Jim Rogers on China and BofA
Some days I feel like ranting about markets, some days I let other do my dirty work. Since I don't have the funds that Jim Rogers does, I can cash the ego bonus of him echoing my sentiments on a few key issues.
The only bad thing about what is shaping up to be a beautiful day, is that I can't embed directly off the CNBC website. What better than to have than Jim's stupid-like-a-fox grin, country drawl and old-school bow tie staring you in the face when you browse over to WSO?
I completely agree on both counts with Mr. Rogers and though he has been way too bullish on China (IMHO) over the past few years, I always like to hear what he has to say because he is not afraid to change his opinion and never seems concerned with ego or personal politics clouding his judgment.
Since I've done quite a bit of writing on my China related views lately, I will focus on the bank stock part of the interview.
If you read me often you know that I hate traditional valuation methods. I don't discount market caps, p/e ratios and the like, I just think they're not very useful where there isn't a transparent market.
Today, few markets are.
The financial sector and bank stocks are anything but. Using and relying on traditional valuation methods which rely on accurate and truthful balance sheets is dangerous when attempting to analyze them.
There is so much garbage left on many BB balance sheets that traditional valuation methods are not going to give you a clear picture of anything going forward. BofA is everybody's favorite whipping boy because of Countrywide, but they are far from being the only culprit.
We are seeing some good signs in the banking sector. Wells Fargo just posted record profits , while Goldman made excuses and Stanley fell on his face . Still, there are no guarantees that anything will change in regards to actual practices at large banks and this should be a warning sign to those looking to jump into financials.
We are starting to see major retrenching signals and populist Washingtonians may even be realizing that slushing turds under the carpet doesn't work. Until there are some real resolutions to the financial crisis fallout, however, I am staying away from bank stocks.
I am now going to throw on my goofiest grin and chirpiest drawl and go enjoy my day. I don't have a bow tie, but I'm going to cheese just as hard as the old man does.
My parting thought for today...I would much rather be Jim Rogers than George Soros,
take that to mean whatever you think it may.
Always good to get a bit of reassurance from the guys at the top that your ideas are sound MMM. I do think that if you can afford to be long some of bank positions you could come out alright in the end. Someone mentioned C being in the shitter for the foreseeable future the other day and I don't disagree but I think that years from now, it'll be at a much more acceptable level than it is currently. As far as China, PUDA made me some serious dinero recently so I am probably in the Roger crowd on being overly bullish but that being said, to listen to some of these commentators, you'd think China didn't have a losing bet. Seems a bit ridiculous to think that dumping cash into anything and everything that's made, sold, traded, box, shipped, seran wrapped, etc. in a country where your employees make less than the family dog might be a bit over the top. Great post though sir, keep it up.
Sidenote: Who wouldn't rather be Jim Rogers? Old man, comfortably wealthy, wearing bow ties and saying whatever he wants. Sign me up.
I never understood the notion of giving a bunch of traders money but not being allowed to figure out exactly what they've done with it because that a disclosure of their position could put them at a competitive disadvantage.
We need to go back to a partnership model for I-Banks- or at least a model where the diseconomies of scale are much less unfavorable to more disclosure about assets.
Until then, I don't like investing in I-Banks. I'd be willing to put up capital for my firm's trading book- we've got a lot of smart folks and it's something I can get full disclosure on if I ask for it nicely and promise to erase it from my memory after I do my analysis. But otherwise, the closest I'm going to get to the financial sector are investments in the exchanges.
I have lots of respect for Jim Rogers
It is my opinion that the land of China owns America. China will be an engine of growth for the foreseeable future. Must we forget that China has been a superpower for the majority of the history of the world, except maybe the past 400 years, that is.
China lends us the money to buy their goods. Anyone see something wrong with that?
A very interesting situation will unfold with the foreclosure crisis, putbacks, and BoA. We will see some very interesting stories unfold
Such as:
Bill Gross, that smart little man, must have known something when he kept increasing the proportion of MBS earlier this year, perhaps an inside ear,,
The two organizations leading this charge are Freddie Mac and the NY Fed, which is essentially the government.. Perhaps trying to get their money back?
and isn't Blackrock 3% owned by Bank of America....
Something fishy is definitely brewing here and this will be an interesting episode of the next few weeks, especially with so many interesting storylines and huge players
Blackrock is 36% owned by BoA.
As for China owning America, I disagree with this statement. First off, we could kick their ass in any armed conflict. Secondly, they may own a lot of our debt, but we issue and print that money. And we can do so at low rates because we can kick anyone's ass. The Chinese have been piggybacking off of us by keeping the Yuan undervalued relative to the US dollar. I'd say its more China/US vs. The World as opposed to China vs. US. Our economies are wound tightly together and we've created a power structure where we reply upon one another.
Blackrock is NOT 36% owned by Blackrock. This was back in the day it owned that much, but now owns 3.64% of the common stock. Check it out on its report. Plus, what public company would be 36% owned by a bank or other corporation. I agree with your views on China and the US, but also in a way I see them "owning" us. If we ever waged an armed conflict with them, how would we fund this. Last time I checked they hold about 800billion of our debt or something to that affect. Where would we get our goods from? Where would Wal-Mart, one of the worlds most powerful companies get their supplies from?
"China lends us the money to buy their goods. Anyone see something wrong with that?"
Yes I do, In the real world makes no sense at all by basically giving away stuff for free.
RANT:
too many people hate on the future of growth and prosperity without ever living and working over here... they read a bunch of shit in WSJ and think they understand the dynamics of this economy or how the market here works, etc...
There may be some relative blips along the way, but I feel comfortable in saying this --- china will not have a single year of growth below 6% for the next 10-15
can we say that about anywhere else on the planet?
you guys should come over here and check this place out. Things are JUST GETTING STARTED over here, and it's the second biggest economy in the world. The Chinese government is beginning to raise wages (there are labor SHORTAGES here... imagine that), and as that wage pressure trickles into the private sector and wages go up, the normal people here "laobaixing" will start to consumer basic products like soap, detergent, toathpaste, etc... a lot more regularly. Then the second class of citizens, the middle class (we'd consider it lower-middle here, but they live in modern housing, etc), will start to buy cars and larger apartments, and the rich people, already the richest in the world, will continue to buy 20 million dollar apartments and bentleys and LV purses and shit for years and years to come.
Another thing I find interesting is that people talk about the unsophistication of China's financial system as if it's this huge problem. It may be a problem and cause a few slip ups in the course or reform, but what it actually is is a huge opportunity. Think of this, China pretty much doesn't even have securitization yet... imagine once they do!!!
The Chinese stock market may not be the way to go, but investing in good US companies like P&G with a ton of exposure to China IS THE WAY TO GO over the next 20 years.
Actually I stand corrected, they own 3.6% of the common stock, which is the voting share. They can't exercise any power with the non-voting shares, so wouldn't the 3.6% be all that matter?
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