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Vincent Fernando, CFA

 
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  • French Publishers vs. Amazon, Google [View article]
    No need for anti-french quips in an otherwise smart article my friend. Your stereotypical depiction of France just makes yourself look ignorant. You clearly have no idea what France is.
    Sep 1 03:54 AM | Likes Like |Link to Comment
  • Long Term Investing Appears to Have Gone Out of Fashion [View article]
    from Paul H:
    "You think the U.S. will disappear.

    Which nation is so much better off?

    China is expanding their fiat currency at a rate 10x faster than us.

    Japan, the #2 economy, is having issues similar to us.

    Just because a speculative bubble burst, you think the world's largest economy will just shut down?

    Sure, we might not be able to live as large (although anybody with money to invest is doing okay here) on average, but life in the U.S. is still better than any place on Earth."

    The US will continue to innovate and will become a stronger nation. People who think it's over misunderstand the US's most powerful feature- it's ability to change on a dime, adapt, and innovate. That innovation is still happening and always will as long as our silly government doesn't lock down the economy with rules. That's what got Japan stuck in the mud once institutions their calcified around the economy. China had a nice clean slate to work off of due to their very troubled past, but trust me they have their own problems which are much worse than the US and at some point their institutions might calcify as those in Japan did, or simply blow-up. I hope they manage them and become a prosperous nation with a high standard of living for the average man, but they will have to run past some pretty nasty economic and social land mines in the process.
    Aug 10 02:05 AM | 3 Likes Like |Link to Comment
  • China's Bull Market: Massive Underlying Risk Still Exists [View article]
    Keep in mind while some Chinese companies may be "too big to fail", it doesn't meant that shareholders can't get wiped out. Thing of Citi or AIG in the US.

    I also wouldn't go beating the government knows best drum too much Dian Chu, though thanks for the comment. Free market forces are what brought China up, once they were allowed to increasingly flow through the country. If anything China is a lesson in how important freeing an economy from government meddling can be. China still has tons of meddling, but luckily an industrious population is build the country from the ground up. I recommend you read China Dream by Joe Studwell for great detailed descriptions of how your ordinary chinese built todays stellar growth once they were freed to do so, while government merely took the credit for "directing them to do so". The average chinese man with the freedom to make economic decisions is what is making China powerful while the government is taking the credit.
    Aug 10 01:58 AM | 1 Like Like |Link to Comment
  • Housing Bust: Speculators Sounded the First Alarm, Not Government [View article]
    Interesting.
    Aug 9 11:25 AM | 1 Like Like |Link to Comment
  • Goldman's China Portfolio: Professional Investing or Day Trading Rag? [View article]
    Noted Mr. Lewis. I would just add that I would hope that the QFII investors were doing more than what you say. But I agree they are pretty much doing that.
    Aug 9 11:24 AM | Likes Like |Link to Comment
  • How You Know the Chinese Market Is in Trouble [View article]
    Ricard, sure good luck to you as well. But just note the bullish Goldman strat piece I took issue with itself even says that valuations quite high, even by the standards of the last few years. I'm saying there aren't any fundamentals to stand on anymore. Maybe there are technicals if that's how you buy stocks. But even technicals will matter little to me when its really just about what the government decides to do with their bubble. So the bull case is just to say you think the government will stay loose despite the fact that the longer they wait the worse the crash they are setting up. But if you are happy with buying on that, fine.
    Aug 7 07:20 AM | 1 Like Like |Link to Comment
  • How You Know the Chinese Market Is in Trouble [View article]
    I see what you are saying about volatility, but the point to me is not so much the magnitude of the recent falls, but more what the falls are coinciding with- the chinese government considering measures to stop potential bad lending. You have a market falling on good long term ideas for the chinese economy. And on the flip side, the market is supported by the belief that the government will continue with pretty irresponsible policies toward lending. For those who are just punting, this doesn't matter I guess, though it would still worry me, but what I am saying is that it is hogwash to call putting money in the chinese market "investing" right now. And this goes back to my criticism with the Goldman strategy piece mentioned in the article.
    Aug 6 10:51 PM | 1 Like Like |Link to Comment
  • How You Know the Chinese Market Is in Trouble [View article]
    If you don't see anything new, I think you missed the fact that this article was a continuation from my previous article which goes through a very recent Goldman piece and rebuts it in depth. researchreloaded.com/c...

