Luke

I think you hit all the buzz words haha, since you assume the WORST is yet to come, it will be interesting how your hypothesis will look like this year and down the road. If that's the sentiment of an average investor looking at china, I think prices look wonderful already!

Buying KWEB is also a great way to play this honestly

Absolutely great Interview, love it how CIO Brendan Ahern can not believe the valuations

Yes very good way to think about ones portfolio! My current portfolio has more than 2x the earnings per $ compared to the SP 500, has higher ROIC than the SP 500 and higher sales growth than the SP 500...good life

Btw, didnt know this: https://www.scmp.com/news/hong-kong/economy/article/1866197/who-takes-title-owner-most-expensive-residence-hong-kong-jack?page=all Nice house!

China is late in the game, they dont have the same government apparatus the US has simply because their development is very new and their industrial revolution started way later. I think its very thinkable that in 10-20 years their country and society will look much more advanced with a lot better government apparatus and clarity for foreign investors.

I still think China is underestimated, undervalued and underappreciated and the US is overestimated, overvalued and overappreciated! High debt in the West? "No problem" High valuations in the west? "No problem at all, easy 30x PE"

10% return for 10 years is 160% return, id say that is a pretty nice base case assumption to get started from dont you think? Especially when its below 10x earnings, isnt that what value investing is about? Not paying much for 10% return and getting the upside for free? Buffett said he'd hire someone who can give him 10% returns consistently immediately.

How do you define "capitalism"? If I look at china I only see capitalism or better "state capitalism". The use of money exists since thousands of years and through several empires, all of them had no or almost no productivity growth and expansionary growth was their only way to get richer. Meanwhile, in China there are restaurants automated by robots, they produce some of the best cars in the world, are leading in sciences, still have a growing economy...I really do not understand how people say "they need to get back to capitalism". They ARE still in state capitalism and one of the most successful in it too. Yes, and they easily can do that: From the good article linked in this thread before about China's options: The first option and most immediate way to address local government debt is to use the central government’s balance sheet. By global standards, the balance sheet of China’s central government is exceptionally strong, with a debt-to-GDP ratio that is significantly lower than that of any other major economy. Moreover, the central government can currently borrow at low rates over long durations: China’s Ministry of Finance is able to issue 10-year bonds at lower interest rates than the U.S. Treasury. Thus, the central government could likely increase its borrowing without substantially increasing its borrowing costs. The central government could set up bailout funds for troubled local governments and LGFVs or explicitly transfer some local government debts onto its balance sheet. Alternatively, the central government could recapitalize the state-owned banks, policy banks, and asset management companies so that they could provide additional financial support to local governments. Yes, they are incentivized to do that and just this morning: https://www.scmp.com/business/markets/article/3249416/hong-kong-stocks-rebound-15-month-low-chinas-premier-li-qiang-signals-measures-halt-us1-trillion Chinese stocks surge as Premier Li Qiang signals ‘forceful’ measures to halt trillion-dollar market rout Okay? A good part of a large financial crisis was made under republican party rule Mr. Bush. Doesnt immediately mean that he is the one to blame for it. Nice try to frame it in the "China wanted to gush out huge numbers in a fake way", honestly its not the truth. Real estate developers got massively greedy and abused the relaxed legislation they got. Thats what happens if you have a "free market". Businesses gamble hard, the little man suffers and government has to clean up! At least the CCP did a lot of things to prevent all these financial companies to overleverage themselves that much and lay a floor for RE. Gotta thank Xi for some regulation! Yes and that will take some time but the balance sheet is top notch and they have lots of room to get through it. I dont think so and pointless debate. They can and will do well. If you make China as simple as writing down 4 sentences, you will have the results we can see in the current bear market

I dont even think they "dont care". Regulators just did their job and there are many understandable things happening. But obviously businesses come after the common prosperity so we have to deal with that in asia.

Frankly my china exposure is high already (25%+) so i might only add again if it gets ridiculous (5x earnings)

I would continuing loading the boat here, Xi is not anti investment and anti money, he doesn't like to see low quality real estate speculators that fill their pockets while common man and society suffers. The health of the society and flourishing matters more than IRR of private equity, doesnt mean they will stop developing and going back to an agrarian society. Chose your fighter!

Tencent as an example earns 25b every year, in 10 years they will have 350b+ in cash on the balance sheet without doing anything but getting some interest. Current marketcap is 330bish. Historically they earn some 30% CAGR a year on investment cash and 60%+ on cash invested into the core business. EVEN if they can not find ANYTHING, they will do buybacks+dividends as they are doing right now. The cash they earn every year compared to the marketcap is way more than what nvidia or any other big tech will ever earn over the next 10 years. Now will they find opportunities for the cash? Will the US block every tech investment globally? Will nobody want to do anything with china and the investment power of the second largest economy? Honestly i don't care if they invest in hippie dippie europe/us or with the saudis and africa as long as these businesses grow. There is very very very low risk except some imaginary boom world war case that for the sake of humanity hopefully wont happen. Everybody takes their odds but fundamentals have to matter at some point and the market can only stay as delusional as when these high quality business chugg along and the classical conditioning subsides ;D

Stagnate meaning they blow the 10% of their marketcap in earnings that are coming in every year away with 0 return or let the cash accumulate on the balance sheet and the market starts discounting the cash while they do 0 buybacks or dividends? Wdym with stagnate?

I bought at higher prices and still think these companies are very very cheap. BUT uncertainty is as high as it gets with China/West relations, sanctions, possible war, crazy government/shady leadership etc. IF China makes the recovery and government stays solid+relations with west dont go worst case, these stocks should do super well from here IMO.

Do you need growth for below 10x earnings?

Its still interesting to look at these things, Nvidia is too difficult to understand for me from this point, youd really need to know what happens to justify the valuation, still remarkable valuation.

Nvidia a nice 4x since last year, 1.4 T company with 20b in earnings a year. Massive!

Well said. Bloomstran has shorts open on Tesla and Nvidia, i think he is already losing money on Nvidia...:D

Best Show I have seen since a long time:

Also to die for classic: Simon and Garfunkel, Leaves that are Green!

Duddee, I have been listening to him too today, just the classics, The Wind, Father and Son, Peace Train etc....just really good old music, epic voice, great guitar, thanks Yusuf!!!

https://www.scmp.com/news/china/diplomacy/article/3248661/chinas-economy-beat-target-52-growth-2023-premier-li-qiang-tells-davos-forum?module=top_story&pgtype=homepage China’s economy beat target with 5.2% growth in 2023, Premier Li Qiang tells Davos forum

Well said