China

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Coal – The Ignored JuggernautSubmitted by Tyler Durden on 06/30/2012 09:38 -0400Submitted by PeakProsperity.com contributing editor Gregor MacdonaldCoal – The Ignored JuggernautOil, natural gas, and alternatives dominate the headlines when it comes to energy. But theres a big and largely-overlooked revolution occurring with the energy source likely to become the most preferred fuel for a world in economic decline: coal.The United States coal sector has been hit very, very hard this spring. Demand has been crushed by over 10%, as warm weather and bountiful supplies of cheap natural gas have induced power plant operators and all other users where possible … Read more

‘s High-Tech Spy Network: Just Had An IPO?

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In the high-tech world of espionage, deep pockets prevail.  Not this time though, as Chinese spies have mined substantial amounts of data.. through Facebook.  Proving that the social data mining machine is a double-edged sword, the spies gathered email addresses, phone numbers, names, and details on family members on a number of high-ranking military officials.  The fake account of United States Navy admiral James Stavridis befriended a number of other officials for an undisclosed amount of time before the intrusion was identified.  Considering the number of ‘spoof’ accounts of a number of famous celebrities and the sensitivity of these high-ranking … Read more

China Dethrones iPhone, Samsung Sales Surge

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Apple’s market cap may rule the S&P, but it’s a different story in China.  The tech giant is struggling to efficiently capture a leading share of the country’s massive market, while Samsung is proving a substantial opponent.  With more than three times the market space over Apple (24.3% vs 7.5%), the South Korean company has a strong lead in subscribers which isn’t expected to be challenged any time soon.  According to Bloomberg, Samsung’s blanket strategy proved much more effective in gaining subscribers than Apple’s tactically narrow approach: “Apple’s partnerships with China’s second- and third-largest carriers give it access to about 34 … Read more

Apple Looking Up In Shanghai Trademark Case

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A local court denied a motion to surpress the sale of the iPad in Shanghai due to a similar ongoing case in the Guangdong Province, allowing Apple stores to continue selling the product until an outcome is decided.  Facing the unpredictability of Chinese courts, this is finally a glimmer of hope for the tech giant.  Although this has no bearing on how the Guangdong case will turn out, it shows that China is in support of Apple continuing with sales probably due to some political pressure. “Proview’s injunction request was rejected,” Carolyn Wu, the Apple spokeswoman, said in a telephone … Read more

Thought Pre-Release Lines for Apple Are Absurd? Try China, Bring Eggs..

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Beijing, China:  Several weeks ago, crowds of people amassed in front of Apple’s flagship store in the pre-dawn hours.  Eagerly awaiting the anticipated release of the new iPhone 4s, customers and scalpers alike grew restless as the chants of “Open the door!!” grow louder and louder.  At 7:15, already past the time when doors were supposed to open, a man steps outside with a bullhorn and announces to the crowd, “Please go back home! No iPhone 4s!!”  Anger spreads through the masses, fights break out between angry scalpers and frantic customers, and eggs start flying…. Read the complete account and … Read more

Second City in China Halts Sales of Apple iPads – NYTimes.com

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According to the NY Times, yet another city in China has halted the sale of the iPad over the trademark dispute with Proview Technology.  About 45 units have already been confiscated from stores and most have been removed from displays, although the devices are still reported to be available under the table. “Proview has also made a filing with the General Administration of Customs in China, he said, putting Apple on notice that the company could seek to block the export of iPads, should Proview’s ownership claims be upheld.  The seizures follow a ruling in December in which a court … Read more

”s Day Love From Iran: Escorted Through Hormuz

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As the Carrier Abraham Lincoln left the gulf Tuesday, it’s battle group contingent was on high alert.  According to the AP: The passage ended a Gulf mission that displayed Western naval power amid heightened tensions with Tehran, which has threatened to choke off vital oil shipping lanes.The Lincoln was the centerpiece of a flotilla that entered the Gulf last month along with British and French warships in a display of Western unity against Iranian threats. There was no immediate comment by Iran about the Lincoln’s departure.  Iran’s Revolutionary Guard has said it plans its own naval exercises near the strait, … Read more

Thinking About Retirement? Forget 401Ks, Graffiti Pays… A Lot.

