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  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    As a skeptic, my main concern is not whether or not the buildings physically exist, but whether or not XIN is the holding company. There have been episodes of forged documents filed at the CCP level for some of these companies, and given the expertise of your typical US-based investor on the intricacies of the Chinese bureaucratic system, it's quite possible that an extremely small minority have any idea whether or not this company truly exists. It's easily imaginable that title documents have been forged, and since no Chinese people are hurt by such a sham (this is a US-listed only company), no one that actually knows how the system works would have any incentive to whistleblow for the sake of US investors - unless they were short-sellers with a heavy incentive to short the stock.

    There have been recent documented instances where due diligence in the form of an eyeball check have been wholly inadequate to ascertain the veracity of the company. I've yet to come across any definitive argument that would settle any doubts as to whether or not XIN holds the buildings in question.
    Jul 20 04:22 AM | 1 Like Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Jared,

    Agree that a straight-on comparison with REITs is not apt. However, in the US, real-estate via publicly traded companies is generally limited to the REIT space, meaning that XIN, if it goes this route, will be competing with them and their 10% dividends for attention.

    There's also the question about expertise and etc...what does a Chinese real estate developer have over a US real estate developer in the US? It's a good move for legitimacy purposes but overall a questionable business move.


    Howard,

    Thanks for the compliment. Just out of curiosity, where are you getting the 47% short interest? On nasdaq, I see this company having a short interest of around 300,000 shares, or less than 1% of float. There is every indication that short sellers are simply not present in this stock at this time.
    Jul 5 04:34 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Thanks for the thoughtful reply.

    I just want to make clear that the "best case scenario" I wrote about is only applicable IF XIN is a fraud. I think it's otherwise obvious that for bulls any scenario where XIN is not a fraud would be a much better scenario :).

    On the US land purchase, that would make sense on a lot of grounds, especially since this is a US-traded-only company. Personally I would wait for it to actually occur, although I would suspect that by that point it would be far too late to participate in XIN's rise when and if such a transaction occurs.

    Still, if XIN actually went this route, it would then become a quasi-US-REIT. I don't participate in this space, but it is my understanding that REIT dividends are usually around the 10% range. That would put another question on XIN's valuations outside of the fraud scenario. Furthermore, if the stock doubled so that it sported a more healthy 5 P/E, then its dividend would fall further to around 2-3%.
    Jul 5 02:37 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Jared,

    Thanks for this followup article. As a follower of the thread that originated from your original post, I can certainly see how you've taken most if not all of the constructive feedback into account before posting this latest article.

    Your article is a great perspective on the bull case for this stock. Personally I remain unconvinced for the following reasons:


    1) The Citron research hit a company that was fairly valued by the current standards for Chinese real estate developers - it sported valuations more or less in line with the rest of the group. XIN is far below this standard, making it unappealing for any short seller to go public about a short position - usually these short sellers are doing themselves (and only themselves) a favor by publicly proclaiming a short position, as the instance of proclamation is usually when they make the largest profits. It would make sense for short sellers to attempt to hit more fairly valued companies first before hitting the bottom of the barrel.

    Citron also does not quite have the reputation for due diligence as Muddy Waters, which is another consideration.


    2) XIN's current rise from penny stock status reflects this reality - if a stock is too cheap for a short seller to profit with a position, that leaves only the bulls in the playing field. The valuations are extremely attractive for value investors, and with a dearth of short-side interest, market action would tend to favor a large appreciation in the stock price.


    3) Again, I take issue with your statement:

    " XIN announced a hefty quarterly dividend of $.04 per ADS (totaling .16 per year, or more than 5%). This represents a substantial outlay of roughly $12 million dollars, which is very atypical behavior for a company that is overstating its financial position as said companies usually hoard cash to stay afloat."

    This cash outlay has to be compared to the initial cash inflow resulting from its IPO. This dividend is extremely small in comparison, and can be sustained for decades from IPO proceeds alone, and is thus relatively insignificant from the perspective of the company:

    http://bit.ly/NaKqLn

    "We estimate that we will receive net proceeds from this offering of
    approximately US$224.9 million, after deducting underwriting discounts and
    commissions and estimated offering expenses payable by us."


    If this company is a fraud, the best case scenario would be for it to continue to issue this tiny dividend until its reputation recovers. Once it does, the company could cease the dividend under the pretense that reinvestment would be far more attractive in creating shareholder value. Then, play the same game that Sino Forest played for decades, i.e. issuing more debt and stock for a phantom company with the intent of lining the pockets of the fraud perpetrators.

