Li Lu Book Documentary - Moving the Mountain - it is riveting

[LongHaul]

Li Lu Book Documentary - it is riveting. 

 

Sounds like he had a lot of adversity to go thru and I genuinely admire him.

 

Moving the mountain: My life in China from the cultural revolution to Tiananmen Square Hardcover – January 1, 1990

by Lu Li  (Author)

 

This is the 1st episode of 7

 

2nd Episode

 

and they follow until episode 7

[Foreign Tuffett]

Does Li Lu still advocate for democracy in China? Insofar as I can tell he does not, and has not for some years.

 

Maybe it is impossible for him to to do this type of advocacy work while also managing a large China-focused hedge fund?

[sleepydragon]

Does Li Lu still advocate for democracy in China? Insofar as I can tell he does not, and has not for some years.

 

Maybe it is impossible for him to to do this type of advocacy work while also managing a large China-focused hedge fund?

 

He still does.

He posted something on his Facebook page on Jun 4th

 

[alpha]

 

Anyone know if this books is available at a reasonable price anywhere? (Amazon etc.. have crazy prices)

[VersaillesinNY]

 

Anyone know if this books is available at a reasonable price anywhere? (Amazon etc.. have crazy prices)

 

It seems that the lowest price is currently on abebooks.com at only 338 usd.

I purchased the book on amazon.com in 2012 for 19.69 usd :), my guess is that you just need to check again in a couple months.

[alpha]

 

Anyone know if this books is available at a reasonable price anywhere? (Amazon etc.. have crazy prices)

 

It seems that the lowest price is currently on abebooks.com at only 338 usd.

I purchased the book on amazon.com in 2012 for 19.69 usd :), my guess is that you just need to check again in a couple months.

 

Hehe thanks, will wait for prices to drop again.

[shamelesscloner]

Has anyone read his new book "Civilization, Modernization, Value Investment and China"? I can't seem to track down an English version!

[GordonGekko69]

On 10/18/2020 at 6:36 AM, shamelesscloner said:

Has anyone read his new book "Civilization, Modernization, Value Investment and China"? I can't seem to track down an English version!

https://www.longriverinv.com/blog/the-practice-of-value-investing-by-li-lu

 

there is at least a fraction of it

[LearningMachine]

4 hours ago, GordonGekko69 said:

https://www.longriverinv.com/blog/the-practice-of-value-investing-by-li-lu

 

there is at least a fraction of it

 

Thank you for sharing.  Very inspiring:

 

Quote

 

This profession is an incredible thing.  It lets you spend every minute studying new things.  It won’t just be your assets that grow through compounding; you will also feel your knowledge, practical experience and judgement compounding at the same time. 

...

I gradually came to realize that the meaning of life is the pursuit of true knowledge.

 

 

Edited July 1, 2021 by LearningMachine

[bennycx]

48 minutes ago, hellowod said:

There seem to be some fetishization on Li Lu due to his association with Munger. If you look at where the other student leaders ended up, and their view on Li Lu now, you will get a different view.

Where can you find this information? I’m curious

[LearningMachine]

What do folks think Li Lu means by following? Is he saying Chinese indexes are not good to invest in because China hasn't yet "entered the modern age," or is he saying they are good to invest in?  Chinese indexes haven't gone anywhere over the last 10 years.  Wonder if it is because companies have been making false accounting statements/projections, companies have been printing shares, CCP hasn't been letting companies exercise pricing power, new companies have been entering at a fast rate & increasing competition, existing companies have been expanding & competing too much, P/E multiples have compressed, or something else?  Has anyone looked into it? 

 

Quote

Long-term index investing works therefore but only in some places, namely those that have entered the modern age and can endogenously produce continuous compound growth.  Moreover, for this to work, the index must represent all companies in the economy to capture its overall economic and commercial performance.  
...
[I]f the stock market roughly reflects the overall economy, then index investing can also be useful.  If the economy itself is growing at 2-3% in real terms, then it should be growing at 4-5% in nominal terms once we allow for inflation.  The average profit of large companies should grow faster still thanks to their scale, perhaps at 6-7%.  And as we said earlier, if you grow at this rate for more than 200 years, your return will be greater than a million times.  Even in your own lifetime of 30 to 40 years, this return will deliver a very satisfactory result.  So there is no need to listen to anyone who promises you a return greater than 10% every year or to double your money, because they are mostly speculators.  Investment must be reliable.  What kind of things are reliable?  Things that are sustainable.  If something isn’t sustainable, don’t listen to it.  Index investing is therefore a good choice when the index reflects the economy’s overall performance.  

