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  • Why I See Gold Headed For $880 [View article]
    Ben..

    Thanks for your reply. I apologize I read the wikipedia entry for the Spratly Islands Dispute fully expecting you to be misled. That is not the case. I guess it is another example of why you do not want to rely solely on the Wall Street Journal for your information.

    I don't have time for anything else.
    Jun 29, 2015. 01:04 PM | 1 Like Like |Link to Comment
  • Why I See Gold Headed For $880 [View article]
    Ben..

    Thank you for your reply to my comment.

    I read the wikipedia entry for the Spratly Island Dispute. The Wall Street Journal has never pointed out that China does have a valid historical claim. My cousin, the law professor would be shocked at my quoting wikipedia.

    I apologize for my ignorance.
    Jun 29, 2015. 01:00 PM | 2 Likes Like |Link to Comment
  • Why I See Gold Headed For $880 [View article]
    Ben..

    Your comment is exactly what the Beijing government states. And it will have trade effects.

    But, every major economic action that China takes has a military purpose as its primary motivation. The seizure of the South China Sea opens up the area to Chinese oil & gas drilling.

    Have you seen their estimates of their share of the global offshore rig market? They are projecting a huge jump. Where are they going?

    There gas deal with Russia is all designed to be able to withstand a Western trade embargo.

    My suggestion is to read one of the fine books on the economic policy of the third Reich. If you are planning for war you need to line up how you are going to continue to import irreplaceable raw materials, equipment and food.
    Jun 29, 2015. 10:29 AM | 3 Likes Like |Link to Comment
  • Why I See Gold Headed For $880 [View article]
    Dear Reader..

    I was impressed with this article. I have reached the opposite conclusion from the exact same set of facts.

    The future price of gold has little to do with global monetary policies. There are two great demand sources for gold. The first, are the inhabitants of countries with unstable governments. India and China both have the potential for future instability. Both of these countries are growing at 7% per year.

    Secondly, there are the central banks of dictatorships that are planning to be militarily aggressive. That includes Russia, Iran and China. These countries need to accumulate gold to pay for the continued movement of supplies if they were subject to trade embargoes.

    Why do you think China is building all those roads and railroads to other countries? I forgot they are being charitable.

    Since energy prices are substantially lower than their historical mean relative to production costs I suspect silver and platinum are the underpriced commodity.

    With India and China controlling over 60% of the growth of global commodity imports it seems with 7% growth rates commodities are going to move up.

    One more thing. I have never seen a profitable chartist account.
    Jun 29, 2015. 09:14 AM | 10 Likes Like |Link to Comment
  • China's $370 Billion Margin Call [View article]
    China..

    My sheet shows the monthly close versus the intermonth high.

    The last drop was 2011.12 (-23.8). 3mos later +2.9%. 6mos later 6.3%

    The previous was 2010.05 (-24.5). 3m later +12.9%. 6 mos later 26.5%

    What needs to be looked at is the monetary environment. Investors are making the same mistakes they did in 2009/2010 in the U.S. market.

    Market participants are not rational. They herd for a variety of reasons which you can read about in the latest behavioral economics book by Richard Thaler "Misbehaving."

    If China is unsuccessful in the interest rate drops this weekend they will just turn the screws in another 30 days.

    I would advise investors to look back last year on any author's claims of expertise on China or any other investing subject. It is an eye opener.
    Jun 29, 2015. 08:46 AM | 3 Likes Like |Link to Comment
  • China's $370 Billion Margin Call [View article]
    Dear Reader..

    Think about this. The Shanghai Composite is down 20% from its intermonth daily high. If the author was keeping spreadsheets with the numbers he would know that this is a historically common experience.

    He would also know that over almost any future time frame it was negatively correlated with future price movement. Thus, investing in the China market after a drop of 20% was profitable.

    There are large swaths of Chinese securities that are selling at enormous discounts to U.S. securities. Since China has a personal savings rate of over 40%, with retail sales up 10.1%, and auto production of 19 million.

    They should copy our economic management. That would be good. We would not have to fire a shot.

    My review of margin numbers for the U.S. market indicates it's extremely difficult to extrapolate any useful information from the data.

    My choice in this area is First Trust AlphaDex China (FCA 25.89). I have no connection to the company. You can read their whitepaper on their selection process on their website.

    You can also download the 50 issues to a spreadsheet and sample what you are buying. When buying in a country with a zero capital gains tax and a regular corporate tax rate the owners budget to cash flow and not taxable earnings. Check out the multiple to cash flow. And then think about that same multiple on the U.S. market.
    Jun 28, 2015. 08:53 PM | 3 Likes Like |Link to Comment
  • Did China's Equity Market Finally Top? [View article]
    Scoots..

    The difference in p/e ratios might be relevant, but they are not.

    FXI (46.79, S&P 2109), which represents China large cap stocks is trading at 12x p/e and more importantly, at 4.1x cash flow.

