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Matthew Cowie  

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  • Chinese Stocks Are Cheap, Hong Kong Stocks Are Even Cheaper [View article]
    The banks are a monster portion of market cap and skew the P/E. Property developers also have single digit P/Es. There is value in the Chinese market, but it's there because the retail investor dominates and stock prices often do not reflect valuation. The market is being driven by psychology and macro factors such as government policy, with the result that people are just blindly buying stocks. As one fund manager in China put it: turn off your brain and buy.
    May 22, 2015. 09:37 AM | 2 Likes Like |Link to Comment
  • A Brief Tale Of 1937 [View article]
    Right, I should say bad debts were wiped out. Economic growth doesn't require 0% debt levels though, it only needs to be low enough to restart the credit cycle, which it is was by the time Roosevelt took office.
    Apr 7, 2015. 08:50 PM | Likes Like |Link to Comment
  • A Brief Tale Of 1937 [View article]
    The depression ended in 1932 because the debts were wiped out. When Roosevelt devalued the U.S. dollar, that was the end of it. Most of Europe was already in recovery. In 2008, only some of the debt was wiped out in the U.S., UK, Ireland, Iceland, etc. Other countries, such as China (who reprises the USA's 1929 role) ramped up debt creation. If there is a cyclical repeat, the next downturn will likely be led by China or perhaps troubles in Europe with Greece.
    Apr 7, 2015. 09:39 AM | Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    If you have to ask me for more money to pay for your bills, you're broke. If instead of taking more money directly, you "counterfeit" it and cause the value of my money to drop, you're broke.
    Mar 18, 2015. 06:19 PM | 5 Likes Like |Link to Comment
  • The New York Times Fails Biology 101 [View article]
    It's sequestered for far longer when the trees are cut after their rapid growth phase and turned into buildings and furniture.
    Feb 19, 2015. 02:37 PM | 4 Likes Like |Link to Comment
  • China's New Age Of Reform [View article]
    This is a fair complaint. Chinese companies need to put up results. But bear markets can last a long-time and psychology plays a large role in them. Adjusted for inflation, the S&P 500 is where it was in 2000, a period when dividends were hiked a lot due to favorable U.S. tax policy.

    One reason why dividends stayed low for so long in China was because government wanted firms to invest and repair balance sheets. After 2008, many firms went into real estate and other non-core business, and are now being forced to shed those assets.

    China also wants private capital to come into the market. Guangdong province just announced they want 70% of provincial SOEs having private investment by 2017. They may fail in this ambitious goal, but private money will demand better returns.
    Sep 30, 2014. 05:39 AM | 1 Like Like |Link to Comment
  • China's New Age Of Reform [View article]
    The Economist: Rickety Rails

    "Individuals account for 80% of stock turnover and institutions just 20%, the opposite of most markets in the rich world; this can make for a wild ride."
    Sep 29, 2014. 06:36 AM | 3 Likes Like |Link to Comment
  • China's New Age Of Reform [View article]
    China's stock market is dominated by individual investors and has experienced a bear market. See this chart of new accounts versus the value of the Shanghai Composite.

    Speculation focused on real estate and gold in recent years, even walnuts became popular. Most ordinary people have given up on stocks.
    Sep 29, 2014. 06:01 AM | 1 Like Like |Link to Comment
  • China's New Age Of Reform [View article]
    A slowdown is due to the law of large numbers; as growth shifts from the large component of GDP to the smaller components, total growth will decline even though the smaller sectors are growing rapidly. A slowdown in Chinese GDP growth doesn't mean the end of growth, nor a falling stock market, it is a temporary adjustment phase. American/Euro/Asian economic models are not the issue, the issue is the marginal return on investment and credit in debt laden sectors of the economy.
    Sep 28, 2014. 11:11 PM | 2 Likes Like |Link to Comment
  • All That Glitters Is Dividend Gold [View article]
    It's all about the price of gold. Above $2,000 an ounce and higher, these will become dividend darlings. Above $2500 these stocks will have more cash than they know what to do with.
    Jul 3, 2014. 07:40 AM | 1 Like Like |Link to Comment
  • Cutting My Dividends By 35% - Improving My Dividend Growth Portfolio [View article]
    It may have to do partly with different sector exposure. VIG would have dropped many financials in the 2009 rebalance due to them not raising their dividends. If you look at VIG, it still has a lower financial exposure (about 7%). VIG has less tech, more industrials, etc.

