Tag Archives: China
Posted on 30. Jun, 2012 by Harvey Sax.
Coal – The Ignored JuggernautSubmitted by Tyler Durden on 06/30/2012 09:38 -0400Submitted by PeakProsperity.com contributing editor Gregor MacdonaldCoal – The Ignored JuggernautOil, natural gas, and alternatives dominate the headlines when it comes to energy. But theres a big and largely-overlooked revolution occurring with the energy source likely to become the most preferred fuel for a world in economic decline: coal.The United States coal sector has been hit very, very hard this spring. Demand has been crushed by over 10%, as warm weather and bountiful supplies of cheap natural gas have induced power plant operators and all other users where possible to switch away from domestic coal. The rapid change in fortune has sent the stock prices of big, listed names such as Peabody and Arch down by double digit percentages, aGermany Guest Post headlines India International Energy Agency Japan Middle East Natural Gas ratings The Economist Worlds the Dow Jones US Coal Index has fallen below 160 from above 225 at the start of 2012.
Posted on 12. Mar, 2012 by Wilensky.
In the high-tech world of espionage, deep pockets prevail. Not this time though, as Chinese spies have mined substantial amounts of data.. through Facebook. Proving that the social data mining machine is a double-edged sword, the spies gathered email addresses, phone numbers, names, and details on family members on a number of high-ranking military officials. The fake account of United States Navy admiral James Stavridis befriended a number of other officials for an undisclosed amount of time before the intrusion was identified. Considering the number of ‘spoof’ accounts of a number of famous celebrities and the sensitivity of these high-ranking officials positions, it’s disconcerting such a simple and well-known technique was so successful.
Posted on 11. Mar, 2012 by Wilensky.
Apple’s market cap may rule the S&P, but it’s a different story in China. The tech giant is struggling to efficiently capture a leading share of the country’s massive market, while Samsung is proving a substantial opponent. With more than three times the market space over Apple (24.3% vs 7.5%), the South Korean company has a strong lead in subscribers which isn’t expected to be challenged any time soon. According to Bloomberg, Samsung’s blanket strategy proved much more effective in gaining subscribers than Apple’s tactically narrow approach:
“Apple’s partnerships with China’s second- and third-largest carriers give it access to about 34 percent of the nation’s 988 million mobile users, while Samsung targeted the whole market. iPhones aren’t sold to China Mobile’s 655 million subscribers, a number almost equal to the combined population of the U.S., Brazil, and Mexico.”
Considering the recent headwinds for Apple on the iPad/iPhone fronts in China along with the stock reaching toward the $550 mark, it wouldn’t be surprising to see the tech giant take a quick breather in the near future..
Posted on 23. Feb, 2012 by Wilensky.
A local court denied a motion to surpress the sale of the iPad in Shanghai due to a similar ongoing case in the Guangdong Province, allowing Apple stores to continue selling the product until an outcome is decided. Facing the unpredictability of Chinese courts, this is finally a glimmer of hope for the tech giant. Although this has no bearing on how the Guangdong case will turn out, it shows that China is in support of Apple continuing with sales probably due to some political pressure.
“Proview’s injunction request was rejected,” Carolyn Wu, the Apple spokeswoman, said in a telephone interview Thursday. “The court granted Apple’s request to suspend the case.” The U.S. technology company insists that one of its subsidiaries acquired the rights to the iPad name in China from the Chinese company several years ago, before the tablet computer was released.
But the Proview parent company, a computer display maker based in Taiwan, says its subsidiary in Shenzhen, which is in Guangdong Province, retains the rights to the iPad name in the mainland. Proview is facing bankruptcy and has said it is trying to force Apple to pay some compensation.
Posted on 16. Feb, 2012 by Wilensky.
Beijing, China: Several weeks ago, crowds of people amassed in front of Apple’s flagship store in the pre-dawn hours. Eagerly awaiting the anticipated release of the new iPhone 4s, customers and scalpers alike grew restless as the chants of “Open the door!!” grow louder and louder. At 7:15, already past the time when doors were supposed to open, a man steps outside with a bullhorn and announces to the crowd, “Please go back home! No iPhone 4s!!” Anger spreads through the masses, fights break out between angry scalpers and frantic customers, and eggs start flying….
