James

Doubling Down on Continued Weakness in Real Estate, Financials

I do appologise about typing errors...my keyboard needs a clean.

Doubling Down on Continued Weakness in Real Estate, Financials

The market will not collaspe - even though I wish it would. I am short and have been for long time Ibelive 12 000 is our next target, banks need to sell stock to shore up assets and get their books more into balance. I also think the equity compoenent of some of the toxi waste that has been sold will also be realised. The credit markets need a capitualtion as well, this will be the beginning of the end (but not the end) as it wll cause a further month of declines after it happens.

When the market goes down it causes a mania between the bears, but they have to keep some objectivity. These are the Bears that said the Dow was going down to 5000, instead it rallied to 14 000. Yes the market/ecomony is in a bad shape, yes the market will go down (I hope lol ). But Amercia is not about to go bankcrupt,collaspe and die. Come on bears...get a grip. It not your friend down the road who's lost all his money. This is the biggest most power nation in the world.

I think the dollar has aropund another 7-8% to go. But if that does happen and it stabilises. Think about all the foreign investment that will flood in to USA (China/Japan etc etc). Also if sanctions are put on China imports (which they should have been at least 2 years ago), think about domestic demand that will create. They are lots of very big factors that people are not lookign at because they are concenrating on the Sub Prime issues. In the enxt few months, I think everyone will be so bored with hearing Sub Prime - Sub Prime that there risk aversion will start to subside.

Of course you all know that 50% of the credit problems are due to confidence issues among the participants. Why ealse has the USA government be buying the equity market everytime it falls sharply.

Any Now we are going down and I will add to my position the whole way down. However in 2-3 months when i can pick up solid companies at PE ratios of 10 - I will put my horns back on and blow my trumpet.

Be a bull. be bear - really who cares?
Isn't trading about making money....

Doubling Down on Continued Weakness in Real Estate, Financials

The market will not collaspe - even though I wish it would. I am short and have been for long time Ibelive 12 000 is our next target, banks need to sell stock to shore up assets and get their books more into balance. I also think the equity compoenent of some of the toxi waste that has been sold will also be realised. The credit markets need a capitualtion as well, this will be the beginning of the end (but not the end) as it wll cause a further month of declines after it happens.

When the market goes down it causes a mania between the bears, but they have to keep some objectivity. These are the Bears that said the Dow was going down to 5000, instead it rallied to 14 000. Yes the market/ecomony is in a bad shape, yes the market will go down (I hope lol ). But Amercia is not about to go bankcrupt,collaspe and die. Come on bears...get a grip. It not your friend down the road who's lost all his money. This is the biggest most power nation in the world.

I think the dollar has aropund another 7-8% to go. But if that does happen and it stabilises. Think about all the foreign investment that will flood in to USA (China/Japan etc etc). Also if sanctions are put on China imports (which they should have been at least 2 years ago), think about domestic demand that will create. They are lots of very big factors that people are not lookign at because they are concenrating on the Sub Prime issues. In the enxt few months, I think everyone will be so bored with hearing Sub Prime - Sub Prime that there risk aversion will start to subside.

Of course you all know that 50% of the credit problems are due to confidence issues among the participants. Why ealse has the USA government be buying the equity market everytime it falls sharply.

Any Now we are going down and I will add to my position the whole way down. However in 2-3 months when i can pick up solid companies at PE ratios of 10 - I will put my horns back on and blow my trumpet.

Be a bull. be bear - really who cares?
Isn't trading about making money....

The Impact of A/H Share/Red Chip Convergence on Corresponding ETFs

Fantastic article - great view and even better content. It never amazes me how hard you guys work with your research and statistical content you include.

I am based in Shanghai and trade A shares with my chinese girlfriend. I just wanted to add some of my views that maybe some of you may find helpful. For the past 20 sessions in the shanghai A share market, volume has been drying up significantly day by day. A lot of big players have pulled out of the market, I can also give first hand information that a very significant amount of investors have taken out considerable amount of their winnings and put it into property.

There is now a sever liquidity shortage in the market and this is the main reason for the increase in volatility. I can tell you that if I had a big trading account that there is so little liquidity it would be very easy to move the market without much trouble. Having day traded Bund for a number of years I would go as far as to say that there is almost no ''paper'' in the market what so ever. It is for this reason that you are seeing H Share/Shanghai price convergence more from aspect of shanghai falling/Hong Kong holding its ground. For those who are playing convergence trade from buying hshares etc - I believe things will get very rosy shortly. The shanghai market needs to fall a little more. Then there should be a relief rally in shanghai that will act as catalyst to appreciation in our hshare freinds. They should overperform quite strongly especially coming into QDII implementation July 5th. Mainly in my opinion through perception as apposed to increased flow. I have been long China Telecom for a while as I am playing the trade slightly different and using other factors in my favour. ie manipulation of price of China Telecom in hong kong to assist in the IPO in shanghai. Something that the chinese government/china telecom and banks (especially our under writing friends) are all going to be involved in. I think China Telecom shares are appealing to short term/long term investors as well. I am considering selling the position night before ipo in shanghai but keeping my options open as i think in 10 years this is a 200hk dollars or should i say 200rmb stock. their earning potential is very very high - but thats another story.