    If you look at this chart which is the ratio of VYM to VIG (a rising line is VYM outperforming) VIG beat it handily in 2008, likely due to holding higher quality firms (quality here meaning less chance for a dividend cut), but during the bull market, this leaves more room for beaten down VYM to play catch up.
    Jun 24, 2014. 08:59 AM | 1 Like Like |Link to Comment
  • China Finance Online - A Stock Primed To Quadruple; $13 Price Target [View article]
    Eventually, Chinese investors will become interested in their stock market again, but I anticipate Americans will get more pessimistic first and might sell down JRJC and everything China if the economy really slows below target growth this year, which right now is looking like a strong possibility. I like this firm though, and I met with one of their sales agents. It's also worth looking at some HK-listed Chinese financial companies.
    Jun 13, 2014. 01:26 PM | Likes Like |Link to Comment
  • Molycorp's $560 Million Intangible Assets Are Worthless [View article]
    China’s Rare Earth Toxic Time Bomb to Spur Mining Boom

    As part of its pollution clean-up, China, which controls 90 percent of the global market, is studying the introduction of new taxes and regulations for rare earths in the second half that are forecast to drive prices higher.
    Jun 4, 2014. 05:37 AM | Likes Like |Link to Comment
  • Does China Really Have 1,000 Tons Of Gold Locked Up In Shadow Financing Deals? [View article]
    I think you are right, but for the wrong reasons. On #1, you may be right, but I will give the WGC their estimate.

    On #2, Chinese are using copper, steel and other industrial metals for collateral. Gold is a far superior asset especially because if debts go bad in China, you would expect industrial commodities to plummet more than gold.

    On #3, they do not care what they pay for collateral because the goal is to get credit. What they need is an asset that let's them access credit. These borrowers face black market interest rates of 20%+ or buying copper or gold (maybe at a premium) to get a loan for far lower interest.

    Why WGC report is not very important in the long run: that gold will never leave the Chinese banking system. Banks will take the collateral and hold it or it will move into the hands of Chinese investors, consumers or the PBOC. It might depress prices and demand, but only temporarily. Whereas copper or steel face a structural decline in demand if there's a major financial crisis because this will accelerate the rebalancing of China's economy.

    Another reason not to worry about it: rehypothecation. If you showed me proof there are 1000 tons of gold used in financing deals, I would still not believe it because there is already evidence of borrowers using the same collateral multiple times. Maybe there is only 100 tons, but 1000 tons on paper. We don't know. Chinese in at least one case in Chongqing even rehypothecated a whole office building.

    Finally, if there is a major crisis, the yuan will depreciate. The government will print money or deplete its reserves to bail out the system, which results in yuan depreciation. Since gold is easier to buy than foreign currency, gold will be a popular asset. Also, stocks are unpopular and home prices will tumble if a crisis erupts here, which again is favorable for gold.
    Apr 20, 2014. 01:05 AM | 5 Likes Like |Link to Comment
  • Why China Buying Gold May Be Bad For Gold's Price [View article]
    China prefers gold to Treasuries because Treasuries have political strings attached while gold does not.

    However, one has to wonder about the logic of selling your reserves to defend the currency. As the Thais found out in 1997, if you have a peg and sell your reserves you are depreciating your currency, not defending it. It's possible to defend the currency if the government chooses the path of hyperdeflation, but history shows that currency depreciation is the most common choice.

    If China sells off its Treasuries, it would be to depreciate the yuan against other currencies in order to get out of a deflationary situation. The dollar might even strengthen because the impact of a depreciating yuan would lead to all Asian currencies depreciating. Those Treasuries would catch a bid.

    The PBOC will keep their gold holdings secret until they have decided the yuan is oversold, then they will announce their gold holdings. The result will be the end of yuan selling and a far more competitive economy with a very strong hard asset backed currency.

    I do think Chinese gold buying could be a problem IF China has a crisis and consumers stop buying. However, this requires them not to view gold as safe haven asset. In China, it is much easier to buy gold than it is to buy U.S. dollars, so if the yuan depreciates, gold is likely to find buyers. This may be the case in many emerging markets as well.
    Feb 21, 2014. 03:08 AM | Likes Like |Link to Comment