MSN Money - China: the dragon that isn't - Jubak's Journal
This is an interesting take on what China's role in the world economy may or may not evolve into and some of the problems that confront China.
You can get a feel for the article just from the title. I think, though, it entirely misses a crucial concept here. China will continue to modernize and play a bigger role in the world. They will demand more resources, expand where it does business and expand the businesses it is in. I do not know at what rate GDP will grow in the coming years but China will continue to need more of what it does not have and make more of what it does have. Because of this, it will have more and more hand (Seinfeld reference) on the world stage. To me, that is the real story.
GDP has been running around 9% in the last couple of years and the stock market is down a lot. Maybe the next big run in Chinese stocks will be when GDP slows down? I own one Chinese stock for clients. I think there may be visibility for a big move up for US holders of Chinese ADRs if China does something with the currency peg. This would be along the lines of the currency issue moving other ADRs that I have written about before. As a side note I think removing the peg could be very bad for the US.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
4 comments:
One day there is a news story about how China will rule the world economy. Next day, we read the article like this.
Where is the consistency?
I think Jubal is a joke. Anyone who can routinely find ten "great" stocks a week is simply is just a pawn of the sell side.
China has big problems and it's growth will be chaotic. So was the US in the 19th century and there was that horrible interlude in the nineties knoan at the time as the GREAT DEPRESSION.
Right now it is fashionable to downplay China, the meme is all over, but it is speculating. One "proof" gives is China's apparent attempt to compress the steel industry into fewer companies. Nowadays we *know* lots of smaller competive companies are better, but in our first surges the "robber barons" in a "private government" of cooperation combined a large part of the economy into oigopolies and monopolies.
The Japanese and Korean systems have had similar features.
So based on history not theory, the Chinese approach *might* be good. We don't know.
Like the internet China might not expand as rapidly or as vastly as predicted, but the general trend og both has been consistent and they are both unbelievably developed compared to a decade ago. Right now the casino barkers want to drive the mania down, but there is no logic to their approach just as there was no logic to their suggestion not that long ago that you could reap huge China profits real quickly. People like Jubal can't even think in the time frames necessary to evaluate this kind of situation. He has to dig up ten great stocks to buy next week and find the next great revelation. It's tabloid finances, keep them moving, keep them shifting investments, *this* one is the REAL skinny!!
until next week.
Roger, there are two points I want to make. First the Chinese economy has grown on the average about 8% in the last 25 years, ever since the "open door" policy implemented by the late Deng. This isn't news. What's news is that American investors didn't give a **** about it until 2002. That's when the domestic market turned really ugly, and Wall Street needed to some other buzz to sell to collect their commission.
Second, the stock markets in Shanghai/Shenzhen are down this year not because of the 9% growth rate. The main reason is an irrational one (well to me at least). Investors are concerned that the the chance of the currency re-evaluation is very real. If that happens, the export machine will take a hit, which means the profitibilities will take a hit, blah blah blah. This to me is utterly silly and stupid. If you take a look at the growth rate of NET chinese export surplus (not just against US), vs the growth of GNP, you can conclude that the majority of China's economic growth is feuled by local economy. Re-evaluation or not, companies should remainly reasonably the same profitibility.
As of MSN Money, I had prefer Warren Buffet's annual report, read it over and over again, than having to be knee jerked by these so-called experts.
I suspect Jim Jubak is a really nice fellow. However, having tracked the results of his picks over the years, I wouldn't give him a plug nickel to invest.
One can be a great analyst and a poor trader, or or mediocre analyst and a good trader, but I'm guessing that Mr. Jubak gives his money to someone else to manage.
Post a Comment