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Ok, so maybe picking up a can of spray paint isn’t the best retirement option for everyone, but it certainly worked out for David Choe.  Back in 2005 and under the direction of Napster kingpin Sean Parker, he adorned the walls of the Palo Alto with his street styled tagwork (the rest of his mixed medium works can be seen here).  Upon completion, Parker asked if he would like to be compensated in cash or in an equal value of stock.  While Choe is no beacon of the mainstream social environment, he took a gamble and accepted the offer of … Read more

‘s Kung Fu Grip, One Finger at a Time..

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Remember when China, producer of 95% of all the world’s rare earths, sent shockwaves through the rare earth markets by announcing a 40% reduction in rare earth production (seen here), and further stoked the fire by “mysteriously halting” all exports of the commodity (seen here) in a retaliatory effort against Japan?  While China’s grasp strengthens while Western economies flail, Malaysia sees opportunity in offering some relief from restrictions by the erratic and opaque Chinese government.  According to the NYTimes, regulators have granted an initial operating license to an immense refinery specializing in rare earth production.  Although this is just the first of … Read more

Iran, Nuclear Policy, and America: An Investment Opportunity In Disaster?

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  We have a delicate balancing act at hand between the threat of an emerging nuclear power, our rapacious thirst for oil, and responsible diplomatic policy.  The consternation in the air is palpable, bringing to mind Buffet’s famous words “Be fearful when others are greedy and greedy when others are fearful”.  So how does one put such words of wisdom into an actionable trade idea?  Since going long nuclear fallout seems short sighted, let’s look at how to take advantage of a potential event driven jump in the price of oil once we fully grasp the situation at hand. At … Read more

‘s Roundtable

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The first thing I look at when I read Barron’s round table is the results of the panelists picks from last year.  On that accord, one would do well by skipping most of it.  There are though, two investment gurus, Bill Gross and Felix Zulauf that tend to make me money. None the less read the whole article and make up your own mind..  It can be found here. Gross: Next, in a world of financial repression where 10-year Treasury bonds yield 2% and 30-years, 3%, certain state bonds and utilities yielding 5% and 6% are decent relative values. It … Read more

Einhorn Ends 2011 Just Over +2%, Closes FSLR Short, Warns On Asia, Mocks “Lather. Rinse. Repeat” Broken Markets

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Anyone wondering why FSLR just jumped, it is because as was just made known, David Einhorn’s Greenlight has decided to close its FSLR position, after bleeding that particular corpse dry. “Our largest winner by far was our short of First Solar (FSLR) which fell from $130.14 to $33.76 paper share and was the worst performing stock in the S&P 500.” Einhorn also announces that he was among the “evil” hedge funds who dared to provide market clearing transparency and buy CDS on insolvent European governments: “We also did well investing in various credit default swaps on European sovereign debt.” As … Read more

Anyone can have a bad call but when you dedicate an entire book to it?

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Jim Rodgers, a peripatetic,bow-tie wearing, prolific financial commentator and author, wrote a book published in December 2007 entitled a Bull in China, Investing Profitably in the World’s Greatest Market.  Rodgers was a vocal proponent of the theory that the sun has set on the West and China was the future.  No one is in fact more associated with this theory than him.  So how well has the investment turned out for his readers.  While Rodgers recommended dozens of stocks, many of which are impossible to price, it’s fair to say that when you advocate purchasing  more than forty different companies, … Read more

China Details Yuan Use Offshore

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SHANGHAI–China has released draft guidelines on foreign investors’ use of yuan acquired overseas for direct investment in the country, taking another significant step forward in further internationalizing the Chinese currency and opening the nation’s tightly controlled capital account. In a statement late Monday, the Ministry of Commerce laid out for the first time the framework for the so-called yuan-denominated foreign direct investment, formalizing a trial program launched in the second half of last year. While under the trial program approvals were granted on a case-by-case basis, the new … Full article available @: http://online.wsj.com/article/SB10001424053111903461304576525731746088812.html?mod=rss_whats_news_us&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fxml%2Frss%2F3_7011+%28WSJ.com%3A+What%27s+News+US%29&utm_content=Google+Reader

