China

[Parsad]

7 hours ago, tnp20 said:

Just curious....how many would invest in Saudi Arabia ....ARMCO for example ?

 

Would you invest in Saudi Arabia and not China ? And if so what would edge Saudi Arabia over China ?

 

 

 

No need to invest in either!  Like I said before, unless you are managing tens of billions, you don't need to go outside of NA.  Cheers!

[Guest]

17 minutes ago, Parsad said:

 

Essentially that's what happens every so often.  People do ridiculously stupid things because they panic.

 

I bought Sears bonds in 2008 at 70 cents on the dollar.  Not bonds out a year or more...bonds that were out less than 3 months!  And at that time, Sears had enough cash on hand alone to cover operations and debt servicing for the entire year!

 

In March of 2020, I bought Biglari Holdings for $49, when book value was over $250.  They had ample securities to cover all expenses.  People were worried about the pandemic and SNS' debt...even though the debt was non-recourse...it was a dollar trading for 20 cents.

 

No speculation involved!  Cheers!

 

That is still speculation dude. If the bailouts didn't occur, those could could have been money losers. I'm not saying it wasn't smart though. The world could have fallen apart either of those times. 

[Parsad]

6 hours ago, Luca said:

Considering that valuations are at rock bottom and if they go back to US/West levels, you would have results that have beaten the DAX. Many have gotten rich like Koos Bekker and chinese fund managers outperform hard...:)

 

How do you trust the valuations and accounting?  I assure you that every Chinese company has two sets of books...one for the auditors and one for management!

 

What margin of safety do you apply for political risk or property seizure?

 

How do you certify Chinese inventory numbers?

 

Do you discount Chinese PPE or take it at face value?

 

What margin of safety protects from the inability to remove capital from China?

 

These are just a few reasons why I wouldn't invest in anything in China. 

 

Sure, it will grow and do well over time, but I'm at a huge disadvantage compared to investing in North America or Europe in terms of transparency and recovering my capital.

 

Cheers! 

 

 

[Luca]

44 minutes ago, Parsad said:

 

How do you trust the valuations and accounting?  I assure you that every Chinese company has two sets of books...one for the auditors and one for management!

Every company is a bit of a stretch, David Webb put it nicely: 

 

“Think of me as an expert mechanic, walking around a second-hand car lot in which there are no warranties, and all of them are discounted for the risk of being lemons,’’ Webb explained in a recent speech at The University of Hong Kong. By avoiding most of the lemons most of the time “and getting a substantial discount on good companies, I have been able to outperform.’’

 

Today we are getting very substantial discounts on very high quality and wide moat companies.

44 minutes ago, Parsad said:

 

What margin of safety do you apply for political risk or property seizure?

The margin of safety is in the valuations already!

44 minutes ago, Parsad said:

 

How do you certify Chinese inventory numbers?

Obviously its not on the same level as in the US but its also not that hard to find reasonably managed cheap companies that can be trusted in China. 

44 minutes ago, Parsad said:

Do you discount Chinese PPE or take it at face value?

Discount is already in the valuation as far as i see it.

44 minutes ago, Parsad said:

What margin of safety protects from the inability to remove capital from China?

Position sizing!

44 minutes ago, Parsad said:

These are just a few reasons why I wouldn't invest in anything in China. 

 

Sure, it will grow and do well over time, but I'm at a huge disadvantage compared to investing in North America or Europe in terms of transparency and recovering my capital.

 

Cheers! 

Fair enough Sanjeev! 

[Libs]

https://www.ft.com/content/91b7b634-9f63-4f5b-9cd4-3b838b9b51e7

 

Yuan hits 16- year low. Good luck with that 'world's currency' thing.

[Spekulatius]

21 hours ago, Parsad said:

 

No need to invest in either!  Like I said before, unless you are managing tens of billions, you don't need to go outside of NA.  Cheers!

Aramco looks overvalued, not sure I got this right. If it paid 15% dividend yield and traded in an exchange I could actyhually buy it, I would think about it. Even then, I think PBR-A is actually a better investment.

Edited September 7, 2023 by Spekulatius

[gfp]

8 minutes ago, Libs said:

https://www.ft.com/content/91b7b634-9f63-4f5b-9cd4-3b838b9b51e7

 

Yuan hits 16- year low. Good luck with that 'world's currency' thing.

 

Well I don't think the fact that it isn't particularly strong vs. the USD is what is keeping it from becoming the "new reserve currency" or whatever.  It is sort of amusing how it was all the rage to label China "currency manipulators" and talk about how unfair it was.  But here we are with the Chinese government, through directives to the major Chinese commercial banks to re-lend and recirculate dollars, manipulating the currency daily to try to keep it stronger.  Markets are not convinced.