    Guess what, the S&P is trading at 18.6x trailing p/e and at 9.4x cash flow.

    The writer picked all this up from the media which is always looking for a sensational statistic to perk up their viewers.

    I presume he is using a p/e of the Shenzhen Composite which is a junior variety of our Nasdaq Composite.

    My first comment would be to always pull down the holdings of any index you are thinking of buying. My second comment would be that someone who holds himself out as an expert on China investments should have been able to predict the slim possibility that the Chinese markets could explode to the upside.

    When I look at the revenue growth rates of the Nasdaq I see companies in many cases at barely double digits.

    These companies that are hot on the Shenzhen are growing revenues in excess of 25% and some at 50% per year. Of course, this is easier if your country has 1.3 billion people and incomes are rising at nearly 10% per year.

    I will leave at that.
    Jun 21, 2015. 03:41 PM | 1 Like Like |Link to Comment
  • Billions And Billions Pour Into India And China [View article]
    Bob..

    85% of autos sold in China are done with cash.

    What is the percentage in the U.S.?

    What is the loss rate on auto loans in the U.S.? It's almost nothing even during 2008/2009.

    Wages are rising near 10% per year in China.

    The comments or lack of comments on this article is incredibly informative.

    Look back to 2009 and see the total lack of realization that readers of SA had missed the beginning of one of the great post World War bull markets.

    In China you have had an enormous market move that SA readers have missed. Instead of asking themselves why and what might explain such an opportunity they seek denial of the event.

    China and Singapore have increased the standard of living of their populations by an enormous amount over the last 20 years. Singapore has a GDP per capita greater than the U.S. In 1960 they were at the level of Ghana.

    China is still at 20% of U.S. GDP per capita and needs to be compared to Japan of 1960. This is just the beginning. High growth economies are by definition are undergoing state led development. Mistakes are made. They are meaningless partially because a road built now will cost 50% more in 10 years as a high growth economy moves forward.

    Good luck on your investments.
    Jun 11, 2015. 07:32 AM | 1 Like Like |Link to Comment
  • Billions And Billions Pour Into India And China [View article]
    Dear Reader..

    This is the best article I have seen on China in the last 2 years. All of the points the author makes can be verified.

    The same facts were true in 2013. See my instablog seekingalpha.com/autho... for an earlier rendition of these variables.

    I prefer FirstTrust AlphaDex China (FCA 27.80, S&P 2076). This is a 50 stock portfolio chosen by an algorithm created at the Univ of Chicago from the 630 H Shares trading on the Hong Kong Stock Exchange. I have no connection to FirstTrust.

    This portfolio has a multiple to cash flow of under 2x. If the portfolio doubles in price it would be selling at 4x cash flow. The S&P is at 9x cash flow.

    This is how you make money in financial markets. It's called mean reversion.
    Jun 9, 2015. 08:56 AM | 3 Likes Like |Link to Comment
  • Margin Debt Reaches New All-Time High - Bullish Or Bearish? [View article]
    Patrick..

    Great comment. As I was reading this I was thinking the author was skewing this article intentionally regarding the margin buying.

    And since I stopped my work to write this comment let me say that none of us know when one of the major global central banks will have to begin tightening. The markets have never made major moves in anticipation of tightening since the "real" economy is always booming at that moment.

    The real threat to any portfolio now is the coming interest rate move. That is different than credit tightening. Good luck.
    Jun 6, 2015. 01:29 PM | 2 Likes Like |Link to Comment
  • Good Intentions Do Not Necessarily Give Good Results [View article]
    Dear Reader..

    I am working with international statistics on a daily basis. I can not help but notice that there are some countries that interfere with "market forces" on an aggressive basis that have achieved the highest levels of increases in their economic well being.

    At the two ends of the spectrum are Singapore and China. Both engage in an enormous effort to make sure that the bottom 20% of their population shares in the increases in economic welfare.

    A hike in the U.S. minimum wage might have some unintended consequences for the food service industry. Already eating in a fast food restaurant is a poor economic and health choice. You are lucky if you are getting 20% or 25% of the full purchase price in food costs for each dollar.

    On top of that the nutritional content of restaurant food is appalling. You are not only incurring current costs but future costs in lost wages and quality of life issues in retirement.

    The tone of the business media equating interfering with "market forces" as equal to "socialism" might be misplaced. It is what we were taught as children.

    I have noticed that writers with this stance haven't done too well with their investment advice historically. But, the readers of Seeking Alpha don't seem to ever take the time to check out the historical record when it is available. It is truly one of the strengths of this blog.
    Jun 6, 2015. 01:08 PM | 3 Likes Like |Link to Comment
  • Bernanke Is Underwriting The Wealthy - Part II [View article]
    Dear Reader..

