There was some chatter on the network, as Adam likes to say, about China being in a bubble or not and the consequence for global markets.There was at least one expert on saying there would not be a spillover into other markets. Well that is not a bet I would want to make.
If China has a nasty V shaped decline I would expect other markets to feel it as well and I would expect it would scare a lot of people.
If the stock market is a bubble and a problem ensues, I don't think it would take away from the long term appeal even if staying away for a while turns out to be the right trade. Everything going on internally now will still be going on if the market cuts in half. The US will still need all of the low cost stuff it imports from China. The returns could be bad for a while but I don't think it permanently derails the China dynamic.
In my post this morning I was wrong about the S&P water index. It has 28% in US companies so it is more global but not totally global. You can get the skinny with this PDF.
The other day, in the car, Dr. Bob was on Kudlow saying how great the retail sales would be this week. Well the same store sales generally stunk and we will see about retail sales tomorrow. The point here is to urge caution about believing people that sound credible. Dr. Bob seems to always be bullish but not everyone will know that. The first time you ever heard fill in the name of any perma bull you did not know he was a perma bull. Likewise the perma bears.
I would not have correctly predicted lousy same store sales but there was no visibility for the to be a great as Dr. Bob was calling for either. Bottom line is this reiterates the need for a grain of salt.
iShares has currency ETNs out to compete with the Rydex Currency Shares. For now there are three ETNs; EURUSD (ERO), GBPUSD (GBB) and USDJPY (JYN). There could be some tax differences with these compared to the Rydex products that are not easy to digest. IndexUniverse has it covered here.
I had an across the board stop order on Volvo execute this morning. It was only on a portion of the position. The stock went parabolic over the last couple of months, paid out some monstrous dividends and split its stock. I can't know whether my stop price will be the bottom or not but the stock had grown into a huge position and trimming some seemed prudent.
I have no expectation that I can be exactly right on something like this but I do have the expectation that I can be prudent. My first stop order was around $80 and I moved it up a couple of time before getting stopped out at $90 which adjusts to $18 for the split.
Just as I was going to hit the publish button on this post a comment came in asking about the Nuveen Currency CEF (JGT). I mentioned it last week and said I would call Nuveen. I called the spokesperson at the bottom of the press release, she said someone would get back to me and no one did.
13 comments:
re China scare,
I don't get it.
PGJ has not declined nearly as much as india or japan's etfs/inp and ewj.
Participation in the Chinese market is a strange thing. This post http://tinyurl.com/2zm4om at seekingalpha highlights how the Chinese market is up HUGE this year to dat but most of the funds and ETFs are not. Some but not all of this is explained by the dual share class structure of the Chinese markets.
Regarding the Wall Street Giants' pronouncement of a bubble, my skepticism about thier motives leaves me to wonder if they missed out and want in at a lower price.
exactly right Rew, i am tempted to say rut roh.
I mentioned this the other day. There does not appear to be an arb mechanism between the A share market in Shanghai or the H share market in Hong Kong. The A shares of like companies are much higher than the H shares. Many companies are dually listed.
Actually I might have mentioned it in an instant message with my brother and not on the blog.
Y'all must read Taleb's "The Black Swan", great insight and funny too(if you like to laugh at the extremely arogant).
Actually Roger you did mention the Shanghai A vs Hang Seng H shares in the comments of the blog, in response to a post I made.
The Shanghai A shares are super bubblicious. I'm sure you realize that those are only open to Chinese citizens and specially dispensed foreign brokers (with quotas). Also, perhaps more interestingly, there is no margin on those. Suggests to me that there is no short selling either. That's not really an efficient market if it's the case.
There are some good articles on seekingalpha about China.
Thanks for the pointer to the global water ETF. However this is a case where I'd rather pick the best. It's not listed in that PDF, but 1 of those 2 Singapore holdings must be Hyflux. Best global water company there is, bar none.
i see hyflux mentioned on CNBC Asia every now and then but have never looked at it, thank you
If China takes a deep V drop I would suspect our market, as well as most other markets around the world, to drop quite a bit as well. Why? Because I just saw a mini version of this happen in February of this year.
"The selloff demonstrates somewhat starkly the inter-connectedness of stock markets around the world," said Hugh Johnson, chief strategist at ThomasLloyd Global Asset Management.
"Markets can decline in one seemingly isolated part of the world and that decline can be transmitted to other parts of the world through the psychology," he said.
http://money.cnn.com/2007/02/27/markets/markets_0630/index.htm
I may not follow that last comment about Hugh Johnson. I know he has been around and he always sound reasonable but is he right very often?
I am not taking a shot, I really don't know.
The notion of higher short term correlations has been circling around the net and MSM fro a while, i have touched on it to.
I would not expect a carbon copy of February however. I am not sure if we could feel it worse or not but brace for something similar, sure, identical, i don't think so but of course a different magnitude may not really matter.
Here then is another article from Goldman Sachs on the China bubble and it's ability to take down markets:
http://www.marketwatch.com/news/story/goldman-sachs-china-risk-market/story.aspx?guid=%7BEF44CF90%2D18BC%2D46E3%2DA096%2D62E0297C9EA0%7D
"On Feb. 27, the Shanghai Composite tumbled nearly 9% on fears that the Chinese government would intervene to slow down the market. The move sparked a sell-off on markets around the world. Read more."
http://www.marketwatch.com/News/Story/global-markets-tumble-china-fear/story.aspx?guid=%7B7AF6B8F5%2D604D%2D4645%2DAA5D%2DFDF7BE804C9B%7D
Roger, do take a look at Hyflux. Their website is a wealth of information, although trying to contact IR is another ballgame. That company is just run well, and poised to be huge for a long time. They will take advantage of water infrastructure building opportunities throughout Asia and Middle East better than any other single entity. Very Muslim friendly, which works in that part of the world, and the founder Olivia Lum is a visionary. The co. is one of the darlings of Singapore. Maybe one day you'll hear about them on CNBC USA, but GE is a competitor.
There is an aggregation of news stories here:
investor village
p.s. I wish you would put an end to the Bill Cara bashing. It's tasteless, and if they can't take it up directly with the antagonist, they certainly shouldn't be bitching about it here.
The reason no one is critical(politely or otherwise) of Carla on his site, he pulls even the most modest of negative comments. There’s nothing left but fawning and flattery.
This may let some air out of that Shanghai bubble:
China Eases Investment Caps, Lets Banks Buy Overseas (Update2)
By Luo Jun and Zhao Yidi
May 11 (Bloomberg) -- China will allow the country's commercial banks to buy stocks abroad, in a move that may release some of the nation's 35 trillion yuan ($4.6 trillion) of savings on overseas equity markets for the first time.
Chinese commercial banks can invest up to 50 percent of the funds pooled under the so-called qualified domestic institutional investors program, or QDII, in stocks abroad, the China Banking Regulatory Commission said in a statement on its Web site. Investors need to have at least 300,000 yuan to purchase such financial products, the regulator said.
``Some local investors may choose to invest in H shares'' in Hong Kong, said Zhao Zifeng, who manages the equivalent of $1.1 billion of investments at China International Fund Management Co. in Shanghai. ``The government has been working on broadening the QDII investment limit for a long time.'' ...
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDddPDo.dQmk&refer=home
anon 11:47 re BC
could you discuss this further with me at a yahoo message board of your choosing...i'm middle of the road on this issue. no hidden agenda from me.
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