 

Edited July 2, 2021 by LearningMachine

[alertmeipp]

6 hours ago, LearningMachine said:

What do folks think Li Lu means by following? Is he saying Chinese indexes are not good to invest in because China hasn't yet "entered the modern age," or is he saying they are good to invest in?  Chinese indexes haven't gone anywhere over the last 10 years.  Wonder if it is because companies have been making false accounting statements/projections, companies have been printing shares, CCP hasn't been letting companies exercise pricing power, new companies have been entering at a fast rate & increasing competition, existing companies have been expanding & competing too much, P/E multiples have compressed, or something else?  Has anyone looked into it? 

 

 

LearningMachine, why don't you "learn" more about it and get back to us?

You have been consistently bashing CCP and China without any solid backing. Seems very odd for you to keep posting all these bad things about investing in Chinese companies and then ask if anyone look into it. 

[Spekulatius]

I am not sure why the Chinese stock market performed so badly,  it China had a severe stock a market crash in late 2015, which occured at the same when we had an industrial recession, as a consequence of the oil price meltdown.

https://en.wikipedia.org/wiki/2015–2016_Chinese_stock_market_turbulence

 

The largest bubble was in 2007 however and the Chinese stock market never really recovered from this. Starting points really matter.

 

Generally speaking, the correlation between GDP growth and stock market performance is fairly weak. What matter much more are ROIC. D how shareholders are treated.

 

[LearningMachine]

1 hour ago, Spekulatius said:

I am not sure why the Chinese stock market performed so badly,  it China had a severe stock a market crash in late 2015, which occured at the same when we had an industrial recession, as a consequence of the oil price meltdown.

https://en.wikipedia.org/wiki/2015–2016_Chinese_stock_market_turbulence

 

The largest bubble was in 2007 however and the Chinese stock market never really recovered from this. Starting points really matter.

 

Generally speaking, the correlation between GDP growth and stock market performance is fairly weak. What matter much more are ROIC. D how shareholders are treated.

 

Thanks @Spekulatius, I agree a growing economy or a growing sector for that matter may not accrue much to the shareholders if there is perfect competition.  I was just curious of the specific reasons for the Chinese indexes over the last 10 years to see how much those specific reasons will continue. 

[LearningMachine]

1 hour ago, alertmeipp said:

LearningMachine, why don't you "learn" more about it and get back to us?

You have been consistently bashing CCP and China without any solid backing. Seems very odd for you to keep posting all these bad things about investing in Chinese companies and then ask if anyone look into it. 

My apologies if that is how you felt from my posts. 

 

I'm actually impressed by what CCP has achieved for China in terms of growth, but as @Spekulatius pointed out, growth may not lead to shareholder returns.   I am usually careful with my words in making accurate statements and often provide a source to what I say.  If there is something that I said that was really egregious, please let me know, and I'd be happy to clarify.   If you're thinking about the BABA thread, I believe, as investors, we should think critically about our investments to figure out entry point and how big of a position to have.

 

I was hoping I could save some time if you or someone else has already figured out the reasons why Chinese indexes didn't perform over the last 10 years.  It is an important question for me in considering Chinese indexes as a potential investment.   My gut feel is that it is one of the reasons I listed above, but I am open to learning if someone else has already figured out the specific reasons.  Next step after that would be figuring out if those specific reasons will continue. 

Edited July 3, 2021 by LearningMachine

[bennycx]

answer:
What is S&P 500 without Fang stocks? Do you see tencent and alibaba listed in China a shares?

[Spekulatius]

@LearningMachine question regarding the China stock market performance is a legit one, and I don’t have an answer, but a few hunches.

 

Checking out the index here and taking FXI as a proxy m the index is chuck full with Chinese tech , probably a 40% allocation ( Alibaba, Meituan, Tencent, JD etc). Then there is a healthy allocation to financials ( Ping An banks etc)

 

https://www.ishares.com/us/products/239536/ishares-china-largecap-etf

 

– the lack of tech allocation is not explaining the Chinese stock market underperformance

- multiples for Chinese stocks have not expanded (PE is around ~15x and have been for while ), for US stocks they have. If you consider that the Chinese stock market has become more tech heavy, then it seems that Chinese stocks have seen multiple compression. Fin aiv also for example have become very cheap ( single digit PE’s).

 

One aspect that is interesting and may explain some differences is that China has not lowered their interest rates to the same extend than the US. China’s interest rate is 3.85% and US is effectively at zero. This is quite a large gap since the Chinese yuan is pegged to the USD effectively. I believe this explains some differences, but there are likely other factors.

 

https://countryeconomy.com/key-rates/china

 

It seems kind of interesting to invest in the FXI after I read thinking though this. Or even better put some allocation into Tencent via Prosus and hope that it works out. Ping An (insurance and generally considered the blue chip in their business also seems interesting , as they benefit from higher interest rates and in fact show higher ROE than most comparable US insurance cos. They also pay a rising dividend.

 

Edit, I went through many other Asian large cap index ETF (Malaysia, Thailand, Indonesia, Korea ) and they all have vastly underperformed the US markets and even Europe, despite higher GDP growth. China is no exception here, it more seems like the US and to a lesser extend Europe is the exception.