Read the complete account and see the photos here:
Posted on 14. Feb, 2012 by Wilensky.
According to the NY Times, yet another city in China has halted the sale of the iPad over the trademark dispute with Proview Technology. About 45 units have already been confiscated from stores and most have been removed from displays, although the devices are still reported to be available under the table.
“Proview has also made a filing with the General Administration of Customs in China, he said, putting Apple on notice that the company could seek to block the export of iPads, should Proview’s ownership claims be upheld. The seizures follow a ruling in December in which a court in Shenzhen, China, acting in a legal dispute between the two firms, dismissed Apple’s contention that it owned the iPad name in China. Proview later asked the authorities in more than 20 Chinese cities to investigative whether iPads were being sold after the ruling, Mr. Ma said, a move that allows the authorities to impound the tablets until their inquiries are complete. In effect, the seizures and the filing are warnings by Proview of the havoc it could wreak unless Apple agrees to pay a large fee to settle the trademark fight.”
Basically, the insolvent Proview wants money from Apple and although they sold the trademark rights through a Taiwanese subsidiary several years back. The argument is that the sale did not include Chinese rights, and now Proview is owed a large sum of money for which they are willing to settle in or out of court.
Posted on 14. Feb, 2012 by Wilensky.
As the Carrier Abraham Lincoln left the gulf Tuesday, it’s battle group contingent was on high alert. According to the AP:
The passage ended a Gulf mission that displayed Western naval power amid heightened tensions with Tehran, which has threatened to choke off vital oil shipping lanes.The Lincoln was the centerpiece of a flotilla that entered the Gulf last month along with British and French warships in a display of Western unity against Iranian threats. There was no immediate comment by Iran about the Lincoln’s departure. Iran’s Revolutionary Guard has said it plans its own naval exercises near the strait, the route for a fifth of the world’s oil supply. But Iran’s military has made no attempts to disrupt oil tanker traffic — which the U.S. and allies have said would bring a swift response.”
Along with the warships several US choppers provided support as an Iranian patrol plane accompanied by an unmanned drone flew overhead. Patrol boats were also spotted although they kept their distance, possibly due to rough conditions during the battle group’s crossing. According to ZeroHedge, it is unclear if the drones shadowing CVN-72 were the same that Iran with China’s help, reverse engineered after the US drone fell in the middle of Tehran and did not self-destruct.
Posted on 02. Feb, 2012 by Wilensky.
Ok, so maybe picking up a can of spray paint isn’t the best retirement option for everyone, but it certainly worked out for David Choe. Back in 2005 and under the direction of Napster kingpin Sean Parker, he adorned the walls of the Palo Alto with his street styled tagwork (the rest of his mixed medium works can be seen here). Upon completion, Parker asked if he would like to be compensated in cash or in an equal value of stock. While Choe is no beacon of the mainstream social environment, he took a gamble and accepted the offer of 1% ownership in the fledgling internet company. And proceeded to go on with his life of art, travel, and homelessness. Fast forward to Wednesday and Facebook’s IPO, and Choe is now the world’s richest homeless man with a stake in Facebook valued at 200 million dollars. Not bad for a guy who wants to retire early, illustrate the Bible, and paint the entire Great Wall of China.
Posted on 01. Feb, 2012 by Wilensky.
Remember when China, producer of 95% of all the world’s rare earths, sent shockwaves through the rare earth markets by announcing a 40% reduction in rare earth production (seen here), and further stoked the fire by “mysteriously halting” all exports of the commodity (seen here) in a retaliatory effort against Japan? While China’s grasp strengthens while Western economies flail, Malaysia sees opportunity in offering some relief from restrictions by the erratic and opaque Chinese government. According to the NYTimes, regulators have granted an initial operating license to an immense refinery specializing in rare earth production. Although this is just the first of many hurtles, the granting of the operating license is one step closer to the expected opening of the facility later this year.. and one small step away from the clutches of China’s monopolistic industry.
