China

[hasilp89]

4 minutes ago, Dalal.Holdings said:

Right now a lot of their actions seem geared toward helping the property sector including even buying unsold units... The problem is that there are just way too many property units in China and the people of China view real estate as their main investment vehicle over their own local stock market…China’s population cannot support so many real estate units and they are not a country with significant immigration.

 

The losses in real estate will not be easy to reverse. Boosting the stock market and corporate sector is certainly not what the CCP has prioritized lately and allowing their tech/corporate sector to flourish would be a 180 from since they purged Jack Ma.

 

Then there are other questions. Are they going to put their desire for Taiwan and all the other aggressive actions in the South China Sea on the back-burner to save their economy?

 

Tepper did well in the wake of the GFC, but China is not the U.S.A. The Chinese stock market has not historically served as the primary investment vehicle of its people and because the people lack a vested interest in it, it has been allowed to flounder. There has also been very limited progress in turning the economy into one driven by consumption.

i think tepper answered all your points pretty well in his interview. It doesn't matter. hard for us fundamental value investors to get our heads around it but he's just using the common sense he has - Xi created buyers and no one is going to sell into that. 

[moneyball]

And this is ultimately what make a market^^^

 

I ultimately believe that governments act based on the constraints that they are under. Bailouts weren't popular in the US during the GFC and ultimately didn't get passed until the market made the politicians pass the bailout measures. 

 

Looking back it's funny to think about how much talk there was about moral hazard back then. Fast forward to covid and we basically told everyone who managed a business prudently that they were an idiot and it is better to run your business in an incredibly fragile manner because you will get an automatic bailout. I digress.

 

Over time we've seen governments take actions they would have never taken before when faced with a terrible economic environment whether that is going off the gold standard, breaking a currency peg, creating new lending programs or sending folks cash in the mail. In many of these situations the governments fought against taking action but ultimately acquiesced.

 

I'm young and can stomach the risk I have if this doesn't pan out. My belief based on bottoms up and top down investment analysis is that the outlook for US stocks seems just okay from a real returns basis. Chinese stocks are absurdly cheap. 

 

To me it seems easy to have a visceral reaction to all of the risks presented by Chinese investment. Not as easy to have the same reaction to a future world where those risks don't materialize. That to me is what creates this opportunity. Agree with you that there is no guarantee Tepper is right, but this type of investing is where the guy excels and his track record shows it. My sense is he has an ego around being known as an all time great for investing in situations like this and isn't just pumping his book - his track record shows that isn't his MO (again just my belief). He called to get on CNBC and talk about it. Not something he really does. Now if this was General Ackman I'd be scared lol.

[nsx5200]

19 hours ago, Spekulatius said:

The more I think about it the more I believe that the CCP putting money in banks is more of a salvage operation than stimulus.

For stimulus the CCP needs to give money to consumers who hopefully spend it, but that’s not what we are seeing here 

 

This seem tells us that the CCP is afraid of their financial system falls apart, just like when Congress decided on TARP in 2008.

 

Not exactly bullish.

https://www.newsweek.com/china-news-hands-out-poverty-payments-1960190

"China is rolling out a subsidy for impoverished citizens[...]"

https://www.reuters.com/markets/asia/china-issue-284-bln-sovereign-debt-this-year-help-revive-economy-sources-say-2024-09-26/

"China to issue 1 trillion yuan of special bonds mainly to stimulate consumption-sources"

"In addition to the special sovereign debt issuance to support consumption, Chinese authorities also plan to ramp up financial support for small and medium-sized enterprises in phases, such as employment subsidies and tax and fee relief, to reduce their operating costs, the second source said."

 

The effort looks more broad than the one reported by Bloomberg.

 

Edited 2 hours ago by nsx5200
reflect additional article from Reuter

[nsx5200]

https://www.scmp.com/news/china/politics/article/3280295/china-tries-rally-risk-averse-officials-ignite-economy-promising-tolerate-mistakes

"China’s leaders are again seeking to rally risk-averse cadres to the cause of decisive economic action by stressing the need to “get things done” and its tolerance of mistakes in a policy known as the “three exempts”."

"The three exempts policy differentiates between “mistakes” made during reforms, suggesting leniency for those stemming from inexperience rather than deliberate violations of discipline; those made in exploration; and those made unintentionally to promote development rather than for personal gain."

 

From the CCP mouth piece newspaper, so calibrate accordingly.  It seems like they realize they've gone top-down too much and are trying to swing it back.  Hopefully they can place more clear policies for the business in China to operate as well.

[crs223]

3 hours ago, Dalal.Holdings said:

Are they going to put their desire for Taiwan and all the other aggressive actions in the South China Sea on the back-burner to save their economy?

 

China is not going to destroy their economy attempting to conquer Taiwan.

[moneyball]

2 minutes ago, crs223 said:

 

China is not going to destroy their economy attempting to conquer Taiwan.

Even in a world where China did such a thing, The US would have to make the decision to nuke the US economy. I’m reminded of Syria and Obama’s hard line in the sand…