Edited July 3, 2021 by Spekulatius

[bennycx]

Alibaba, Meituan, Tencent, JD -> when were  these stocks added to fxi? How did they perform since added to the etf vs US tech?
is there a constituent cap to fxi?

[LearningMachine]

 

11 hours ago, Spekulatius said:

Fin aiv also for example have become very cheap ( single digit PE’s).

Thanks @Spekulatius, which specific companies were you thinking here? 

[LearningMachine]

7 hours ago, bennycx said:

Alibaba, Meituan, Tencent, JD -> when were  these stocks added to fxi? How did they perform since added to the etf vs US tech?
is there a constituent cap to fxi?

 

As of 2014, "FXI’s top holdings include[d] Tencent Holdings ( 700.HK ), China Mobile ( 941.HK ), China Construction Bank Corp. ( 939.HK ), Industrial & Commercial Bank of China ( 1398.HK ), Bank of China ( 3988.HK ), China Life Insurance ( 2628.HK ), and Petrochina ( 857.HK )... With FXI around $39"  See https://www.barrons.com/articles/the-alibaba-effect-1416274234

[nafregnum]

On 7/2/2021 at 2:03 PM, LearningMachine said:

What do folks think Li Lu means by following? Is he saying Chinese indexes are not good to invest in because China hasn't yet "entered the modern age," or is he saying they are good to invest in?  Chinese indexes haven't gone anywhere over the last 10 years.  Wonder if it is because companies have been making false accounting statements/projections, companies have been printing shares, CCP hasn't been letting companies exercise pricing power, new companies have been entering at a fast rate & increasing competition, existing companies have been expanding & competing too much, P/E multiples have compressed, or something else?  Has anyone looked into it? 
 

 

I think I found the answer to your question about what Li Lu meant - there was a Q&A session afterwards where he says this:

 

https://www.longriverinv.com/blog/qampa-with-li-lu

 

Question 11.  You said earlier that index investing can be a suitable choice for the average investor so long as the index reflects the overall economy.  Assuming passive index investment funds continue to occupy a larger and larger share of the market, what consequences do you think this will have? 

 

Li Lu:    This is a very interesting question, although perhaps less relevant in China because index funds do not yet comprise a large part of the market.  The situation is also different in China and the US.  In China, because we haven’t yet fully implemented [an effective system of corporate disclosure], nor do we have a strong policy for de-listing companies, our indices do not fully or fairly represent the underlying economy.  I think that the regulators will address this in the coming years.  We have transformed from a manufacturing- and export-led economy into a consumption-led economy.  In this new era, the means of financing may move from indirect finance to direct finance.  The role of the stock market will grow in importance, and this will require attracting more and more people to participate in it.  But if we want more people to participate, we will have to better control the market’s gambling and excesses, and increase the part of it which focuses on investment.  The best, fastest and biggest way to do the latter is through index investing, which means making indices better reflect the underlying economy.  One possibility would be to develop a good ETF to do so.  But there are many man-made factors involved which make this not the easiest course of action.  The best approach is to therefore use a market-based solution [and enhance regulation] so that the existing indices become more representative.  This is China’s challenge. 

[LearningMachine]

5 hours ago, nafregnum said:

 

I think I found the answer to your question about what Li Lu meant - there was a Q&A session afterwards where he says this:

 

https://www.longriverinv.com/blog/qampa-with-li-lu

 

Question 11.  You said earlier that index investing can be a suitable choice for the average investor so long as the index reflects the overall economy.  Assuming passive index investment funds continue to occupy a larger and larger share of the market, what consequences do you think this will have? 

 

Li Lu:    This is a very interesting question, although perhaps less relevant in China because index funds do not yet comprise a large part of the market.  The situation is also different in China and the US.  In China, because we haven’t yet fully implemented [an effective system of corporate disclosure], nor do we have a strong policy for de-listing companies, our indices do not fully or fairly represent the underlying economy.  I think that the regulators will address this in the coming years.  We have transformed from a manufacturing- and export-led economy into a consumption-led economy.  In this new era, the means of financing may move from indirect finance to direct finance.  The role of the stock market will grow in importance, and this will require attracting more and more people to participate in it.  But if we want more people to participate, we will have to better control the market’s gambling and excesses, and increase the part of it which focuses on investment.  The best, fastest and biggest way to do the latter is through index investing, which means making indices better reflect the underlying economy.  One possibility would be to develop a good ETF to do so.  But there are many man-made factors involved which make this not the easiest course of action.  The best approach is to therefore use a market-based solution [and enhance regulation] so that the existing indices become more representative.  This is China’s challenge. 

 

Thanks @nafregnum for sharing.  Highlighted is exactly the answer I was looking to confirm.