    I highly recommend that every reader of this post go to the Ben Bernanke Blog and read his short summary on "Monetary Policy and Inequality." It is just over 1 page and summarizes the views of over 90% of the experts in 2015 on central bank monetary policy.

    I took economics classes in the 1960's. What is written here is what was taught at that point in time. In fact, in my biology class when they showed a cell they had one or two dots and the rest was empty.

    One of the quotes in Bernanke's blog is "monetary policy, if properly managed, promotes greater economic stability and prosperity for the economy as a whole, mitigating the effects of recessions on the labor market and keeping inflation low and stable."

    Not only are the author's free market views extreme they are a threat to our democracy. The Weimar Republic was unable to cope with the economic restrictions of the Versaille's Treaty. The unemployment rate went to 30%. No democracy can survive allowing market forces to make adjustments.

    Another Bernanke quote from the blog is "if policymakers took more responsibility for promoting economic recovery and job creation, monetary policy could be less aggressive."

    Anyone who works with global market economic statistics realizes there is little magic to the long term disposable income increases in Singapore, China and South Korea. All of these countries started with nothing. They all "upskilled" their populations as their incomes grew.

    That means they increased the percentages of their population with STEM degrees. Even if you don't practice in the particular field your degree is in you can function in the modern economic system. It is up to the government to make this growth happen.

    I got into commenting on Seeking Alpha in 2009 because of an article by this author. His articles have had an effect on the investment policies of his readers. It has not been a good experience. Investing with the direction of monetary/liquidity policy has been the key to good investment returns.

    I wrote an instablog on SA in June of 2013 on China in which my major point was the Peoples Bank of China had the determination and the ability to turn monetary/liquidity policy in China and it would set off an investment boom.
    Jun 3, 2015. 10:05 AM | 3 Likes Like |Link to Comment
  • Chinese Stocks Are Cheap, Hong Kong Stocks Are Even Cheaper [View article]
    Ernie..

    I think the author and many commentators may be confused.

    EWH is an ETF which represents Hong Kong Companies. The Hang Seng Index (^HSI) follows these companies.

    The H shares are Chinese companies that trade on the Hong Kong stock exchange. There are over 600 of these companies that trade on the Hong Kong exchange. The index that follows them is called the Hang Seng Enterprises Index (^HSCE). The First Trust AlphaDex ETF (FCA) is a 50 stock portfolio chosen from this index.

    It's the difference in valuation of the H Shares to the Shanghai Composite Index (^SSEC) which is what you are hearing about.

    I am not connected to FCA, but you can download a white paper on their techniques and a spreadsheet of the individual companies. Just check a few out and read the annual reports. Alibaba failed to meet the listing requirements on the Hong Kong exchange.
    May 23, 2015. 08:06 PM | 1 Like Like |Link to Comment
  • Chinese Stocks Are Cheap, Hong Kong Stocks Are Even Cheaper [View article]
    plmac...

    The author was not clear that he was recommending H shares. These are Chinese companies that trade on the Hong Kong Exchange. The Hang Seng Index follows Hong Kong companies.

    My recommendation in this space is the First Trust AlphaDex China ETF (FCA). This is roughly an equal weight portfolio of 50 Chinese companies out of the roughly 600 that trade in Hong Kong. They use an alogrithm which you can read the white paper on their website.

    There is no discussion here of monetary policy. While valuation is the most important factor in investing it has always been the case that investors who fight a negative monetary environment will suffer even if the valuations are low. China will continue to rise because the monetary backdrop is bullish and the H shares are cheap on a relative basis to the other major markets
    May 23, 2015. 07:38 PM | 3 Likes Like |Link to Comment
  • Greece Has Won This Round [View article]
    Cutric..

    When Greece leaves the Euro and adopts the new Drachma that currency will immediately devalue by roughly 40% to 50%. This will set off enormous inflation in imported goods and services. Long term lending will come to a halt.

    Just look at Russia. Wages are down 10% and prices are up 14%. That lowers the living standard by 24% and, you as a government, never raised taxes or lowered pensions.

    On the other hand Greece is a great travel destination. Being part of the Euro has made a trip to Greece for foreigners artificially high relative to other choices.

    The drop in the Drachma will immediately set off a boom in tourism. Tourism is a high employment economic sector and requires low skills. This is why China subsidizes foreign and domestic tourism.

    As a side, if you want to know what good economic policy looks like you just have to ask yourself what China is doing.

    China uses tourism to employ the older generation that lacks STEM skills.

    These minority parties in the PIGS can sell their follower's their fantasy view of the world because there are no simplistic real life examples of the economic consequences.

    I would think Greece leaving the Euro would reduce the political power of these fringe movements.

    Keeping Greece in would increase their power.

    On your second point most Greek debt is held by central banks and international financial institutions. It will have little economic effect. I think bank regulations would not allow banks to hold Greek debt without a full reserve.
    May 23, 2015. 07:19 PM | 1 Like Like |Link to Comment
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