO price of HK$4.95.

“Why? Mainly because of the surging demand for cement in the wake of the Sichuan earthquake!”

Bottom line: Look at these two worlds separately. Do not confuse one with the other.

And whatever you do, don’t miss Tony’s 20-minute audio briefing, naming his seven favorite China stocks. It goes offline tonight.

To hear it, just turn up your computer speakers and click here.

Good luck and God bless!

Martin

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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