The long-term performance of share investments is driven by economic growth and company profits. 

The more profit the higher the dividends and share prices. 

The less profit the lower dividends and prices. 

Short-term share market movements are often driven by speculators and short-term traders chasing quick profits. 

Day traders, short sellers and gamblers spread rumours and talk markets up or down today to create gains. 

Long-term investors want to share in the company’s future success. 

Short-term traders have no interest in the company, simply wanting to squeeze the maximum profit out of the shares in the next few hours or days. 

They add unwanted volatility to markets and frustrate long-term investors. 

Investors can now take advantage of speculators and profit. 

Part of the recent share price slump is unjustified and has been caused by speculators talking markets down. 

This provides an opportunity for investors to buy in at favourable prices to enhance long-term profits. 

The recent global share price slump was triggered by the Chinese government’s decision to devalue its currency by about 4 per cent. 

Official figures also showed an 8 per cent contraction in Chinese manufacturing over the last year. 

Short-term traders concluded that the Chinese economy must be slowing rapidly, perhaps falling into recession. 

This would mean slower global economic growth, reduced profits and share prices. Better sell now. 

That is one scenario. There is another possible explanation. 

China’s manufacturing is clearly slowing down. 

Despite this its economy is still growing at 5 or 6 per cent per annum, healthy indeed. 

The main driver is consumer spending. The average income across China is now about US$10,000 per annum. 

There are several hundred million people with incomes higher than that, many approaching our income levels. 

They are spending and the economy is growing.

China is becoming more a consumer society and less a cheap manufacturer, as its government intends. 

However manufacturing is slowing more quickly than intended, mainly because the Chinese currency is pegged to the US dollar. 

The US economy is growing strongly so its currency has been rising against most others. 

The euro fell about 16 per cent against the greenback over the year to end July, the yen is down 17 per cent, the Australian dollar lost 21 per cent. 

The Chinese yuan declined only one per cent in that period. 

That is pricing Chinese manufacturers out of the market, making them less competitive.

 So the government decided to do something about it. 

It devalued the yuan 4 per cent. 

It wanted to partly decouple from the US dollar to remain competitive. It’s a sensible step. Chinese officials said it was a minor move and should not concern investors.

Perhaps the Chinese economy is decelerating more than expected, but it is unlikely to justify all the recent share price falls. 

Long-term investors should consider buying now. 

Australian bank shares are down about 20 per cent from their peaks. 

Dividends are likely to be over 5 per cent in the next year. Add an imputation tax credit and the income yield is 8 per cent. 

Price to earnings ratios are attractive. 

Other stocks with sound incomes and long-term growth potential include AMP, Aurizon, BHP Billiton, CSR, Dulux, Flight Centre, Orica, Perpetual, Rio Tinto and Woodside. 

Property trusts such as Stockland and Cromwell pay high incomes and appear to offer good value.   

It isn’t necessary to buy at the exact bottom. 

It is safer to miss the start of the recovery to confirm it appears definite. 

So any time now appears a good time to buy.