I have another paper available for download outlining my China short thesis available for subscribers here: China Macro Discussion 2-4-10 China Macro Discussion 2-4-10 2010-02-04 13:10:26 922.25 Kb.

In addition to the issue-specific ETFs (proffered (Chinese
ETFs with Exposure to Real Estate, Banks, Insurance and Export
Industrials)
that I have already proferred, I will be offering my
viewpoints on specific companies across various geographic regions
as well. Those ETF's have actually performed quite well on the short side YTD. For those who don't subscribe to my blog, here are some excerpts from the 11 page download:

Can China Control the “Side-Effects” of its Stimulus-Led Growth?

The strongest argument for a Yuan-revaluation relies on a basic tenet of economics: tinkle with prices and you disturb the resource allocation equilibrium prevailing in the economy. China’s endeavor to push economic growth through stimulus spending and its lax control over money supply has started to affect the “side effect” - INFLATION. The very contrivance used to maintain stability has become a threat to economic resurgence. And if there is one such thing that could force China to drop its dollar peg, it is out-of-control inflation.

image001.png

One of the major reasons for inflation in China is the rescue program initiated during the recent global slowdown. The Stimulus program aimed at creating a temporary demand within the economy has apparently worked wonders – aiding the Chinese economy to grow by a healthy 9% in 2009. This program has apparently overheated the economy, gorging on what may become untamed GDP growth, currently 10.7% in 4Q09 - its fastest quarterly growth in two years - which was uncannily higher compared to the 6.1% growth in 1Q09, the lowest since the introduction of quarterly GDP figures in the fourth quarter of 1999.

Published in BoomBustBlog

A quick discussion note for paying subscribers.

In Bloomberg: China Central Bank Says Price Threat Is Complicating Management of Economy

Jan. 29 (Bloomberg) -- China’s central bank said rising inflation will complicate management of the world’s third- largest economy in 2010 after record lending sparked a jump in property prices and added to overcapacity in some industries.


Published in BoomBustBlog
A quick discussion note for paying subscribers.

In Bloomberg: China Central Bank Says Price Threat Is Complicating Management of Economy

Jan. 29 (Bloomberg) -- China’s central bank said rising inflation will complicate management of the world’s third- largest economy in 2010 after record lending sparked a jump in property prices and added to overcapacity in some industries.

A quick discussion note for paying subscribers.

In Bloomberg: China Central Bank Says Price Threat Is Complicating Management of Economy

Jan. 29 (Bloomberg) -- China’s central bank said rising inflation will complicate management of the world’s third- largest economy in 2010 after record lending sparked a jump in property prices and added to overcapacity in some industries.

Thursday, 21 January 2010 23:00

Follow Up to the China Short Thesis Debate

I have included ETFs that have exposure to the industries discussed in the post "Some Light Shown on My Developing China Thesis". The list of ETFs can be found here: pdf Chinese ETFs with Exposure to Real Estate, Banks, Insurance and Export Industrials 2010-01-22 02:27:03 377.96 Kb.

The subscriber download to the aforementioned post is pdf "A Note On Potential Short Opportunity Opinions in China 2010-01-21 01:13:06 475.18 Kb " which is available to retail and pro Subscribers as a 6 page PDF document, Pro subscribers are invited to the discussion/debate between myself and my analysts
on the merits of the China short as it compares to the up and coming
European Sovereign Crisis short opportunities I will be publishing very
soon (a preview is available here:
Deflation, Inflation or Stagflation - You Be the Judge! - please excuse the fact that I compressed several European nations into EU charts).

I want it to be known that we are still formulating the empirical thesis behind the short, but I have decided to keep all subscribers abreast of the deliberations in real time, as well as offering the tools that I would use to take action if I deemed it prudent.

Published in BoomBustBlog
Wednesday, 20 January 2010 23:00

Some Light Shown on My Developing China Thesis

First, in today's news.

Yen Weakens Against Higher-Yielding Currencies After China Growth Quickens

Jan. 21 (Bloomberg) -- The yen declined after a Chinese report showed economic growth accelerated to the fastest pace since 2007, damping demand for Japan’s currency as a refuge.

The yen weakened against all of its 16 most-active counterparts on speculation the nation’s central bank will keep interest rates low as the economy struggles to gain momentum. The euro was near a five-month low against the dollar on concern Greece will default on its national debt as credit-default swaps on the country’s five-year sovereign bonds climbed to a record.

Published in BoomBustBlog

As you recall, my take on the deflation vs inflation debate is much less crystal ball-ish than many other pundits on the web. I never was very much into fortune telling or forecasting the future. From what I observed and researched, if I had to make a call that call would be stagflation.

On that note, here is an interesting note from one of my site's subscribers on how China is exporting to what is amounting to stagflation to the United States, now!

Published in BoomBustBlog

In "Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!", "It Doesn't Take a Genius to Figure Out How This Will End" and "He Who Bloweth the Bubble With Wet Lips Should Stand Back Lest Spittle and Saliva Spray Upon Ye Face" I not only declared my opinion that China appears to be enthralled in a massive bubble, but Chinese economic reporting cannot be trusted. There have been a few comments stating that the "new and improved China is not the China of 1989 Tiananmen Square".

It appears that the recent flap with Google security and the censoring of searches sheds light on this debate.

Published in BoomBustBlog

In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to have a team take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

Below is a list of shortlisted banks that have reported higher returns relative to S&P 500 between the period March 9, 2009 and January 5, 2010 - the bear market rally of 2009. The methodology that we followed for this short listing is as follows:

· We took out a list of banks that are domiciled in the US and have market capital of more than $500 million and current share price of more than $10.

· Next we calculated returns for each bank and S&P 500 between period March 9, 2009 and January 5, 2010.

Published in BoomBustBlog

Just the other day I stated "Why does everyone confuse a bubble with economic progress" in a post about a very probable bubble in China (see "It Doesn't Take a Genius to Figure Out How This Will End" then get your chuckles on with "Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!"). Well, as if on cue, Stocks, Metals Decline Around World After China Curbs Lending; Yen Weakens:

Jan. 7 (Bloomberg) -- Stocks fell around the world, driving the MSCI Emerging Markets Index down the most in three weeks, and metals declined after China moved to curb lending. The yen dropped after Japan’s new finance minister said he would welcome a weaker currency.

The MSCI emerging markets gauge slipped 0.7 percent at 9:45 a.m. in London, led by China as the Shanghai Composite Index plunged 1.9 percent, the biggest decline among benchmark indexes tracked by Bloomberg. Futures on the Standard & Poor’s 500 Index lost 0.3 percent. Copper retreated from a 16-month high and oil snapped an 11-day rally. The yen weakened against all 16 most- traded currencies.

Central bankers in China, the engine of the global economic bubble recovery, sold three-month bills at a higher interest rate for the first time in 19 weeks after saying their 2010 focus is controlling record loan growth. The Federal Reserve said in the minutes of its latest meeting that the U.S. economic recovery might require additional stimulus measures to be sustained.

Bubble Blowing Growth will probably reverse slow this year as tight credit will damp the artificially derived and probably outright lied about demand side,” said Zhang Ling, who helps oversee $7.2 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That will dash investors’ hope of another year of fast bubble blowing growth.”

Published in BoomBustBlog
Page 5 of 7