    Such an open and direct public rebuttal of Goldman's China market strategy view won't exist anywhere else on the net, and I use Goldman's own words to support my view.
    Aug 6 03:35 PM | Likes Like |Link to Comment
  • How You Know the Chinese Market Is in Trouble [View article]
    I have been to China on multiple occasions both in a business and holiday setting and bear no ill will towards the country. I say nothing in my piece to accuse china of being too communist or that its numbers are suspect. I don't know where this is all coming from in terms of comments. Note I actually say that I believe the market is fearing a Chinese government which actually makes a better financial system by reigning-in lending. I hope the government reigns in lending for the sake of the country.

    My piece is also not simply screaming that the market should come down just since it ran up so much this year. Note I link to a previous article of mine where I do a detailed rebuttal of the latest Goldman portfolio strategy, maybe skeptics of my piece should take a look at it. The chinese market looks stretched even by the measures of a stated bull, the Goldman strategy piece's author. By his own numbers it is shaky and he basically admits he's just hoping for the government to support the liquidity side of things. He admits there is basically little of a valuation argument left in favor of current levels. Finally note a veteran China hand, Andy Xie, is also linked to in my article, and also sees the market as over-priced and a dangerous bubble. I recommend anyone who is bullish go and read that piece as well. Could it keep running up based on people continuing to pour in. Sure. Great if you are able to capture further upside. But I think it's a very risky proposition, even as a punt. And should basically be completely ignored if your aim is to make an "investment" rather than a simple punt. Anyways, thanks for the back and forth.
    Aug 6 02:42 PM | 1 Like Like |Link to Comment
  • The Broken Window Fallacy: More on 'Cash for Clunkers' [View article]
    fletchermic: "The new window DOES have more value IF it is more suitable."
    Sorry, this misses the point. I don't say that the new car/window doesn't have more value than the old one. I say that its better to spend money on a new asset without destroying an old asset that has remaining value. You can spend money on a new asset AND still have the old asset, rather than simply spend money on a new asset but LOSE the old asset. That is the key point to take away from the parable.

    The parable also doesn't require that the new window be of exact value as the old one. The main point of the parable is to highlight the fact that people forget the cost of destroying the original asset and only look at the asset bought with new spending.

    "If the pollution costs averted and oil resources saved is greater than the "driving miles remaining" residual value of the Clunkers, then there is a "net" increase in wealth for the village. If they are not, then there is a net decrease in wealth."
    As I replied above: The resale value of a car will represent its net value, inclusive of its gas inefficiency and problems with being old. As the cars have positive resale values, then unless the entire auto market is wrong then they indeed have a positive net residual value even after deducting for their age and fuel inefficency, which means that as you set up in your quote, and I also say in my article, that destroying them is a net decrease in wealth for "the village".

    I actually think we're on the same wavelength here judging by the logic you outline just above. We can know whether cars still have net positive by realizing they still have positive resale values.


    On Aug 06 12:37 PM fletchermichael wrote:

    > I contest your assertion in response to Truthmeister. The new window
    > DOES have more value IF it is more suitable. What can be argued
    > is that the destruction of the old window is a loss if it still had
    > usable life left in it. But if the new one has more value than the
    > old one had, the village still has a net increase in wealth. It
    > would be preferable to reuse the old glass somewhere else if it did
    > still have value to someone. Otherwise, recycling the glass into
    > a new window pane can at least capture the residual value.
    >
    > The "broken window fallacy" parable entails a trade of one piece
    > of glass for another of equal quality. Ergo, there is destruction
    > of wealth for the village. This is why the Cash for Clunkers is
    > a very imperfect (if not specious) example of the fallacy. A pure
    > example would be if citizens or the government bought up new cars
    > and crushed them just to stimulate the economy.
    >
    > If the pollution costs averted and oil resources saved is greater
    > than the "driving miles remaining" residual value of the Clunkers,
    > then there is a "net" increase in wealth for the village. If they
    > are not, then there is a net decrease in wealth. Also note that
    > unlike the parable where (it's implied) the broken glass is discarded,
    > the Clunkers do have a residual recycling value of refined steel,
    > glass, rubber, plastic, etc. All value is not lost. This must be
    > taken into account in the equation. I don't pretend to know if the
    > final summation is a net positive or negative wealth adjustment but
    > the author of the article totally ignored this aspect and presented
    > a totally one-sided view.
    >
    > A true "broken window fallacy" is the continued procurement of the
    > F-22 Raptor for which we no longer have the enemy it was intended
    > to counter. The plane is virtually useless according to the secretary
    > of defense. That which is not seen is the money that could be diverted
    > to counter an enemy which does exist.
    >
    > I also noticed that the article incorrectly used a citizen vs government
    > argument. This has nothing to do with the "broken window fallacy".
    > Whose pocket the payment comes from is irrelevant. If the whole
    > village pays collectively (via their government budget) or just the
    > shopkeeper individually, the amount of village wealth destroyed is
    > exactly the same -- the value of one window. The government vs citizen
    > payment issue is belongs in another venue.
    Aug 6 02:31 PM | 1 Like Like |Link to Comment
  • How You Know the Chinese Market Is in Trouble [View article]
    Alphameister instead of actually arguing points, you simply blame me for not writing a china buy article early this year or explaining why the market as a whole is a "remarkable value". I've also seen from previous posts that you are long Chinese stocks. I'm not sure what you're trying to accomplish here with such comments. Best of luck.
    Aug 6 09:38 AM | 5 Likes Like |Link to Comment
  • The Broken Window Fallacy: More on 'Cash for Clunkers' [View article]
    No the broken window is not a net gain for the storeowner, even if it was dirty and old to begin with. With all due respect, you are falling for the fallacy right here. The clunkers, despite being inefficient, have a net present value, as easily seen by the fact that they have positive resale values. Thus while they are less fuel efficient, their remaining lives and usefulness still results in a net positive value for the vehicle. Thus destroying the vehicles thus simply destroys this present value. If we weren't destroying the vehicles then it would be far better. We'd still have the government spending its money for people to buy new efficient vehicles, but we'd still be able to use up the remaining value from the old vehicles. Your logic only holds if the vehicles have a net negative present value. But again, given that they can command a resale value, either the entire auto market is wrong, or indeed they have net *positive* value. In this same way, in the economic parable, even if it is an old dirty window, the fallacy still stands as long as the window has a net positive value.
    Aug 6 08:22 AM | 2 Likes Like |Link to Comment
  • Goldman's China Portfolio: Professional Investing or Day Trading Rag? [View article]
    You seem to have found some pretty cheap stock picks, unless they are cyclicals. I'm saying it's pretty dangerous to buy "the market", and that Goldman's piece is far from "investment" material. Not saying that there might not be a good stock pick here or there. Hope the picks work for you.
    Aug 5 01:35 PM | Likes Like |Link to Comment
  • China Gains on U.S. Manufacturing [View article]
    Yeah the US isn't perfect. And it has shown itself to be far less flexible than once believed given the bailouts for companies during this crisis. But come on, it is still far from being china with its huge, government-supported state owned enterprises.

    In terms of new companies, and new jobs: you don't think new companies will start, or successful ones will expand over the next few years? This would fly in the face of 200+ years of US economic history. You want a smart upstart autoplayer: Tesla motors. Healthy banks are also now expanding into the vaccuum left by failed banks. There are tons of smallcap companies doing well, especially in tech and healthcare. New ideas will continue to flourish in the US as long as our government doesn't make it too onerous to experiment with a new business idea. Realize that in early 20th century 60% of americans were working in agriculture. A lot of agriculture jobs were lost when compared with today. But they were replaced by manufacturing and services of increasingly higher value. At the time a lot of people might have bemoaned the loss of agriculture jobs, but in the end the nation was far better for it. The key is to help displaced workers retrain and re-allocate. That's where the money should be spend by government. Rather than bailing out weak companies.
    Aug 5 10:42 AM | Likes Like |Link to Comment
  • Goldman's China Portfolio: Professional Investing or Day Trading Rag? [View article]
    Freya: that's not true I know of pro's who have done well or at least ok through the crisis. You can be long/short, and you can also reduce your long exposure without going to the extreme of 100% cash. Note US treasuries rallied like crazy at one point during the crisis.

    James: I am not doubting Goldman's ability to make money. What I am doubting is the ability for their latest China piece to provide a prudent way for their brokerage clients to make money. Let's look at what they say, not just stop at "Well they're Goldman, so it must be pretty good advice" The point of my article is that we should have some sort of value underpinning our investment decisions, especially if we espouse them to be rigorous and disciplined, and that Goldman's latest China justification is pretty similar to your average retail trader's thinking. Chinese shares are clearly stretched, note the market drops 5% on even the slightest inclination of the Chinese government reducing liquidity.

    I'd be wary of thinking you can feel where the cycle is going without the support of valuation in case you are wrong. And there is no need to feel rushed to invest now. Buying China now is far from the trading opportunity of the decade. There will be far safer times to invest in China. There are also other ways to invest with exposure to China's growth, in other markets. Whatever upside one envisions based on further stretching of already high valuations and expectations, the downside risk is massive right now, risk-reward is far worse than it has been in awhile, and thus the investment case (not the punting case) is pretty weak. FYI I just found support from Andy Xie a long time China watcher. You can find it at researchreloaded.com/c... In either case, I appreciate your feedback.
    Aug 4 03:20 PM | Likes Like |Link to Comment
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