This is the chart for China Digital TV Holding Company (STV) which IPO'd last Friday as best as I can tell.The IPO price was $16 and it closed Tuesday at $51.08 up $11.59. The day of the IPO, Friday, it was up 75%.
There have been others, both in the US and Shangai, that have gone similarly berserk.
From the top down this is the same thing that happened during the Internet stock bubble. This is something I have mentioned before a few times, it is a very common pattern. China is most certainly at least a mania. The returns have been huge, the demand is extreme and so to meet that demand there are now a lot of IPOs, and they are all very hot.
So far this is exactly what happened from 1998-2000. I would add that this will happen with just about every mania in the future too.
All along I have never said China was bubble because I believe that is the wrong term. For all I know the Chinese market may drop 50% like the S&P 500 or 75% like the Nasdaq but the difference, I believe, will be that it does not take every market down with it in the same manner as happened in 2000.
Because of what happened so recently in 2000 I just do not believe that a China plummet, if it happens, will be the all encompassing bloodbath that we had at the start of the decade.
The recent action in the home building stocks supports this notion. Year to date Toll Brothers (TOL) is down 30%, Centex (CTX) and Lennar (LEN) are each down 50% and Beazer (BZH) is down 80% yet the stock market has had a very good year so far. There has been a lot of content in the last couple of years saying how important this group yet it has imploded as bad as the S&P 500 seven years ago and the broader market seems not to care.
So I believe it will be with Chinese stocks if they ever implode. Maybe someone will leave a well reasoned comment explaining why China is different and fundamentally that may be true but for now there are similarities to the Internet days.
As a follow up to yesterday's post it seems clear that readers want a re-hash of the old portfolio.
Just kidding.
We are headed over to Hawaii next Tuesday, this seems like a good project for a long plane ride. I hope to have something up within the next week and a half.
16 comments:
Not sure I agree. Things came pretty unhinged last February/March when China was headed down... The bears could really spin this story.
good point. my thought would be to say that i think comparing a two week event, and I might say the yen's rally ended up being more important, to a 2 1/2 year implosion might be a stretch.
That was one day. There was another day after (sorry the date doesn't come to mind) where China was off 3 or 4% (maybe more) and we shrugged it off. I tend to agree with Roger on this, if I had to speculate. I think the first signs of cracking might shake us up a bit, but in the long term it will be a relative non-event. I certainly have other reasons to worry about my long positions moving forward, but this isn't really one of them.
Things came so unhinged that we set record market highs a matter of months later.
Hey Roger and hope you all have a nice trip to Hawaii. (As an aside, sad story about the snake bite up in your neck of the woods, I have killed a rattler here in Fountain Hills each spring...sorry PETA fans).
Here is a rookie question...is there some regulation prohibiting ETF funds from just copying the moves of good MF managers? I look at CGMFX which has had a hot hand for seven straight years (up 70% ytd) and wonder why an ETF couldn't just mimic Heebner's moves at a much lower expense rate.
Secondly, someone asked the other day about foreign bonds...there is an American Family bond fund....BEGBX that has a very low Japanese profile, and that is doing quite well.
Lastly, isn't a southeast Asia fund going to be safer than, say, FXI, if an when China corrects again?
Thanks, Scoot.
mutual fund reporting is in a arrears by several months to really copycatting becomes unlikely. Further ETFs, as of now, are indexed products. copying an active manager wouldn't seem to fit.
I sold all my emerging market funds including China in Dec 2006, and replaced them with bear market funds.
I regret that decision now, and I am really in a conundrum as to how to get out of these inverse funds which have lost me a lot of money.
I don t think getting back into emerging markets at this point would be very smart. But I am one of those investors who makes consistently wrong decisions about where the market is going.
For example, a couple weeks ago I bought some shares of SinoBiomed (SOBM) a chinese biopharmaceutical firm. The next day the stock took its largest drop in a year. I don't care so much in this case because it is a cheap stock and I am holding it long term.