Biden to Defend Obamanomics in China

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The People’s Daily, the official newspaper of China’s ruling Communist Party, spelled out Beijing’s chief concerns ahead of Biden’s arrival in Beijing on Wednesday evening local time, when he was greeted by senior Chinese diplomats. China wants Biden to reinforce U.S. assurances that its holdings of dollar assets and U.S. Treasury debt remain safe, despite Standard & Poor’s recent downgrade of the sovereign credit rating of the United States, the paper indicated. Since the Standard & Poor’s ratings downgrade in August, Chinese state media have accused Washington of reckless fiscal policies that have created uncertainty about Beijing’s big holdings of … Read more

Pressure Rises on China to Fight Inflation

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  SHANGHAI—Fresh data showing strong capital inflows into China and a spike in the interest rates on central-bank debt showed continuing pressure on the government to keep fighting inflation with tightening measures despite worries about weakness in the global economy. Foreign direct investment in China last month jumped 20% from a year earlier to $8.3 billion, China’s Commerce Ministry said Tuesday. The data came as the People’s Bank of China unexpectedly jacked up the interest rate on its debt for the first time since late June. That higher yield, which came in a regular weekly auction of one-year bills, was … Read more

The “shorts” who popped a China bubble

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NEW YORK/SYDNEY (Reuters) -They are a rag-tag bunch, often working from home or tiny offices scattered round the world, from rural Texas to Beverly Hills and a suburb near Australia’s Bondi Beach. Some have never even been to China; most don’t speak or read Chinese. And yet in the past nine months, this small group of “short sellers” has published research exposing accounting fraud at a series of Chinese companies listed in the United States and Canada, and made as yet unproven allegations against a whole bunch more. As a result they have scuttled a once hot sub-sector of the … Read more

Another promiment bear joins Chanos in China bashing

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Shilling: China Heading for a Hard Landing, Pt. 4 China’s Future, Part 4 Illustration by Jonathan Zawada By A. Gary Shilling Jun 29, 2011 6:57 PM MT 4 Comments     Past performance, in China’s case, may be indicative of future results. In late 2007, the Chinese government was scrambling to control a capital-spending boom. The central bank was concerned about 11 percent growth in gross domestic product, far above its official target of 8 percent, and about money flooding in from exports and direct foreign investment. By Nov. 1, the People’s Bank of China had raised its one- year … Read more

Chanos vs. China?

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Svea Herbst-Bayliss and Matthew Goldstein of Reuters report, Top hedge fund chiefs: short green tech, store gems:
Bet against solar energy, says famed short seller James Chanos. Squirrel away gems, advises bond guru Jeffrey Gundlach. Go long on discount retailer Family Dollar, counsels activist investor Bill Ackman.

These and other hot — or unusual — ideas emerged on Wednesday from an annual conference where top hedge fund managers pitch their best investment ideas.

Chanos threw cold water on alternative energy companies, saying that shares in wind turbine maker Vestas Wind Systems and solar panel maker First Solar Inc likely will fall.

Arguing that alternative energy may not create the jobs politicians predict, Chanos said he would likely offend the green movement with his bets.

“The cost of wind is 50 percent more expensive than natural gas,” Chanos said, adding that Denmark-based Vestas would be a good company to bet against or sell short.

The environmental benefits of solar power are also questionable, he said.

Chanos said he is certain that he is on the right path on First Solar because top managers are leaving the company. “We advise you to heed their warnings,” he said, drawing both applause and laughter.

Ackman, who has cemented his reputation as a polite activist, said his new idea is on the passive side — indeed it is not even his own, but investor Nelson Peltz’s idea. He likes retailer Family Dollar Stores Inc for being accessible to shoppers and selling unique and inexpensive products.

While lagging behind chief rival Dollar General, its managers are trying to close the gap, and the company may be a buyout candidate for private equity firms, he said.