 

USD-CNY and USD-JPY has been a very tight correlation lately.  A lot of dollar funding in Asia comes through Japan or by transforming Japanese collateral into USD-denominated monetary instruments, derivatives, etc...  Indian Rupee will be taken along for the ride.  *I'm sorry, Bharat, old habits die hard

Edited September 7, 2023 by gfp

[Spekulatius]

36 minutes ago, gfp said:

 

Well I don't think the fact that it isn't particularly strong vs. the USD is what is keeping it from becoming the "new reserve currency" or whatever.  It is sort of amusing how it was all the rage to label China "currency manipulators" and talk about how unfair it was.  But here we are with the Chinese government, through directives to the major Chinese commercial banks to re-lend and recirculate dollars, manipulating the currency daily to try to keep it stronger.  Markets are not convinced.

 

USD-CNY and USD-JPY has been a very tight correlation lately.  A lot of dollar funding in Asia comes through Japan or by transforming Japanese collateral into USD-denominated monetary instruments, derivatives, etc...  Indian Rupee will be taken along for the ride.  *I'm sorry, Bharat, old habits die hard

The problem with CNY is that they soft-peg their currency against the USD, but not their monetary policy. Currently China is lowering interest rates and otherwise easing money supply while the US is still tightening. That puts pressure on the USD-CNY ratio naturally.

 

The bigger problem with CNY becoming a reserve currency is that it's not freely exchangeable in other currencies. You can get your money in the Yuan easily, but you may not be able to get it out.

[Spekulatius]

Belt and road / Kazakhstan:

My guess is that Chin really does not give a damn if Belt and road is economically viable, it’s all about buying influence.

[Spekulatius]

China exposure of US companies :

https://www.investors.com/etfs-and-funds/sectors/sp500-companies-face-much-larger-problems-in-china-than-apple/?src=A00220

 

Of course Apple not just has revenue exposure, but also huge supply chain exposure. Then add Taiwan… Risk are not priced in for the likes of QCOM , TXN or MPWR, imo.

[Luca]

[UK]

https://www.bloomberg.com/news/articles/2023-09-08/rahm-emanuel-s-musing-about-china-leaders-stirs-new-controversy?srnd=premium-europe

 

“President Xi’s cabinet lineup is now resembling Agatha Christie’s novel And Then There Were None,” Emanuel wrote. “First, Foreign Minister Qin Gang goes missing, then the Rocket Force commanders go missing, and now Defense Minister Li Shangfu hasn’t been seen in public for two weeks. Who’s going to win this unemployment race? China’s youth or Xi’s". The comments conflict with the commonly observed practice of US diplomats staying away from speculation on other countries’ domestic politics. China’s ruling Communist Party also typically issues sharp rebukes of any foreign official’s discussion about the government’s inner workings.

...

In an interview with the Wall Street Journal last week, he said the Communist Party used “lying and cheating as a modus operandi of the state.” He also said the US shouldn’t stand in the way of China’s growing economic peril. “My view is keep doing what you’re doing,” he said. “You’re the one with 30% unemployment among youth, not us. You got 10 years of housing with nobody in it. You got people that are getting fleeced by the big developers and the banks. You got municipalities in China that makes Chicago look like a AAA-rated bond. Keep at it.”

 

Edited September 8, 2023 by UK

[formthirteen]

Quote

China’s automobile industry, figures Bill Russo, the founder of the consulting firm Automobility in Shanghai, has enough unused factory capacity to make more than 10 million cars (sufficient to supply the entire Japanese car market—twice). Beijing boasts about its extensive network of high-speed railways, already the world’s largest—but the state-owned company that operates it has racked up more than $800 billion in debt and posts substantial losses. The Cato Institute once described China’s rail-building bonanza as a “high-speed debt trap.”

 

Quote

The more power Xi has commanded, the heavier the state’s hand in the economy has become. Xi has relied on state industrial policy to drive innovation, and he has imposed intrusive regulations on important sectors, such as technology and education. As a result, China’s private sector is in retreat. Two years ago, private companies accounted for 55 percent of the collective value of China’s 100 largest publicly traded firms, according to the Peterson Institute for International Economics; in mid-2023, that share fell to 39 percent.

 

https://www.msn.com/en-us/money/markets/what-china-s-slowdown-really-means-for-the-west/ar-AA1gna6E

Edited September 8, 2023 by formthirteen

[TorontoRaptorsFan]

India’s Military Studying Options for Any China-Taiwan War 

 

https://www.bnnbloomberg.ca/india-s-military-studying-options-for-any-china-war-on-taiwan-1.1968736.amp.html

 

 

[formthirteen]

https://twitter.com/michaelxpettis/status/1700378847512842679

 

Quote

The reason is because since the late 2000s Beijing could only maintain high rates of GDP growth (above, say, 3%) by increasingly shifting the locus of economic activity from the productive "hard-budget constrained" parts of the economy to the less productive...

