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Amadon

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  • Stocks Sink On Eurozone Debt Worries [View article]
    And it gets worse! Check this article out from Eric Fry.

    At last count, Germany was on the hook for about €1.5 trillion of direct and contingent liabilities. For starters, as James Grant, editor of Grant’s Interest Rate Observer, explains, “There’s the money that the German government has pledged to defend the euro. Such commitments — promised but yet undrawn — include €22 billion for the first Greek bailout, €211 billion for the European Financial Stability Facility, €190 billion for the European Stability Mechanism, €12 billion for the European Financial Stabilization Mechanism and $40 billion for the Securities Markets Program. They sum up to €475 billion, or 18% of German GDP.”

    Next up, the Bundesbank is facing another €698.6 billion of exposure to various peripheral European central banks. That exposure derives from an obscure credit facility known as the Trans-European Automated Real-Time Gross Settlement Express Transfer System — i.e., “Target2.” The Bundesbank’s Target2 balances soared to €698.6 billion in May… from €644.2 billion in April,” Grant observes, “and next to nothing in 2006.”

    Read more: Like a Lead Zeppelin http://bit.ly/MY3TkS


    http://bit.ly/MY3QFX
    Jul 10, 2012. 10:26 PM | Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    Hi Chuck; The link was pointed to a graphic GDP projection from Goldman Sachs Asset Management entitled "Transformation Of The World Economy". The projection shows that the share of Global GDP for Developed Markets (US and EU) will decline from 78% in 2000 to 31% in 2050, a 160% contraction or about 3.2% per year. At the same time Emerging Markets and Growth Markets are projected to increase 1550% and 2100% respectively. My takeaway from this chart is that the developed markets. US and EU. are not competitive with the emerging and growth markets in terms of labor cost, and health, safety, environmental regulations. This is likely to even out at some future time as the emerging economies raise their standard of living and the developed world faces the structural changes of a declining standard of living, which appears to be going on now with lower wages and loss of jobs. I will try to repost the link.
    http://bit.ly/LZVYyw
    Jul 9, 2012. 10:51 AM | 1 Like Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    Would you also consider this projection from Goldman Sachs Asset Management to be biased or based on well known facts that can be observed on a stroll through your local Walmart?
    http://bit.ly/LZVYyw
    Jul 9, 2012. 05:52 AM | 3 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    "Dude, I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger,". I really enjoyed the article and the comments. I agree with the author and I expect Goldman Sachs Asset Management does too, judging from this chart "Transformation Of The World Economy".
    http://bit.ly/LZVYyw
    Jul 8, 2012. 02:47 PM | 1 Like Like |Link to Comment
  • 3 Reasons The Market Could Plunge Next Week [View article]
    For those who argue that the US and EU need to put more focus on growth over austerity to solve our problems I would like to suggest they take a look at this chart from Goldman Sacks Asset Management (GSAM), entitled "Transformation Of The World Economy". The projection shows that the share of Global GDP for Developed Markets (US and EU) will decline from 78% in 2000 to 31% in 2050, a 160% contraction or about 3.2% per year. At the same time Emerging Markets and Growth Markets are projected to increase 1550% and 2100% respectively. How exactly are the PIIGS countries of the EU going to grow with this kind of mega-trend as a background? Are they going to use the loans to grow more olives, and grapes or try to lure more tourist? Do you really think they (and we) are going to transform our economies to compete with Brazil, Russia, India, China, Mexico, Korea, Turkey and Indonesia? If so they are going to need a much larger loan for a longer period of time partly to hire more police to control the rioting.
    http://bit.ly/LZVYyw
    Jul 2, 2012. 10:40 AM | 1 Like Like |Link to Comment
  • 3 Short Candidates Due For A Plunge [View article]
    Thanks. I loved the article. Very well written. I'm joining the other followers. I need to go now and plan some short sales before its too late. I have a bad feeling about the market overall for the next few months. I suspect that the economy in China is going off the rails and they might not loan the Western economies the money we need to keep the dream alive.
    Nov 29, 2011. 11:26 PM | 1 Like Like |Link to Comment
  • Xinyuan Real Estate's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    There is a nice article on Bloomberg this morning about Chinese real estate and the developers. Should be interesting for anyone following XIN.
    http://bloom.bg/urqLWi
    Nov 29, 2011. 01:29 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    Hi,

    Your comments comparing china to Las Vegas and other places where McMansions were built is very interesting and I appreciate the comments.

    Even so, one of your central thrusts - "A book value discount of 76% is the same as selling dollar bills for a quarter each. It makes me wonder how long any business can survive selling dollars for $.25 each" - is quite mistaken, because the business isn't selling dollar bills for that price; instead, investors who already own a piece of the business are selling it at that price.

    Anyways, best of luck with your investing career :)

    Hi Jason, thanks for your comment. I would like to try to defend my statement if I may. I was considering the investors who have bought the stock from the IPO until now are inherently the 'new owners' of a real estate company operating in 2nd Tier Chinese cities. If you read through the transcript carefully you will see that the business originally described in the “Blue Sky” prospectus of 2007 whereas the company would acquire land through auction and build apartments for China's rising middle class seems to have pretty much run its course. Here is what the CFO Thomas H.R. Gurnee had to say.