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HKK: Small Cap Muscle for Hong Kong

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If you ever get a chance to go to Hong Kong, do not pass it up.  I received my first opportunity in 1982 and immediately fell in love with the place.  The business energy level is so high there that it is infectious.  Perhaps that is one of the reasons that just two days ago, the Swiss-based International Institute for Management Development (IMD) ranked Hong Kong the World’s Most Competitive Economy.

The large companies of Hong Kong help make it a global powerhouse.  However, its smaller companies, the unsung superheros of Hong Kong, might better exemplify its true competitiveness.  With Wednesday’s (5/18/11) launch of IQ Hong Kong Small Cap ETF (HKK), U.S. investors can for the first time get easy access to this desirable segment of the world economy.

The underlying Index IQ Hong Kong Small Cap Index is a capitalization-weighted index that aims to capture the bottom 15% of the publicly available total market capitalization of companies located in Hong Kong.  The 15-year old iShares MSCI Hong Kong (EWH) targets the largest 85%, which theoretically allows for zero overlap between them.  Although the two ETFs may compete for the dollars investors decide to allocate to Hong Kong, they are actually complementary products.

HKK’s sector breakdown has Consumer Discretionary at 23.6%, Financials 18.9%, Materials 15.7%, Technology 10.9%, Consumer Staples 8.8%, Industrials 6.7%, Transportation 5.6%, Communications 2.7%, Energy 2.6%, Utilities 2.3%, and Health Care 2.2%.  This is vastly different from EWH, which has a 61.9% allocation to Financials (EWH overview page).

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Rebalancing through wage increases

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Is China currently rebalancing?  The currency has been appreciating, the PBoC has hiked interest rates four times, and wages have been surging.  Because of all of this I am often asked if China has finally begun the long-waited rebalancing process and whether we have yet seen an improvement in the underlying economy caused by a rising consumption share.

Those who were hoping the answer was yes will have been disappointed by the release Thursday of the World Bank’s China Quarterly Update – April 2011. Here is their summary:

China’s economic growth has remained resilient as the macro stance moved towards normalization. Both fiscal and monetary policy contributed to the normalization. Consumption growth slowed in early 2011. But overall domestic demand held up well, supported by still strong investment growth. Real estate investment has so far remained robust to measures to contain housing prices—a policy focus. Reducing inflation is the other policy priority, after inflation rose to 5.4%, largely on higher food prices.

So what is going on?  Isn’t China doing all the right things – raising wages, the exchange rate and interest rates – and, if so, why isn’t the economy rebalancing towards higher levels of household income and consumption?

The key, I think, is in distinguishing between real and nominal changes.  On a nominal basis, for example, it is clear that the currency is appreciating, interest

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Chinese recycling and US interest rates

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I mentioned in last week’s blog entry that during my trips to New York, Washington and Hangzhou in the past two weeks one of the common themes was concern about rising debt levels and weaknesses in the banking sector.  Another theme – one which I want to discuss in this entry – was the possible impact of China’s rebalancing on US and global interest rates.  A lot of people were very concerned that if China does indeed rebalance, US interest rates will soar.

The argument runs like this.  If China raises the consumption share of GDP faster than investment declines, this will result in a reduction in China’s current account surplus.  Clearly if China’s current account surplus drops, the amount of capital it exports must drop in tandem – since a rising share of consumption means a declining share of savings and so a declining excess of savings over investment which must be exported.

But because it is recycling the world’s (and history’s) largest current account surplus, China is one of the world’s largest purchasers of US government bonds.  If China’s current account surplus declines, and so China sharply cuts back on its purchases of US government bonds, this should automatically cause US interest rates to rise.

In at least half the meetings I attended this was the argument.  Fortunately for me, just after I returned to Beijing Martin Feldstein made the same argument in a Project Syndicate blog entry.  He starts out;

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‘s the Hindenburg

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China is often admired as an economic miracle, especially since the government has been able to balance, thus far, a Communist/Socialist political infrastructure while operating a semi-capitalist “free” market. But as a side effect of a global economic slow down, and considering bits of information that filter out of an extremely well controlled society, China’s economic power is beginning to be questioned. The often mentioned Chinese “housing bubble” appears in the headlines from time to time, despite a lack of understanding of what exactly is taking place. In the United States and Europe, citizens understand what happened, and why the … Read more