James Kar

What You Can Do During a Slow Growth Recovery

Hi Old Trader:
The FOMC meeting language basically telling investors that the Fed would accommodate the economy and would keep rates low as long as possible. But this is what the Fed's planning but the global currency and commodities markets may not let the Fed has its way.

The Fed thought the fiscal stimulus along with the monetary policy would get the economy going. We know this fails so far. Now, the gov even talk about second stimulus. This no doubt will make global investors losing confidence in the US$. They may even think the US gov is engaging in reckless fiscal policies that will sink the dollar value. Thus, the US gov may have to offer higher rates to attract bond buyers. If China has its way about the global reserve currencies issue, the US$ may start to trend downward again. With higher commodities prices and lower US$, investors will demand higher rates before lending to the US government.
Remember now China starts to settle global trade in RMB, which in turns will reduce demand for US$. This would make the US$ even weaker. Once investors lose confidence in US$, the Fed has no choice but to raise interest rate even the Fed does not want to. What do you think?


On Jul 06 09:52 PM Old Trader wrote:

> Mr. Kar,
>
> Didn't the language of the last FOMC minutes indicate that rates
> will "remain low for an extended period of time", or words very close
> to that? Actually, good quality corp. debt is not the worst place
> to park some money for say, the next 9-12 months, maybe longer.<br/>
>
> Given that Biden 'fessed up to the fact the current administration
> totally missed how severe the downturn would turn out to be, and
> there's talk of the "next" stimulus plan, I don't see rates rising
> for some time, though obviously, at some future point, they will,
> as the Gov. tries to unwind the mess.
>
> donzelion; I agree with you on the quality dividend paying stock
> play, as well. Some of the healthcare stocks are good, and as RE
> Broker mentions, foreign telecoms work, too.
>
> Disclosure: Long JNJ, FTE

What You Can Do During a Slow Growth Recovery

Hi "Oldman": As the interest rate is as low as it is now, the interest rate cannot go much lower since the Fed already target the fed fund rate close to zero. The chance is higher for the rate to go up instead. As the interest rate goes up, bond price goes down. At this time, I would not put most investment in bond. May be you can consider dividend paying oil stocks like ConocoPhilips (COP) paying $1.88 dividend with the current yield at 4.60%. The stock pays you something while you are waiting for the recovery. Also, the stock will participate in market recovery plus giving you some inflation or USD depreciation. Hope this helps.

Domestic China Companies Offer Investment Opportunities

Dave: Thanks for pointing out my mistake. I must have read a few things at the same time and mix up the info. I will pay more attention from now on. I will also look into HOLI.


On Jun 26 11:27 AM Dave Marsh wrote:

> The increase yesterday was because the company "entered into a new
> agreement with Shanghai Nine Dragon Co., Ltd. (www.ninedragon.com.cn)
> to undertake the major projects located in the Nine Dragon Resort,
> Zhejiang, including a seven star hotel, a marine park and luxurious
> villas. " Didn't mention a rail system in the news release. If
> you like rail and nuclear buildout in China, look at HLS Systems
> (seekingalpha.com/symbo...), specializing in automatic
> control systems specifically for high speed rail and nuclear power
> plants. Forward earnings look fantastic. Lightly traded right now,
> but tends to just go up. I'm long CAEI, APWR, and HOLI.

Domestic China Companies Offer Investment Opportunities

I will watch APWR. Thanks for the info.

Inflation vs. Deflation: What Are Investors Facing?

Hi Barking: I think the gold will keep going up gradually for 2 reasons: 1. as US dollar continue to fall, gold is an asset class has a negative correlation with the dollar. So, most investors will use gold to diversify the US dollar risk. 2. cultural demand - which has not been addressed enough. Both India and China consumers love to hold gold jewelry - not 12k or 14k, but in pure gold. As the middle class continues to grow, they have more money to buy gold jewelry, especially for Indians. They will buy gold when they have money and when the price starts to drop. So, I would say just the consumers in China and India can provide support in gold price so it will not drop too much from here. Of course, all bets are off when the global economy goes into deep recession, which I don't think it will happen.