    Also, regarding the buyback, again, the shares that were bought back do not have to be publicly traded...almost all of the buyback could have been a private transaction. If it involved phantom cash in the corporation, it could have been nothing more than a simple accounting maneuver with private stakeholders to make the stock look more attractively valued.
    Jul 5 12:17 PM | Likes Like |Link to Comment
  • 8 Reasons Why Gold Could Face Downward Pressure [View article]
    Apologies should probably be on my end, it's been a while since I've participated in these forums and thus I sought clarification in case I was missing something. Cheers.
    Jun 15 02:17 PM | Likes Like |Link to Comment
  • 8 Reasons Why Gold Could Face Downward Pressure [View article]
    Mr. Viswanathan,

    Appreciate your article and your feedback as it lays down an interesting perspective on the reasons to buy or sell gold.

    Correct me if I am wrong, but this article seems to be based purely on a trader's perspective. Much of your article cites supply and demand flows to justify market movements, which is ground in a very convincing logic, as of course greater demand outflows and supply inflows would cause the price of gold to fall.

    However, the article doesn't seem to address any fundamental reasons as to why to hold gold. It talks about Indian jewelry demand, central bank demand, and Chinese demand, but doesn't necessarily address why any of this demand exists in the first place. It also talks about greater supply without addressing where the majority of this new supply is coming from (China).

    Interestingly enough I think the answer to "what is this fundamental reason to hold" is held inside your statement:

    "Gold is never for the long investor. Gold is good as an insurance & as a medium term hedge against inflation. But, in the long run it underperforms stock markets. In fact, great long term investors such as Buffett or Graham would scoff at gold holdings as an investment."

    First off not sure what is Graham's position on gold - Buffett of course has been quite vocal about it. However, nearly every statement Buffett has made deriding gold can be seen to hold true if you replace the word "gold" with "money" - Buffett derides any innately non-productive asset in comparison to a productive asset. This is important in that money itself is usually not seen as an investment, but as a foundation upon which to make investments.

    Second, Buffett is a great investor, no question, and I derive most of my investment philosophy from his sources, however, Buffett is also an extremely nationalistic mouthpiece for the US. Given the worldwide demand in gold, and given the recent significance of non - Western - aligned countries (especially China) in shaping this demand, and given the UTILITY of gold - and it currently only has two major types of utility: 1) jewelry, and 2) monetary - gold can be seen as not only having a profile as a widely held and widely traded commodity, but also, because of its ties to something as fundamental to government legitimacy as money supply and money creation, becomes extremely political.

    Analyzing the political positions of the major gold players IMHO thus becomes central to analysis in gold inflows and outflows. As money is often equated to power, it is interesting (if you consider gold to have good potential as a type of money) that China, which is often seen as the major contender to usurp the US's position as the lone superpower, is a bottomless pit for gold consumption AND production, whereas in comparison demand and supply in other countries has been relatively feeble. It is also interesting that this trend becomes stronger and more evident the farther away these countries are from China. This culminates in comments from central bankers in the West mulling the use of gold as a monetary stopgap for its fiscal problems, i.e. net-selling gold.


    To sum up my comments:
    1) Money is not an investment, but a foundation upon which to invest. Anyone buying gold as opposed to any fiat currency is questioning the strength of this foundation.

    2) Money is extremely political, and can be seen as a measurement of power. Currently power is measured in dollars, but what if someone or something challenges this status quo? What would then become the measurement of power? My answer to this question is gold, and it seems to be the exact same answers central banks give in hushed whispers around the world. This reasoning has held true throughout the past 100 years as evidenced by central bank holdings, and even more so beforehand when quantities of gold was seen as oftentimes the only legitimate unit of exchange.
    Jun 15 01:59 PM | 1 Like Like |Link to Comment
  • 8 Reasons Why Gold Could Face Downward Pressure [View article]
    ..."severe inflation could be good as investors seek ways to avoid corporate bankruptcies."

    I'm not sure I follow this logic - perhaps you can proffer an example. From my understanding, severe inflation would probably be an engineered solution FOR bankruptcies of any kind, first and foremost that of the government. For corporations to face risk of bankruptcy, they would have to have outsized debt to begin with, which does not seem to be applicable to any sector except financial. Agree with the rest of your comment.

