Thursday, March 13, 2008
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From the standpoint of this site being about sharing process I find the current state of the China investment theme to be particularly difficult right here. As disclosed previously I had close to across the board exposure to China with Sinopec (SNP), charted in red, that I first bought in 2004. I sold the last of it last May over concern that the run would soon come to an end. I did not use a stop order because at the time the day to day movement did not, IMO, lend itself to stop orders.
The sale was good in that older clients made 2 1/2-3 times their money, the sale was so-so except I was a few months early, the sale was bad because while I sold at $103 it peaked out at $178 (point there being there are many ways to look at a sale). Sinopec closed yesterday at $96.26.
What makes it difficult is that many things related to China are down a lot; the Shanghai Composite, charted in blue, is down about 30% from its peak in October which is a lot but there doesn't seem to be any recognition of the decline and I can't recall any what's wrong with China articles or TV segments. There was virtual panic (slight exaggeration) when the US market was down 5%, China is down 30% and very few, if any, people seem to care.
Down 30% is not the worst place to initiate a position because often people start to give up at about that level which is why 30% is about the average size bear market decline in the US. But if China is down 30% and no one is even miffed, holding off seems right but that is what makes this a tough call.
Just so no one gets confused I am talking about the price of stocks not the story on the ground in China. I have been convinced for years now that China is a huge story and could easily supplant the US in being the globe's big Kahuna but none of that makes it immune from bear markets. The stock I want buy is not down anywhere near the 46% that SNP is down, but it is down noticeably and like I was saying with financials the other day I feel good about where the price will be 36 months from now but three months is tougher to see.
This hopefully shows that it is ok to not know. No one can know everything, there cannot be perpetual clarity with everything. I think I am reasonably well in touch with the theme (stocks going down, CPI going up, GDP going down, yuan going up, the magnitude of importance of the Olympics) but for now I don't feel like I have solved it just yet. This has happened with other things in the past and will happen in the future, it is normal.