On Jun 19 11:18 AM Barking wrote:

> James...how do you see gold doing in the above scenario?

Inflation vs. Deflation: What Are Investors Facing?

You are exactly correct. China needs to deal with the dollar situation very carefully. I think this is why China is gradually and slowly open up the capital market for RMB. Now, foreign firms can issue bonds in RMB for China expansion. Also, China starts to settle trade with its neighboring countries using RMB as well. This actually is more dangerous that people think. Because the changes are so slow and gradual, most people will not pay too much attention.


On Jun 19 12:58 PM daves1001 wrote:

> Yes, China is in a delicate position. Seems like their best strategy
> is to gradually wean themselves of investing in treasuries and hope
> that the dollar does not completely collapse before they have most
> of their eggs in other baskets.

Will China Drop U.S. Debt? Unlikely

Instead of behavioral perspective, may be using the term "game theory" is more appropriate. But I am not sure the Chinese is thinking about the "threat" is a game! Chinese does not like to make empty promise. They like to give warning so the issue can be resolved. If the issue cannot be solved satisfactory, then more drastic action will be taken. Of course, right now there is no other currency can replace the US dollar. This is the reason that the Chinese is heavily buying up natural resources. This is a great way to diversify its dollar holding. In this economic environment, holding natural resources is better than holding US dollars. Especially with potential hyperinflation in the future, this move is a smart move. Of course the Chinese cannot just dump its dollar reserves, but it is buying less and less every month. This also causes the T-bond yields to go up. In the near future, the dollar will stay weak. In longer term, the Chinese will move to diversify its US dollar holding by urging the IMF to use special withdraw rights. If the dollar keeps falling or even at its current level, this will happen - just a matter of time. Remember, Russia is working with China on the same issue.

BYD: Risky Now, Value Later

Old Rick: thank you for the reference. It is a good article.

John Petersen, as you know, BYD stock price goes up so much because of the exposure brought by Warren Buffet. He got in before others so Buffet deserved higher return. Furthermore, the earlier you get in, the more risk you are taking. So, I am not surprised to me that Buffet got in at a lower price with higher return potentially. My philosophy is this: since I cannot buy stocks at the bottom, I just evaluate the risk/reward based on the current price. Just like the current stock market situation, if you use the March low as a reference point, a lot of stocks have gone up over 100%. But it does not mean they won't go higher. But of course, we have to evaluate the risk/reward more carefully, and every investor should evaluate each investment according to their own risk/reward profile.

Opportunity to Buy China Natural Gas Before Nasdaq Listing

Thanks LosORO, your comment makes me a little bit more sensitive to the detail. The company CHNG acquired is another China natural gas company, Lingbao Yuxi Natural Gas. Since there is only one natural gas company for each smaller city (government allowed monopoly), this in effect increases CHNG's customer base and thus increasing its revenue and earning power. This is also CHNG's strategy for expansion in terms of geographically.

By the way, CHNG was not delisted from the bulletin board.

Since this article is only an update so I did not include all the financial earning analysis. You can read prior article posted or go to my site for prior articles that have financial analysis.


On Feb 07 04:38 AM LosORO wrote:

> You said CHNG acquired another company but you didn't say which company
> they bought.
> Is it an American company they bought or somewhere else like China
> ?
> The company they bought can mean good or bad.
> Like BAC bought ML, you see the point ?

Is AIG a Buy Following the Government Bailout?

Katako: Thank you for your question. I usually don't check the comments often. If you want a timely response, please ask your questions at my web site. Also, you can check out other ideas.

To answer your question, even though it seems AIG needs more money than expected as it has draw down more funding, I still expect the stock can do well in the long run. The is particular true as the global central banks are coordinating to stable the financial markets.