Posted on 24. Jan, 2012 by Wilensky.
We have a delicate balancing act at hand between the threat of an emerging nuclear power, our rapacious thirst for oil, and responsible diplomatic policy. The consternation in the air is palpable, bringing to mind Buffet’s famous words “Be fearful when others are greedy and greedy when others are fearful”. So how does one put such words of wisdom into an actionable trade idea? Since going long nuclear fallout seems short sighted, let’s look at how to take advantage of a potential event driven jump in the price of oil once we fully grasp the situation at hand.
At the mentioning of the country results in a harsh, metallic taste of uncertainty and fear in the back of your mouth when you consider the effects on your portfolio. Developing a perspective on the state of affairs is difficult, especially solely from sorting through headline after headline; from the motorcycle delivered assassination of nuclear scientist Mostafa Ahmadi Roshan on Wednesday near Iran’s main enrichment facility to Europe’s proposed boycott of Iranian crude, to the menacing threat of a barricade in the Strait of Hormuz.
Lets break things down and set the scene so we can take a more accurate look. We have two main catalysts; the increasing threat that Iran poses to the rest of the world and of course, oil. It was most recently reported that Iran’s nuclear program had passed the low enrichment rate of 3-5% and begun to reach the threshold of weapons grade uranium, breeching the 20% level which is sufficient enough for a crude yet effective nuclear weapon. The assassination of Roshan yesterday only supports this theory, suggesting the program had progressed far enough to merit a public killing regardless of the political fallout. While the nuclear threat from Iran doesn’t seem all that immediate (at least until they find another sucker to be Director), former CIA chief Michael Hayden still feels the country ” ..is the single greatest destabilizing element right now with regards to global security”.
Fear aside, this brings us to the second catalyst: oil. One fifth of the world’s oil passes through the 34 mile wide channel, accounting for 35% of all waterborne oil traffic.. an ideal conduit for a battered and beaten nation to draw in an unwavering audience.
Now Iran gets pushed around quite a bit, with the most recent abuse in the form of sanctions against all crude oil exported from the nation; starting what Iran has referred to as an “economic war” on the country’s largest export. A ten day long display of naval tactics in the Strait was just the beginning for Iran’s government, stating that “if sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz.” Responding in turn, the US Navy ordered a second Carrier Battle Group into the region, just to keep an eye on things (which must make China feel all warm and fuzzy inside).
So now that we have pieced together a relatively coherent picture of the different catalysts in the scenario that could lead to a spike in oil prices, lets take a look at how to best position for such an event.
1. In an effort to reduce variables in such a complex and politically driven scenario, a simple strategy is highly recommended for the average investor. One of the easiest and cheapest options to develop a position is through buying the corresponding ETF, although since these funds generally invest in near term futures contracts due to the difficulty of holding the physical asset there is potential for some tracking error on the part of the fund.
2. Another option that provides a more direct investment is to own the actual oil companies (SLB, HES, HAL, XOM, etc.) Although also relatively inexpensive in terms of trade costs, this strategy subjects you to the headline risk of the individual companies rather than limiting your exposure directly to the price of oil. This strategy also lacks a guarantee that the correlation between oil company and oil price will appreciate in line with each other.
3. Which brings us to a play more directly linked to the movement in the price of oil and involves less capital than option 1 and option 2: buying options on the futures contracts. Each contract is for 1,000 barrels and a $.01 move in the price per barrel equals a $10 move in contract price. The pricing of these options requires some understanding of both the futures markets and options strategies, so is not appropriate for the average investor.
While some sort of drama ensuing from the Middle East debacle seems imminent, there is no guarantee that events will play out as expected and oil prices will respond in turn. Buying stock in a solid, multi national company with a strong balance sheet and diversified portfolio of assets might be a safer play on the chance that Iran can agree to some sort of terms on their Nuclear development program.