    My points are related to US stocks - I cannot comment on Europe.
    Jun 14 11:23 AM | Likes Like |Link to Comment
  • Hyperinflation And The Fiscal Case For Gold [View article]
    If it was easy everyone would be making money. :)
    Jun 6 02:22 PM | 1 Like Like |Link to Comment
  • China's trade data showed surprising weakness, with its trade surplus widening to $18.4B in April from $5.4B in March. Exports were up 4.9% (vs. 8.5% consensus) and imports were up just 0.3% (vs. 11% consensus). It's "a wake-up call for policy makers to do more to stimulate domestic demand, and is likely to lead to further elevated fiscal spending and monetary easing," according to a Credit Agricole note.  [View news story]
    This emphasis is just bizarre. Most countries would consider a net increase in exports to be surprising strength in trade data, but apply this logic to China and you have to flip it around for some unknown and probably politically motivated reason.
    May 10 10:07 AM | Likes Like |Link to Comment
  • The next economic boom, writes Daniel Gross, will be created by the efficiencies unleashed by America's transition from an Ownership Society to a Rentership Society. It's not just housing - citizens are getting used to the flexibility of renting across a whole range of goods. "The U.S. economy needs the dynamism that renting enables as much as - if not more than - it needs the stability that ownership engenders."  [View news story]
    LOL, welcome to serfdom America.
    May 5 04:11 PM | 2 Likes Like |Link to Comment
  • Are you seeing this where you live? WSJ says stunned home buyers are finding that bidding wars are back. Unlike the big demand of the bubble years, this trend typically is driven by lower inventories of homes listed for sale, but at least a few giddy sellers are pocketing nice profits. Enjoy it while you can, housing bears say, because the market is still dismal and will remain so for a generation.  [View news story]
    Agree that most of the article was rather fluffy. The one key quote that made it "relevant" to the US as a whole is sourced from the NAR, another dubious quality:

    "An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday."
    Apr 30 12:18 PM | 1 Like Like |Link to Comment
  • Home prices aren't just not rising any time soon, Case-Shiller Index co-founder Robert Shiller says the whole notion of home ownership is undergoing a sea change that may last “for many years." Americans today lack a "success mood," he says, less enamored by the American Dream of a house in the suburbs. "The anxiety outweighs the [low] interest rate."  [View news story]
    It's interesting to see so many people trying to time a bottom in housing these days.

    All I get from Shiller here is that he doesn't see a catalyst for another bubble, and that housing prices have finally reached a "normal" level. That should be good news to most people.
    Apr 28 01:04 PM | 1 Like Like |Link to Comment
  • Are you seeing this where you live? WSJ says stunned home buyers are finding that bidding wars are back. Unlike the big demand of the bubble years, this trend typically is driven by lower inventories of homes listed for sale, but at least a few giddy sellers are pocketing nice profits. Enjoy it while you can, housing bears say, because the market is still dismal and will remain so for a generation.  [View news story]
    Good point. Regardless, we know housing is what the Fed is targeting more than anything else, so it is encouraging to see that their efforts are having an effect.

    I think the Fed will risk significant inflation to see housing return to some semblance of normalcy, especially where debt ratios are concerned.
    Apr 28 12:53 PM | 1 Like Like |Link to Comment
  • Affects Of A China Real Estate Crash [View article]
    There's no "official" reason to doubt the earnings range, as I am referencing the CIA:

    GDP - per capita (PPP):

    $8,400 (2011 est.)
    $7,500 (2010 est.)
    $7,000 (2009 est.)
    note: data are in 2011 US dollars

    http://1.usa.gov/I1GGrZ

    Even if you take out all PPP considerations and just use the "official exchange rate", you get a number above $5000 per capita. Again, this is according to the CIA.

    The fact that there still is a huge portion of their population earning substandard wages means that there will be continued downward wage pressures in the developed world. Regarding real estate prices, this means that these people will more than likely experience much more pronounced wage growth than other segments of the Chinese population, to say nothing about the developed world. This would translate to a continued, pronounced appreciation in all consumer goods, including residential real estate. This trend is counter-balanced by the fact that 200 million people in China is not even close to 20% of their population.

    If oil prices do collapse, I would consider that to actually be one of the brightest pieces of news for the world economy outside of some sort of technological revolution that put the entire world back to work profitably.
    Apr 25 01:06 PM | Likes Like |Link to Comment
  • Affects Of A China Real Estate Crash [View article]
    1) The "average" Chinese person is now earning somewhere between $5k and $10k per year (depending on how you calculate it).

    2) It's very easy to apply what we know - in this case metropolitan real estate prices - to what we don't know - in this case real estate prices throughout China. Cities like Shanghai and Beijing do indeed have a lot of elements of a top-tier metropolis, but they are not at all representative of living conditions throughout the country. China has *just* crossed the line between majority urban and majority rural. It's important to maintain that perspective, as it is easy to think that all of China is one gigantic Guangdong SEZ, which it is not.

    3) If Chinese GDP slows to 4%, and that is where the jobs are at, then I would shudder to think what would be happening here in America and in Europe. One possibility I envision is that oil prices become so prohibitively high that "globalization" completely shuts down - that would cause many jobs to migrate back to the US. However, one thing to remember is that most of high-tech is manufactured in Asia now, and that many tech firms have lamented that the US simply does not have sufficient human capital to move those jobs back here - at least, not at current wage levels.
    Apr 21 02:42 AM | Likes Like |Link to Comment
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