The Market Cannot Fix the Financial Crisis By Itself

It seems the entire economy is put on hold because no lender is willing to provide financing of any kind, from home and car buying to small business investories. Of course, as I mentioned before, passing the bailout plan does not mean the banks will start lending. The banks do not want to lend because they afraid the debtors will default. Even they have money on hand, it doesn't mean they have to lend. This is an important but misunderstood situation: the banks actually have money but are not willing to lend. Remember, the Federal Reservce has been pumping money into the banking system. If the banks need money, they can always borrow from the Fed. The main issue is they afraid the economy will go into recession and there will be more defaults. A lot of people believing this is a liquidity problem, but it is not. This is an economic issue. As the global economy possibly go into recession, the banks have no reason to lend. The root of the crisis starts with decline in house prices. To fix the problem, we have to fix the root - get the house price to appreciate. How? By getting the economy going again. Homeowners would not walk away from their home if the houses worth more than the mortgage. People can start making payments when they have jobs. So, the ultimate solution is to fix the economy. I wonder what would happen if the Congress use the same $700 Billion to stimulate economy.

Nixing 'Mark to Market' Won't Solve the Problem

A lof the investors blame the current crisis on the accounting standard board. The accounting rules require companies to write down assets to market value, known as "mark-to-market". Since there is no market for the mortgage back securities, the banks have to write down to zero. But now the accounting board allows the companies to use their own judgement when assets have no market. When an asset is bad, it is bad and should be written off. So, by changing the accounting rule, companies suddenly can have a good healthy balance sheet because the management has more flexibility in terms of how to value the non-marketable assets. Of course, a mortgage should be worth something if the borrower is still making payment even thought there is no market. The banks can go back to the good old days of banking operation - own the mortgage they created. Then, the banks can value the mortgage based on the future cash flows generated from the mortgage - mark-to-intrinsic value.

My suggestion is this: The banks should separate the mortgages they own into 3 groups and value them separately. (1) mortgages they want to hold until maturities, (2) mortgages they know are bad and should be written off, and (3) questionable mortgages that they want to sell. Then, we create an exchange to trade such mortgages. The global investors are smart enough to value the questionable mortgages in an open exchange condition. Now, the banks can either sell the mortgages or market them to the market.

Is AIG a Buy Following the Government Bailout?

Paulo, I am glad that you made some money also. If you are interested in short-term trades, you should try (academically proven) 52-week new high momentum trading. I have developed some criteria screening for those stocks. Check it out, you may be pleased.

Is AIG a Buy Following the Government Bailout?

I am very glad my article triggers so much discussions. Of course, it is the basic nature of disagreements creating the market- someone buys and someone has to sell. The is how the market works.

About the "loan agreement", I don't think anyone really understand it. I also read about it is actually an "equity participation note". In other words, it is a loan but sharing equity characteristics. We can argue what specific word means, but the bottom line is the US govenment is providing a loan to AIG so it has time to sell some assets without triggering a fire sale selling at rock bottom price. Then, in order to protect the loan being default, the government requires all assets as collateral. More important, AIG basically cannot pay dividends until the government loan is repaid first. Also, the equity allows the government to replace directors and executives if necessary. The equity feature is providing the US government some rights to protect itself, but I really don't believe the US govenment want to own the company and make profit out of it. The loan already provides about 11% interest.

When I first write the article mentioning "warrants" because this is what the media called it. Now, I know a little bit more. Since it is an equity participation note, there is no exercise price. In other words, the US government already "owns" AIG through the note. At the same time, when AIG pays off the loan, then US government is out of AIG also. So, once AIG sells its assets, rearrange its business model and pay off the US government, AIG remains independent.

I am glad "anon10" agrees with me and "bought a load of AIG". The stock basically has doubled after your purchases. You may consider taking some profit now. In the long run, AIG is still a good company, but it will have short term fluctuation. So, you may have a chance to buy it back at a lower price later. You may think about only selling one-half to recover all your costs. Now, whatever AIG you own is your profit.

I really wish all of you can come to my site and make some comment on my other ideas. You can even post your ideas on my site.

Surprise: Lenovo Finally Launching Servers

Chinese executives are usually conservative. Before they make a move, they will evaluate and evaluate a few more times before diving in. You can say they are slow to respond, but on the other hand, they won't make "silly" mistakes. Now, Lenovo decides to go fore servers businessm, they are ready to compete.