 

"soft-budget constrained" parts. Because the latter isn't sustainable, and much of it must eventually be reversed anyway, the only way to preserve the GDP growth rates that fueled the "sorpasso" expectations was also what had ultimately to undermine those very expectations.

 

This was always an exercise in how fundamentally we misunderstand what GDP means. Even most economists – who really should know better – seem to think that GDP is a measure, comparable across countries, of the total value of goods and services produced by the economy.

…

This has been hard to explain to economists, although engineers, mathematicians, other others who think in terms of systems find it almost trivially obvious. Without hard budget constraints, there is no way to differentiate between value creation and value destruction.

 

 

 

[UK]

https://www.bloomberg.com/opinion/articles/2023-09-10/war-over-taiwan-would-be-a-financial-disaster-for-us-and-china?srnd=premium#xj4y7vzkg

[crs223]

On 9/7/2023 at 11:47 AM, Libs said:

Yuan hits 16- year low. Good luck with that 'world's currency' thing.

 

Name one currency that has not hit a 16 year low in the past 20 years.

[mcliu]

 

[Guest]

Never surprised by the Chinese work ethic. They never stop! 

 

https://www.scmp.com/news/people-culture/trending-china/article/3233135/wage-cheater-woman-china-who-held-16-jobs-once-over-3-years-never-went-work-used-multiple-incomes

[juno323]

Was reading The Investor Manifesto by Bernstein (published in 2009) and came across this
 

“Similarly, brokerage houses and mutual fund companies often tout the stocks of emerging-market nations, such as Brazil, Russia, India, and China (the so-called BRIC countries) because of their rapid economic growth.

But beware: Share dilution, and often outright theft because of lax security  laws, vaporizes a lot of this growth by the time it reaches the per-share level.

 

For example, China’s economy has been growing at a blistering 9 percent real rate per year for more than two decades. Yet between 1993 and 2008 investors actually lost 3.3 percent per year in Chinese stocks, even with dividends reinvested.

You read that right: Over this 16-year period, even before expenses, the investor in Chinese stocks lost 41.5 percent of value. (The loss of 3.3 percent per year before inflation calculates out to a loss of 5.7 percent per year after inflation.)”

 

[Luca]

59 minutes ago, juno323 said:

But beware: Share dilution, and often outright theft because of lax security  laws, vaporizes a lot of this growth by the time it reaches the per-share level.

That's why it is important to invest into quality businesses if you invest in China.  

59 minutes ago, juno323 said:

 

For example, China’s economy has been growing at a blistering 9 percent real rate per year for more than two decades. Yet between 1993 and 2008 investors actually lost 3.3 percent per year in Chinese stocks, even with dividends reinvested.

 

Based on which metrics? The Hang Seng is still up 100% in that period even if you take the absolute 2008 rock bottom which isnt a fair comparison anyways. 

59 minutes ago, juno323 said:

You read that right: Over this 16-year period, even before expenses, the investor in Chinese stocks lost 41.5 percent of value. (The loss of 3.3 percent per year before inflation calculates out to a loss of 5.7 percent per year after inflation.)”

Based on which data? 

[UK]

https://www.bloomberg.com/news/articles/2023-09-14/xi-crackdown-on-china-health-care-aims-root-out-corruption-bribes-for-doctors

[Spekulatius]

4 hours ago, UK said:

https://www.bloomberg.com/news/articles/2023-09-14/xi-crackdown-on-china-health-care-aims-root-out-corruption-bribes-for-doctors

The Chinese health care system is strange. It's sort of socialized, but you have to bribe doctors and pay extra buy various means to get good treatment (like medicine). there are also a bunch private clinics. I think buying worthless saline solution may just be one way to bribe doctors and if that's the case, there will be other means to facilitate a transactions.

 

I honestly have no idea how it works, but one reason for the high savings rates are health care expenses. People are afraid they are left to die when they get seriously ill without the monetary means to buy or bribe to obtain a decent treatment.

Edited September 15, 2023 by Spekulatius

[Spekulatius]

After the foreign minister notes missing, the defense minister Li Shangfu goes missing too:

Then  XJP did not attend the Brics meeting. I am sure all is well in Beijing but probably not everyone is.

[sleepydragon]

48 minutes ago, Spekulatius said:

After the foreign minister notes missing, the defense minister Li Shangfu goes missing too:

Then  XJP did not attend the Brics meeting. I am sure all is well in Beijing but probably not everyone is.

if a war starts, within a month those soldiers will turn back to Beijing. Too corrupted, too naive