Comments (48)

Aug 10, 2010

It's so hard to say because the government has such a large role there. If China bursts, almost all global equities will go down with it ha.

Check out my older blog:
http://www.wallstreetoasis.com/blog/dear-china-you...

Yours truly,
The Young Investor

Aug 10, 2010

yeah but u did not read my post.

I say short which If i am not mistaken means you are profiting when stock declines.

Therefore shich stock to short? I would be afraid to pick chinese companies in the sector but the argument to short european companies that supply the bubble and have mostly china as end market seems smart.

Aug 10, 2010

Why are you afraid of shorting chinese companies? Because you are not sure which to short, because you thing that they will their price will not fall enough, or because you fear chinese government thugs coming after you for shorting their companies?

Aug 10, 2010

because some might be rescued by the state + i dont know too much about their actual business model and activities to put the little money I have there as I have absolutetly no idea whcih one to pick.

what about you?

somebody read chanos on china?

Aug 10, 2010

Well, I do believe that there's a bubble, and I do believe that there will be a re-adjustment, but I don't think it will derail the economy and I have no idea of how big it will be or how it will pan out. Therefore, I am not willing to bet anything right now. (the party is very conflicted and split on how to deal with the real estate bubble, and trying to predict which faction wins is a coin toss).

Basically, I know enough about China to know that I don't know enough about China.

But, if you fear that specific companies are going to be bailed out and are therefore not a good target for shorting, you may bet on some index of several such companies, so that a single intervention doesn't screw your strategy up. Just a vague idea, mind you.

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Aug 11, 2010

judge it right...caterpillar etc. but i do agree the government can and will intervene if/when the bubble bursts

Aug 11, 2010

short equities, short risk assets, long safety assets (JPY) ? if there is a china bubble bursting, you will see tremendous flight to quality, so buy receiver swaptions on US rates because i'm assuming the yield curve will flatter further as investors buy run towards treasures for perceived safety....also buy AUDJPY, CADJPY, EURJPY, NZDJPY puts...

Aug 12, 2010
quag_mire:

short equities, short risk assets, long safety assets (JPY) ? if there is a china bubble bursting, you will see tremendous flight to quality, so buy receiver swaptions on US rates because i'm assuming the yield curve will flatter further as investors buy run towards treasures for perceived safety....also buy AUDJPY, CADJPY, EURJPY, NZDJPY puts...

Amateur question, but why Japan? I'd say the Indian currency seems to be a viable alternative: EUR/INR, GBP/INR, USD/INR.

I win here, I win there...

Aug 14, 2010

Why Japan ? The yen is not really "quality" as most people would think, but it has been acting as a safe haven currency for a very long time. A reason is probably that it has been the major Currency Carry trade currency to borrow cheaply, like the CHF has been for Eastern Europe. I would definitely add CHF to the equation as well as an ultimate safe haven, leveraged by the fact that it is a very tiny currency money supply wise. But beware of the SNB, they have lot's of tricks in their warchest, they once had negative saving rates for conversion to fight the Franc appreciating.
If you want to play on the China story, take into account it is primarily construction, so that is where the action will be. Look to the materials site of the scenario, there you will find large liquid companies to short, primatily those that sell most of their output to china. Listened to the Chanos presentation in London, dude I love him. But be hedged, so short one particular company and long the commodity index or something of the like....

Aug 14, 2010

Can't really call it a bubble right now. Companies like YOKU are protected heavily by the government (ie. blocking YouTube) and will probably get all the time in the world to figure out how to monetize. Nevertheless, sure some of the Chinese internet companies may be extremely overvalued, but why would you even consider betting against them? Set a target for what seems right for you, and stick with it. Don't get greedy when you've gotten some major gains and are not sure of the future.

Aug 14, 2010

I'm under the impression that there's incredible speculation on a possible facebook partnership. Stocks don't usually go up ~10% in a day on idle speculation.

Nothing but air in either direction. Exciting, but quite scary.

Aug 14, 2010
FinancePun:

I'm under the impression that there's incredible speculation on a possible facebook partnership. Stocks don't usually go up ~10% in a day on idle speculation.

Nothing but air in either direction. Exciting, but quite scary.

BIDU is supposedly the company that is partnering with Facebook. I think with Chinese stocks, you can't expect to have any logical reasons behind movements. With such a lack of information regarding the operations of Chinese companies, most people can only rely on speculation or rumors to trade.

Aug 14, 2010

do they have long-dated puts?

Aug 14, 2010

Just sold some shares of Youku... that stock is going down at some point.

But I think SINA is a great buy. Weibo is absolutely amazing - I think it's hard for US analysts to get a grip on how popular the thing has become. Having some mainland family, when I heard that my grandmother was on Weibo, I knew this thing has tremendous potential.

