Loungin

2 Comments

    • ON: Thu Sep 25th 01:36 AM
      Commented on:
      Investing in China Is Still the Best Long Term Play
      While I agree that LONG TERM this is a great market to be in, there will be some more short-term pain. Retail sales in August were up, but let's wait to see September since many experts believe retail sales will show serious weakness since August retail sales were up due to olympics. Yes, 8 month numbers were up, but look at month over month and wait for September.

      Real estate prices declined for the first time in a long time in August and are expected to decline again in September because of consumer confidence. Prices are plummeting. Sound familiar? I wonder how many loans in China are subject to real estate risk after the insane growth in 2007? Do you really think they weren't aggressive lending into the RE market?

      The yuan continues to rise against the dollar. As we look to pay for this bailout the dollar will continue to weaken, sending the Yuan vs. dollar higher. This severely affects exporters since they become much less competitive in their major market, the U.S.

      U.S. consumer demand is expected to be WAY down during the holidays, another major impact on Chinese exporters.

      There are incredible short-term risks in China right now. I think the market is set to plunge in Q4 and even Q1 of next year. Then maybe we'll see a bottom.

      Let's wait to see September statistics to see how strong the short-term really is. In the meantime, I'm sticking with my puts on FXI.

      Follow Michael Pettis' stories on fake trades and major issues within the financial institutions. He has the exact opposite take on the situation and seems to be way more in touch with the market. Ride this Chinese market down until you're absolutely sure real estate and exporters have bottomed out. Until then, it is still a very risky bet to be long China in the upcoming months.
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    • ON: Fri Mar 14th 16:38 PM
      Commented on:
      The Difficulty of Investing in China
      I'm a PE guy and think in terms of EBITDA multiples. If you just look at the fundamentals of FXI's holdings (finance.yahoo.com/q/hl...) the average EBITDA multiple was 9x at the end of Feb when it was trading at 145. FXI prices have contracted 10%+ since then. Hell, we pay 8-10x for businesses in the U.S. in the PE world all the time, and that's the private sector. For public stocks to be trading in that range (a lot lower now due to contraction) in a super high-growth country such as China is crazy. I would buy that all day long. Companies in the states trade at 10x+ and they are in low to medium growth sectors. I continue to buy JAN 2010 FXI calls at 140 as the price continues to fall. I think it's a bargain, despite the olympics, inflation, etc. If our fund had the opportunity to buy diversified, high growth companies at 8x EBITDA we would be all over it.
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