Stock up

Last night the really smart, looks twenty years younger than she is, works hard and well dressed Chinese spouse and I went to a dinner sponsored by Credit Suisse for folks that have an account with that august financial institution.

My wife enjoyed the dinner and financial information. I enjoyed the beer.

More than that I can't say. I did learn or actually relearn some things about investing in Hong Kong. The stockbrokers and banks here use the right terminology but have different definitions for those terms. For example: if a brokerage agent in Hong Kong tells you " This is a good medium term investment" they mean it is a good investment for about 6 months. Short term investments are normally on things you stay invested in for less than 60 days. A long term investment means out to about 1 year to 18 months. In other words, they do not believe in long term investing and gear all of their advice to get-rich-quick thinking.

The hotshots they had giving opinions had some advice to buy stocks in various areas but were basically saying "Buy China, make 100% in 12 hours" I found this to be rather odd advice. Not that Chinese stocks are not profitable right now but; I cannot believe that any responsible brokerage house would issue an almost unqualified "Buy" to Chinese stocks.

You can look up the sources for what I'm going to use yourself, and you can believe me or not but here is why I would exercise caution in buying Chinese stocks

1. The Chinese stock market is a speculative market. Even the Chinese admit this. Speculative markets, especially those with lots of investors who have never lost anything are dangerous markets.

2. The Chinese stock market has too many people using unsecured capital to buy stocks. Many small investors in China have taken out multiple mortgages on their flats to buy stocks. If the markets fall those investors will owe several times the value their entire worth. There is no real way of knowing how many people this will affect but the murky banking laws in China make fraudulent loans a real problem.

3. The Chinese stock market has not fully realized the level of anger and concern by US and European consumers over the poor quality of Chinese made goods. Yes, some of this is unfounded and some of it is essentially racist or jingoistic but that doesn't matter because if a significant portion of Western consumers simply say "Nope, if it is from China I don't trust it and will do without it" then the Chinese economy is in trouble and the reasons for them doing it don't matter. By essentially blowing off the concerns of overseas consumers of Chinese goods the PRC is exacerbating the problem. I believe that one or two more big scandals, real or imagined involving goods made in China would result in a spontaneous mass boycott of Chinese goods.

I also found it interesting last night that they didn't mention defense contractors like General Dynamics. I would think, given the war in Iraq and the one coming between the US and Iran that investing in companies that make bullets, bombs and military airplanes might be a profitable move. And, please, don't give me any moral posturing about not wanting to invest in death. Especially if you investing in Chinese sweat shops, factories and coal mines.

Until Next Time
Fai Mao
The Blogger who isn't an Investment analyst

Death Wish

I am not really a financial or investment kind of guy. I figure that if you spend less than you make and save some you'll be OK That doesn't mean I don't have some investments, it just means that I am not obsessed with making money. But, I have been watching the recent fall in stocks world wide markets.

Not being heavily invested I can afford to snicker at the panic and silliness that might be about to ensue. People who place their value as a human in monetary wealth make some really funny, albeit sad statements in times like this. I realize that laughing at other people's misfortune is a character flaw but sometimes we can't help who we are. More importantly, I am not laughing at the poor who are genuinely going to be hurt in an economic down turn. I'm laughing at the smug, self important speculators and arrogant new rich who don't think they'll ever lose and have never suffered through a recession. That means most of the newly rich "entrepreneurs" in China.

Because investors in the PRC have never been in a down turn they have the potential to be more fun to watch than most others. They have a strange combination of patriotism and incompetence that is going to be fun. There were reports on the Chinese news stations about Shanghai investors who were exuberant because when the Shanghai market fell others did too. They were making statements like "See, the world follows us . We're important!"

Idiots! Who is going to starve first the US or the PRC? If the world goes into a severe depression the PRC will wish that they'd been a little more careful.

I wonder when the bodies will start hitting the pavement in Shanghai?

Until Next Time
Fai Mao
The Blogger who is more of a saver than an investor