Will slowly liquidate Youku positions and put them into SINA. Wouldn't be surprised at all if SINA hits $200 within a year.

Aug 14, 2010
Aug 14, 2010

Will social media really burst? I think that it's become an integral part of our modern society, and that it will evolve with the times. I suppose there could be a bubble bursting as we separate the quicker evolving social media from the slow/bumbling ones.

"All I've ever wanted was an honest week's pay for an honest day's work."

Aug 14, 2010
Linfone:

Will social media really burst? I think that it's become an integral part of our modern society, and that it will evolve with the times. I suppose there could be a bubble bursting as we separate the quicker evolving social media from the slow/bumbling ones.

This post leads me to believe social media, this is exactly what people said about tech companies in 2000.

Aug 14, 2010

I think the general tenor of unproven tech IPOs will go quickly (look at Pandora). Just my .2 cents.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Aug 14, 2010

I think you'll see US-listed China deals go south before the social media deals. The former is already showing cracks of weakness with the latter still relatively strong. As far as the actual Chinese economy however, that depends how long the Party can keep the party going...

Aug 14, 2010
DaCarez:

I think you'll see US-listed China deals go south before the social media deals. The former is already showing cracks of weakness with the latter still relatively strong. As far as the actual Chinese economy however, that depends how long the Party can keep the party going...

I agree for maybe the next 6 months or so, but once regulators begin to crack down on these shitty ass reverse mergers coming out of China, and once Chinese companies have to go through full SEC review and approval, there will be a demand for US listed Chinese stocks, I believe. There is a tremendous opportunity with tech and internet companies in China, they just need to get their shit together and the SEC needs to figure out the proper way to regulate these reverse mergers.

On the tech bubble, call me crazy, I just don't think were in a full on bubble at all. Pandora has a shitty business model, the more they grow users. their margins go to shit because of royalties. I don't see how they have a sustainable business model over the long term, but then again, I have not read their S-1, so I'm really in no position to comment. If we were in a full-on bubble, I think investors would be jumping through hoops to get a piece of Pandora stock and over looking the fact that their business model is shit. And if you look at all of the large cap tech guys (google, apple, etc), they're undervalued and trading at P/E's of like 10-13x when there is no doubt that they have tremendous growth opportunities.

Aug 14, 2010

Corruption is par for the course in an authoritarian, non-democratic state. Corruption does and will continue to exist. But it all doesn't really matter because the Chinese consumer are able to afford things today they can only dream about 10 years ago.

Also, calling China's economic ascension (i.e. a phenomenon that has lasted ~30 years) a "bubble" is somewhat ignorant and condescending. Keep in mind this is a country comprised of 1.3 billion people and a country that for the vast majority of human civilization (up until the mid 1850's Industrial revolution) was considered the preeminent economic and military powerhouse in the world.

If the world witnesses a return of Chinese economic hegemony (which it likely will within the next 10-15 years - in terms of aggregate GDP or PPP), it would probably be more aptly described as a return to a historical norm than as a historical aberration.

Aug 14, 2010
ibhopeful532:

Also, calling China's economic ascension (i.e. a phenomenon that has lasted ~30 years) a "bubble" is somewhat ignorant and condescending. Keep in mind this is a country comprised of 1.3 billion people and a country that for the vast majority of human civilization (up until the mid 1850's Industrial revolution) was considered the preeminent economic and military powerhouse in the world.

If the world witnesses a return of Chinese economic hegemony (which it likely will within the next 10-15 years - in terms of aggregate GDP or PPP), it would probably be more aptly described as a return to a historical norm than as a historical aberration.

[img]http://upload.wikimedia.org/wikipedia/commons/thum...
China was stagnant in its development for several hundred years. I think a lot of their advancement in the past few decades has been because of their intellectual property theft.

"...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

  • Schopenhauer
Aug 14, 2010

If bubbles were that easy to spot, they would never happen.

The most important question is probably which bubble would be more devastating; and I think companies having heavy involvement with China will pay a steeper price because the bubble will be hidden for a while until it explodes in their face

Aug 14, 2010
freroht:

The most important question is probably which bubble would be more devastating; and I think companies having heavy involvement with China will pay a steeper price because the bubble will be hidden for a while until it explodes in their face

Agreed, well to an extent. They're both in very different asset classes, while the "Social Media bubble" is strictly in stocks which the public doesn't even own a lot of, China's bubble on the other hand is in everything, just like 80's Japan and everybody else in '08, which could be devastating if/when/where/whatever it goes belly up.

I think the world's pretty insulated from a Chinese collapse though, truth is it's them who's gonna get fucked when everybody else goes to hell.

