Well nothing to worry about anymore, right? Short term moves rely on a lot of irrational things but closing out the week like this is better than the alternative.
I disclosed getting stopped out on Volvo yesterday; today the stock is up close to 10% on earnings news. I sold roughly 1/3 of the position. It had grown in to as much as 6% of some accounts (give or take) which is a lot more than I allocate to one stock. In a way the sale looks bad, which is how it goes sometimes, but I still own the stock and so the way I look at it I have a stock at 3-4% for most accounts up 10%-ish--not a bad day. However any criticism of the timing of getting stopped out is very valid.
I found this little diddy in the FT; there are going to be a lot more Chinese IPOs. The positive is more choices will mean less buying pressure on the names that already exist. The negative is this creates more supply and based on history supply will eventually overwhelm demand. That is what happened with the internet bubble.
I still believe mania is a better word than bubble to describe China--well where US investors are concerned. Everyone you know does not have 50%, or more, of their portfolio in Chinese stocks, I don't think I am hearing a lot of "this is different" and a lot of people seem to think a big hit in China is plausible.
If China cuts in half, or worse, I do believe other foreign markets, including the US, would be impacted but I do not think it would be the all-encompassing deathblow that 2000 was. If a normal correction or bear market gets triggered because of China, and to be clear I don't know what to expect, it would have been something at some point so why not China?
On a related note I shaved a little bit off of the one Chinese stock I own for clients this morning. The name in question is up a ton today after a nice move and so for some (not all) people, as a function of circumstance, it made sense to cut back a hair.
Update/correction; there is a second Chinese stock I own for two or three people but not across the board and I took no action on that one.
Wikinvest Wire
10 comments:
Once the belly flop starts, can one short the chinese market using etf's or mutual funds?
Curtis
ETFs yes (subject to availability) OEFs no
"If China cuts in half, or worse, I do believe other foreign markets, including the US, would be impacted but I do not think it would be the all-encompassing deathblow that 2000 was."
I'd offer this opinion, which I readily admit is in a fact free zone. If their market blows out 50%, it could potentially throw them into recession as liquidity potentially would dry up. So all of those Chinese reserves that have all of those hedge fund managers drooling, may have to be deployed in bailing out their financial system.
If China's growth rate were to be impugned in some way due to a stock-shock, that would affect the psyche's of quite a few global investors, for they are the economic life raft that many are clinging to.
you can use things like FXI or BIDU to short. However i believe that the real mania is in the Shanghai market which is not open to foreign investors.
Lots of these stocks are dual listed in Shanghai and Hong Kong and the Shanghai shares are up a LOT MORE than the Hong Kong shares for the same underlying.
This is setting up much like what happened to the Saudi market two years ago.
Leisa and Sami frame it well. I think the result would be in the middle of their comments. The Saudi market is more of an island sentiment-wise than China is.
"Based on a variety of data that have come out after the first estimate of Q1 US growth at 1.3% it is now likely that US growth in Q1 was actually below 1% (probably close to 0.7%); we are thus already into a “growth recession” territory. As discussed extensively in this blog a US hard landing can take two forms: a “growth recession” i.e. a period of time when growth is well below potential and in the 0% to 1% range; or an outright recession, i.e. two consecutive quarters of zero growth.
If Q1 growth turns out to be below 1% (as now likely) we would already be in growth recession range in Q1. The revisions of Q1 GDP growth that will push the revised estimate of Q1 growth rate below 1% are:
- Lower change in inventories than initially estimated reducing Q1 growth
- Better construction spending than initially estimated increasing Q1 growth
- Much worse trade balance in March than initially estimated reducing Q1 growth
The net effect of these three factors is an estimated 0.7% growth for Q1 (JP Morgan today revised its Q1 estimate downward to 0.8%).
Much more seriously, Q2 started on a very weak note for private consumption based on initial estimates of retail sales. I now expect Q2 growth to be closer to 0% or even negative (i.e an outright recession)." - Roubini
Kersplash!!! Can we do a bigger belly flop than they can...?
Are we naive to think that investing in stocks of companies that are ultimately controlled by the communist government of China
are the same as buying speculative stocks in a functioning democracy?
Western investors and companies invested a boatload of money and intellectual capital during the 1930s in countries that eventually turned into the Axis - all for better returns and promises of stability from the likes of Hitler, Tojo and Mussollini.
I have money invested in China, but I thought this would be a different view from others expressed on this post.
it would seem to me that the potential mishap from mismanaging an economy growing at 9% that is new stock market investing would be bigger than whatever is really going on here.
Call me crazy again, but I just nibbled a few FXI 115 puts.
IMHO I think that one of the things that presently fuels the market is the fact that due to things like discount brokerage firms and the data available to the average person on the Internet, more people around the world are getting interested in investing. More cash constantly coming in gives legs to markets around the world. The big drops in the market just don't seem to last as long as before. Today was another example of this I believe.
For that reason alone I project a more optimistic view of future markets than 6% yearly average returns. I would say more like 10% for the next 7-15 years or so as more and more people get comfortable with managing their own portfolios and investing in general. More money coming in basically faster that the number stocks in the market increase means higher stock prices due to supply and demand.
Of course the more well off folks will still use money managers such as Roger. But the big influx of cash is through the lower and middle class slowly getting addicted to investing. And ETF's and index funds are helping as well as seemingly safer and easier vehicles to enter the market increase.
I work with a classic middle class guy who works two jobs. I got him into investing four years ago and he is completely addicted to saving and investing now. He has managed to save 80k in those four years, and he follows the market every day. He is not alone in being a new investor.
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