Anyway predicting this liquidity change over into housing this 2 months ago we purchased a brand new appartment. I could already see the early birds were following my thoughts. In all I visited 30 developments in 8 days. I can tell you that the developments were all very very busy. Infact it was very obvious that the old real estate days were returning.
And why not shanghai real estate is disgustingly undervalued. Another story....

Anyway I also advised a number of foreign investors to buy property and as a result found myself re-visiting the 30 developments over the course of the last month. Imagine what the trading pit looks like when its very busy. Well thats what I experienced at almost every development inthe past month. Every single property at all developments sold out in this time. I am not over estimating either. Every last property. The liquidity flowed from the stock market straight into real estate in a very obvious way. 80% of my chinese trading friends have bought properties in the last month. Its quite amazing, the chinese people when it come to this sort of thing are a lot smarter than people give them credit for. Especially financial press. Anyway now there is a situation that there is hardly any property in the inner ring in shanghai. So much so that now the secondhand market is very strong. It has been two years of pain for real estate agents. But now they are starting to get busy again.

Index Futures Shanghai Market:

I am not sure if western news is aware but index futures to trade shanghai 300 have been approved.
The date is not set in stone but there has now been formal acceptance that futures will begin to trade. There is division within government when to allow them to start trading. Bascially there are a few concerns - of course one is the obvious arbitrage situation that will result. Imagine being short indexes and buying main constituents in Hshare market. Also there is worry that everyone will start to trade the market intead of buyin stock. At 300rmb/point with current levels of volatility a lot of poor people will get destroyed. Having traded Dow + Dax I know its a very hard game. Also the government is not so happy that for the first time there will be leverage. The lack of leverage to date in China is of course the main reason there has not been a huge amounbt of vicitms.
Anyway the system is in place and has been tested by virtual trading for quite some time now.

This adds a new layer to the cake of financial integration between Hong Kong and China. And to future trade opportunities. I thought I would point it out. I think there is a bit of an attempt to keep it quiet.

Anyway hope this helps....I would like to finally add it is not too late to buy investment property in Shanghai or for that matter China....

CIBC Warns On Chinese Bubble

Great insight – that’s a fantastic way of evaluating things....it is also very consistent with how Chinese do business. I look at China as a group of Chinese families and the group mentality that is genetically/culturally engrained in the Chinese mind is the secret of understanding how the Chinese invest. I would say that it is very likely that China has more underground/family fund syndicates than the USA has institutional mutual funds.

People cite dumb and smart money when looking at trading activity. I think people should look at whether the money is for investment or speculative purposes. If the majority of the money is speculative then it is very possible that the chinese market will be subject to becoming a bubble and bursting. However the market could be supported if a high percentage of the 2 trillion savings moves in the market with the view for it to stay in the market to be used for retirement etc. Then you get a situation where PE ratios are high and the market is overvalued for a number of years but does not experience a severe full and earnings catch up with valuations.

One thing’s for sure if China becomes the biggest economy in 15 years like some predict. The shanghai stockmarket in 15 years can easily sit at 15 000. I wonder how many people would then look back and say I wish I purchased stock when people were predicting the bubble would burst in 2007 when the market was valued at 4200.

I would also like to bring everyone’s attention to what a real bubble looks like. In my mind the shanghai market as it is, is not a bubble. Take a look at Yunnan Pu-Erh tea prices. Up 20 fold since last year. That’s a bubble – a bubble that will burst. The shanghai stockmarket rising from undervalued to over valued in the last few years is not
By any means a bubble.

Another thing to understand is that a by product of global inflation is earnings inflation. So PE rations of 44 mean absolutly nothing right now until perception/growth of china changes. Which from what I can see isn’t going to change for a least 2/3 years.

The time will come when the market gets hit – but the time is not now…..

CIBC Warns On Chinese Bubble

Even though your opinions may be valid - John it strikes me that you need to be more respectful in your comments,
I have read your replies to lots of posts and even though I agree with what you say most of the time - you can not go about commenting in the way you do.

What Caused The Latest Chinese Correction?

There is always a catalayst and until a genuine catalyst comes to the chinese market t will carr on going up.
I can not buy at these nose bleed valuations and wish someone would come and take this market down again.
The main reason why the government has not taken the market lower with its comments is because they are waitintg until all their friends have IPO'd off lots of stock in new issues.

You see most (i say most) care more about their friends (and by association themselves) making money than causing a stockmarket bubble.
Do not for one second think that the biggest gainers from this rally are not government officials.

So anyway when their motivation for the rally recedes then we will see some sort of correction, It may not be as big as everyone expects.
Especially if earnings are strong, thus adjusting PE ratios to better levels. Also what strikes me is that in a capitualtion at a top - there is almost always panic buying. Actually I think it will be the foreign institutions that buy the top - not our ayii or village farmer. Foreigners have pulled quite a bit of money out - when they see the market rising in this next leg of an upmove (if things continue of course) then they will start buying again.

The market wont hit 5000 - the government would not allow that. However my guess is that it will get near. 4900.
If I was a gmabler (which I wish I was) Id be long oil stocks in the index and banks and consumer stocks.

anyway we'll see......