    “Now on the balance sheet there is no real change in trends here. As of the end of September 2011, the company reported cash and cash equivalents of $525 million compared to $470 million in last quarter end. Total debt outstanding decreased from $318 million at the end of the second quarter to just $304 million at the end of Q3, 2011. “ I agree- The trend is to consolidate all assets and debts into a golden nest egg. The money came from American investors during the boom times of 2007. The land was acquired and some apartments with lovely sounding names were built and sold it seems to 'local investors' who intend to rent them out on terms that do not seem to have a long horizon. Again here is the CFO.

    “These contracts generally call for a 10% down payment upon signature. The second payment of 20% within 30 days, a third payment of 50% six months after contract signature, and the final 20% payment 30 days before delivery. In short, full 100% payment is required within 6 months to 12 months from the signature date and must be completed before delivery of the apartment.”

    “We are highly confident that these contracts would be successful for several reasons. First, we perform in depth credit to extent our buyer’s ability to pay. Second, buyer non-performance terms are highly punitive. Third, we’ve retain substantial collateral that we retain the apartment of course plus any installments made to date. Fourth, it is the lack of a third party mortgage provider in these contracts limits any buyer allegations of any forced mature (nature?) has happened last year or during a period of given the policy changes. And fifth and finally, all of these contracts are absolutely non-cancel bond with no provisions for buyer termination without Xinyuan.”

    My reading of this is that the originators of this plan will have transferred all of these (non-portable) assets to local 'investors', leaving the 'the company with nothing except a highly portable bag of cash, upward of 700M to 1B, by April of 2012 when the 'annual dividend' is announced. If you look at the future plans... well here is the CFO in his own words.

    “Well, that's a good question. We've got a lot of cash and we haven't bought any properties since the end of 2009. So we have a lot of power for potential land acquisitions. If we find several and can execute several attractive land acquisitions, it might lead us, well you talked about dividend. I'm sorry, once we implemented that dividend.

    We didn’t do it lightly, and we want that dividend sustainable and that is our policy from now forward that we will pay the dividend and we hope that that dividend is an increasing dividend year-on-year. And it is not contingent upon project acquisition; I was thinking more the share buyback. On the share buyback, we will watch to see how much money we’re going to spend on new land acquisitions, but on the dividend, we hope to sustain that for the very long-term years and years.”

    OK...
    That sounds to me like he said they have made no new land acquisition's since 2009, and they have lots of cash but I don't see any new projects coming up. I think that means that they are getting out of the real estate business. In fact the CEO, himself made a comment about that.

    Yong Zhang
    “He is commenting that in the Tier I cities the fact well known that prices are dropping a lot. He is wondering will this propagate into the Tier II cities and are we being, so we’re seeing realistic pricing, we are not going to drop our prices.”
    What the CEO is trying to say is that everyone knows that real estate prices are “dropping a lot” in china, just as they are here in the good old USA. Generally known as a real estate bubble. They have 1 project in the planning stage which may or may not go forward, but as the CEO noted it is a tough market now so probably not. The CFO indicated that they may sometime in the future re-enter the land auction market if they felt they could secure it with a loan, meaning they do not want to purchase it with the any of the load of cash the company has accumulated thus far, probably because they feel the risk would be too high.
    Back to my original point. If the company no longer is in the real estate business having sold all of their holdings, and the original business has been sold to investors on the NYSE, and stocks are still trading, then I have to ask myself just what is the business plan. All I can come up with is somebody is selling 'the promise' of dollars for quarters. If you can figure out what else is being earned I would like to know.
    Here is the problem I see and it goes to a sad fact of human nature. It looks as though Yong Zhang the CEO, and Helen Zhang the Investor Relations Spokesperson, and Thomas H.R. Gurnee the CFO, could find themselves on the horns of a 'moral dilemma' come April, 2012. They will be sitting on a huge amount of cash in USD of somewhere between 700M-1B with not much to do except send investors their dividends from now into eternity. I am not exactly sure what the investors could do if they failed in that sacred duty. Maybe they could all get together and form some kind of group action to sue them but if I was a class action lawyer I doubt if I would take the case because I think it comes down to the old saying of 'caveat emptor' (Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud.)
    I hope I have made myself a little more clear. Thanks for taking the time to read this.
    Nov 27, 2011. 11:50 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    Hi Jason; I would like to comment on your post relating to "how could we have known it was a fraud?"
    I think that here is a clue from the Q&A Transcript.

    Matthew Larson – Morgan Stanley

    All right. So if you annualize 42, you’re talking a $1.60 or $1.70 and that’s where you get your 1.4 times EPS is what you had mentioned. So, you should have Reuters or Thomson or whoever else make that clear, because this is an extraordinary value already and this would highlight it maybe even more that’s number one. Now, number two your cash position ballooned to $525 million and then if I net out debt it looks like you’ve got 220 somewhat million in cash, so your cash position to my simple eye looks greater than the market cap of your company, if I net out all the liabilities. Is that an appropriate way to look at this?