People like Coldplay and voted for the Nazis, you can't trust people Jeremy

Aug 14, 2010
freroht:

If bubbles were that easy to spot, they would never happen.

Oh, like the housing bubble? 20% annual price increases aren't obviously a bubble?

The real magic of a bubble is that everyone KNOWS it is a bubble and is trying to get a piece of the action before the gravy train rolls over a landmine.

Aug 14, 2010

China's bubble burst over a year ago, they are simply plugging hemorrhage holes with band aids at this point. A not entirely accurate, but adequately representative analogy would be the USSR in the early to mid 80's.

Aug 14, 2010

That's a very interesting point seabird. Reminds me of something my dad told me (big 4 accountant). he was speaking with a client of his company that makes power systems for military/other uses, and asked about patents. he said they dont get patents because then it becomes public and the chinese just copy it.

Aug 14, 2010

20%? That seems a bit conservative...

To elaborate on my post a bit, I find that "certain things" which become part of our lives never really have a bubble. Things like tulips, which never really have a life changing impact, wither up and die almost instantaneously as soon as demand dries up. It is my belief that a generation growing up on Facebook or YouTube may possibly never know anything different from using the internet to connect to one another. Imagine this hypothetical: if space colonization occurs, we will have a true use for social media.

One example I like to use about life changing social impact is the car, which prior to the 50s and 60s was for rich people. Once (suburban) teens got ahold of it, American Graffiti was a sign of the times. Then look at where the car is now. It's a mainstay of travel for suburban teens; it became such a normal part of our lives that people don't give it a second thought. I think as long as teens are exposed to some sort of social tool, then it will embed itself on their psyche.

"All I've ever wanted was an honest week's pay for an honest day's work."

Aug 14, 2010

i think we're both seeing these crack -- look at all the reverse merger IPO frauds from china or the tech companies from there that have been getting slaugthered. also look at Pandora dying off pretty quickly

for what its worth, i think brazil is a much better play than china

Aug 14, 2010
shorttheworld:

i think we're both seeing these crack -- look at all the reverse merger IPO frauds from china or the tech companies from there that have been getting slaugthered. also look at Pandora dying off pretty quickly

for what its worth, i think brazil is a much better play than china

Interested to hear your logic for Brazil over China, arguably Brazilian growth is just a symptom of the Chinese economy.

Aug 14, 2010

The Party always has more tricks and tools then you can imagine, but I do believe that the bubble will burst but burst slowly. Under the worst scenario, China can simply go back to the old way of 100% command economy.

Aug 14, 2010

I think the social media thing is too often viewed as the end all, be all of the future. Its a great tool and some of these social media people forget its JUST a tool and has to be used with something else to create value and sell value.

My money is on Eurozone first and then China

"Ambition and education is first and talent is second"- T.I.

Aug 14, 2010

Even China's ruling party knows they are cooking GDP figures. In order to gauge Chinese economic climate, use proxies: electricity production, freight tonnage, port tonnage. These metrics have been stagnant or falling. Couple that with the monumental state side non-performing loan portfolios with rising debt service requirements amongst the general public and you have a recipe for disaster.

As for social media, are the valuations wild: yes. However, I am a strong believer of boom/bust being essential for all innovations. Steady 3-5% economic growth with no wild fluctuations happen only in the minds of economists and policy makers. Real life goes through euphoria to despair. All you can hope for is while the bubble goes on, a fundamental innovation seeps into people's psyche. Social media has accomplished that.

Aug 14, 2010

i think someone already posted that video...based on the discussions we've had recently, probably. Those towns are scary...

http://www.wallstreetoasis.com/search/apachesolr_s...

Aug 14, 2010

I read about it a while back, around this time last year I think, on the NYtimes
http://www.nytimes.com/2010/10/20/business/global/...
WSJ also has one of my ABSOLUTE favorite, comprehensive interactive map on the subject, in case any of you is interested

My country is experiencing the same problem I think (though at a much much less extent) :-s And since taking out mortgage loans to buy houses is a relatively novel concept where I'm from, it's basically impossible for you to own a house in your 20s

My formula for success is rise early, work late and strike oil - JP Getty

Aug 14, 2010

My formula for success is rise early, work late and strike oil - JP Getty

Aug 14, 2010

china is one big sino-forest.

I have to return some video tapes.

Aug 14, 2010

yes, it is a bubble...and commodities will crash when china crashes

Aug 14, 2010

It's not a bubble, in my mind. Growth may slow and we may see a correction in the real estate market, but we're not going to see anything below 5.0% GDP growth for the next ten years.

Aug 14, 2010

Yes. Vacancy rates in the new housing are sky high. People can't afford to live in these new condo projects. With the govt pumping GDP and growth rates I'd say its a disaster waiting to happen

Aug 14, 2010
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Aug 14, 2010
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