But my guess is that the day after I sell my inverse funds the market will drop big time. I want to hold on to them recoup some losses but I am experiencing pain and indecision.
Thanks
Jim
Jim.
If you're in a taxable account and not an IRA I would recommend that you do your selling in January and not December. That holds off the IRS for another whole year on your taxable gains.
And on what whim did you discern that the market was going to correct last year in December? O.K., that was a rhetorical question.
If you are getting antsy and you're figuring on a correction, it is better to sell of 10-30% of your portfolio and stay in with the rest. Let the correction happen and then go back in in stages when you think the correction is through. Maybe 10% back in after each 5% loss in market value. You will re-coup your money and then some on the bounce back.
It sounds like you are like me in that you can't time the market at all. Of course that also includes 99% of all other investors. The other 1% are just lucky.
You might (understatement) be better off with a buy & hold portfolio like the one in my IRA. It has a very low expense ratio, and does a good job of accruing dividends.
VGTSX - 10%
DODFX - 10%
VSGIX - 5%
VISVX - 5%
VIVAX - 10%
DLS - 10%
VFINX - 15%
VWO - 8%
VGENX - 12%
FIREX - 5%
DBT - 5%
The rest in: EWY, EWA, SLX or XME.
If you need more money for these last ETF's you could pare down VGENX to 10%, or maybe VFINX to 12%.
I have buys for ADRE, BIK and VWO set at 20-25% during current levels. I am in no rush in trying to catch a rocket, as I am sure it will return to earth at some point.
I should mention also that Vanguard's funds sometimes charge for having less that 10k in each fund. They also charge a 1% exemption fee for VGENX if it's held for less than one year.
A good replacement for VGENX is their VDE ETF. And the small cap funds can be in VB & VBK. I also like their VTV with it's 2.57% yield.
FFRHX is good if you insist on having bond exposure.
From Marty Chenard today at Stocktiming.com, "There will be a real danger to worldwide indexes when this (Chinese bubble) implodes, and will likely set off panic selling."
Roger,
So many words, yet I can't figure out what you are saying......just a bunch of "maybe this, or I'm not saying that"...
Instead of this mealy mouth blather, why not talk about how to play China in a well diversified portfolio, and how to rebalance regularly to avoid getting whacked if valuations get too extreme?
I sold all my emerging market funds including China in Dec 2006, and replaced them with bear market funds.
I regret that decision now, and I am really in a conundrum as to how to get out of these inverse funds which have lost me a lot of money.
I don t think getting back into emerging markets at this point would be very smart. But I am one of those investors who makes consistently wrong decisions about where the market is going.
Jim,
In terms of managing your portfolio:
1. Stop making big bets on guessing near-term market direction.
2. You don't mention it specifically but it sounds like you probably are not diversified. Diversify across multiple investments/asset classes that are uncorrelated. I (and Roger) mentioned in a previous post the concept of strategy and counterstrategy.
But my guess is that the day after I sell my inverse funds the market will drop big time. I want to hold on to them recoup some losses but I am experiencing pain and indecision.
The market does NOT care that you have experienced losses nor that you want to recoup them. That is IRRELEVANT. The only important question is does it make sense now to hold the inverse funds in the percentage allocation that you do. If not, you need to make the change, regardless of what may or may not happen.
Pain is an emotion, not an aspect of rational decision making. Forget that you feel pain, and make the most rational decision you can make now.
Jim,
You need a plan...
buy a double short fund....
I would not doubt a blow off top today on the Chinese markets.
I'm expecting a hard drop.
The Real Estate bubble in China is even bigger. A condo in Shanghai is selling for more than $400 per square foot. The medium household income is less than $3000 a year. Home price in Shenzhen increased more than 50% last year. China has been trying to cool down the economy for more than two years without any success. The bust may come before 2008 Summer Olympics with Taiwan moving to independence. The World economy will take a hard hit after the bubbles pop. Commodities, Basic Materials, and Financials will be hit the hardest.
Post a Comment