    Thomas H.R. Gurnee

    Yes it is and I’m sorry, I didn’t bring it up. It’s a good point.

    Matthew Larson – Morgan Stanley

    All right. So I mean you’re getting an entire business for free, it seems like all right. My point of even mentioning this is because, I don’t care of the business if the bubble and plots over there if you haven’t bought any property in a couple years, you don’t have any legacy obligations then I just – I don’t really understand other than the fact that it’s a too strange investment world we’re in.

    I think what is bothering Matthew Larson – Morgan Stanley is the same thing that bothered me. All of the real assets like land, apartment buildings, etc. are being sold off and converted to cash, with no legacy obligations like managing the property and collecting a revenue stream going forward. No new properties purchased since 2009 or under development. The only asset left is a net cash position which at present is larger than the whole market cap of the company.

    In theory, someone could buy up the company, name herself CEO, and order the CFO to bag up the cash and fly it to the USA, then fire the CFO and the Investor Relations Spokesperson, default on any liabilities which may be owed to Chinese creditors, announce on April 2012 that all future dividends have been canceled until investor sentiment improves, make a real estate investment in the Bahamas to house the new corporate headquarters and everything would be legal.

    Consider this: Think about the 'investors' who bought these apartments from salespeople who have recently had their commissions doubled in order to “incentivize' them. These apartments will be full of renters, with no central management to oversee maintenance, settle disputes, collect rents, organize trash removal, pest control, set safety and behavior standards, etc. Think 'civil unrest' like Detroit on Halloween Night. Luckily XIN has spared the stockholders that nightmare.

    But of course I may look back on this in a couple of years with tears of regret that I didn't recognize
    that “it's freaking gold and worth 10 times the current price. “
    Nov 27, 2011. 11:18 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    I am a retiree with lots of time on my hands and enjoy trying to learn how to pick stocks that seem promising. I look mostly at stocks that pay dividends. I have the time and interest to do 'due diligence' before I dive in. I like to see substantial insider commitment of their own money, rather than grants and awards. I consider it a good sign that the management and directors are working for the shareholders. After I buy a stock I monitor it closely, especially insider trading. As someone said, "There are lots of reasons to sell a stock but only one reason to buy it.
    Nov 27, 2011. 04:43 AM | Likes Like |Link to Comment
  • Xinyuan Real Estate's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    Riddle me this:
    I would now turn the call over to Tom Gurnee, our Chief Financial Officer.
    Thomas H.R. Gurnee
    (quoting Thomas H.R. Gurnee)
    ASPs held firm with our aggregate ASP rising from $1,228 per square meter to $1,362 per square meter, primarily due to the launch of the premium Zhengzhou Royal Palace property.

    Lets say I was an investor and wanted to buy a 800 square foot (74.32 square meters) apartment with a view to renting it out. It would cost me $1,362 per square meter for 74.32 square meters or $101,223.84USD or (643917.55RMB) (1 Chinese yuan = 0.1572 US dollars).

    If I rented it out at 15% ROI = $15183.45/yr. or $1265.28/mo.

    (quoting Thomas H.R. Gurnee)
    Of the 73% of Kunshan contracts signed in the third quarter were of the seller-financed variety versus traditional mortgage contracts for the remaining 27%. The contracts were useful also for hiring (rental) properties where mortgage availability is limited namely Zhengzhou Colorful Garden and Xuzhou Colorful Garden town [halls], as well as Zhengzhou Royal Palace apartments.

    Apparently, third party traditional mortgages from local banks are not available for investors, so 3/4 of all sales are seller financed on essentially short term loans of less than 1 year.

    At this time, our preferred method of declaring and remitting dividends is to declare an annual dividend soon after the annual filing of our 20-F currently scheduled for April 2012.

    (quoting Thomas H.R. Gurnee)
    As of yesterday’s close our share price was $1.89, the [three year] price earnings ratio based on today’s guidance works out to $1.4, and our September 30, 2011 book value stood at $605 million indicating a trading discount of book value of over 76%.

    A book value discount of 76% is the same as selling dollar bills for a quarter each. It makes me wonder how long any business can survive selling dollars for $0.25 each, and increasing 'sales commissions' 92% from the 2nd quarter to the third quarter. I also wonder what would happen if many or most of the 'investors' who are buying the rental properties under such short-term punitive loans found they were having trouble finding young married couples willing and able to pay $15183.45/yr. or $1265.28/mo. for an 74.32 square meter apartment in Zhengzhou Royal Palace.

    My best guess is that probably sometime before (quoting Tom Gurnee again: At this time, our preferred method of declaring and remitting dividends is to declare an annual dividend soon after the annual filing of our 20-F currently scheduled for April 2012.) April 2012, the whole thing will arrive at the bottom of the 'declining triangle', all of that cash will disappear, the construction (which has already slowed down) will come to a complete halt, and Zhengzhou Royal Palace will become a ghost town similar to many areas in Ireland, Las Vegas and other places where McMansions were built for people who could no longer afford them.

    I may be wrong as I usually am but I think I will take a pass on this extra-ordinary dividend.
    Nov 27, 2011. 04:42 AM | Likes Like |Link to Comment
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