Posted on 23. Jan, 2012 by Harvey Sax.
The first thing I look at when I read Barron’s round table is the results of the panelists picks from last year. On that accord, one would do well by skipping most of it. There are though, two investment gurus, Bill Gross and Felix Zulauf that tend to make me money. None the less read the whole article and make up your own mind.. It can be found here.
Gross: Next, in a world of financial repression where 10-year Treasury bonds yield 2% and 30-years, 3%, certain state bonds and utilities yielding 5% and 6% are decent relative values. It doesn’t mean that they are without risk, and certain states have huge liabilities. I might even live in one. But a number of levered funds own relatively safe A-rated and double-A-rated municipal bonds and yield 7%, plus or minus. One is the Pimco Municipal Income Fund II [PML]. It is a $700 million fund and trades at a 5% premium to net asset value. It provides a 7% tax-free yield by investing in 5% municipal bonds and borrowing at 25 basis points.
Invesco Van Kampen Municipal Opportunity Trust [VMO] also is 40% levered. It buys A-rated and double-A-rated municipal bonds and levers a 4% to 5% return up to 6% or 7%. Munis have done well in the past few months. But 7% tax-free sounds pretty good, and I’ll take it for 2012.
In past years you recommended mortgage REITs such as Annaly Capital Management [NLY]. Do you still like them?
Gross: Annaly levers six to seven times, which doesn’t sound too risky relative to an investment bank that levers 10 to 15 times. Annaly buys almost exclusively government-agency-backed mortgages, so we’ll call it credit-risk free. The real risk is the cost of money, and prepayments on their holdings. Annaly and companies like it are sort of modern-day banks without any infrastructure. Like banks, they aggregate deposits and make a spread. Annaly isn’t on my list this year, but conceptually, a 14% yield from a six-times-levered agency-backed investment portfolio is better than a 2% yield from a bank stock when the bank has borrowed 10 to 15 times its assets and has a cumbersome infrastructure.
Zulauf: I assume the world economy is decelerating. China’s economy will slow more than expected, but the Chinese government won’t do anything dramatic to stimulate it. China will ease somewhat, but in piecemeal fashion. That is why those looking for China to get us out of the doldrums are wrong.
Zulauf: Last year China’s GDP grew by 9.1%. This year they will publish something like 7.2%, but the slowdown in reality will be more pronounced, and it will affect those who depend on China. The U.S. economy could grow by 1% or 1.5%. In Europe, I expect the next stage of the crisis — the ratification of a fiscal agreement — to be critical. I can’t believe all the countries in the euro will ratify it, because it would lock them into a depression for five years. There will be exceptions, and that will trigger the next crisis.
Felix Zulauf’s Picks
|10-Year U.S. Treasury*||1.96%|
|Australian 3-Year Bond Future**||3.16|
|Gold (spot price, per ounce)***||$1,617.95|
|Australian Dollar v. U.S. Dollar||1AUD=$1.02|
|Turkish Lira v. U.S. Dollar||$1=1.88 lira|
|iShares MSCI Emerging Markets Index FD / EEM||$38.23|
|* Sell when yield falls to 1.20%. ** March 2012 contract. *** Buy when prices fall below $1,520 probably some time this summer.|
We remain in a deleveraging world, and the deflationary process is intensifying. In the stock market, valuation compression has been at work since 2000. Occasionally we have had bull-market rallies when stimulus has been applied in major quantities. The last fiscal stimulus was in 2009, because all governments have realized they have too much debt. Fiscal stimulus is the only thing that works in this economy, and that will come later. We have to fall into a crisis that triggers a policy response. Equity markets around the world will top out during this quarter and then enter the next down leg in the cyclical bear market that started last spring.
And when will that end?
Zulauf: It could end in the second half of 2012 or in early 2013. The market could drop 20% from the first quarter’s high. Therefore we will need ammunition later this year or early next year to buy. My first recommendation is capital preservation, or cash. It doesn’t return anything but you’ll need it to buy when asset prices become cheap.
Schafer: What’s the symbol? [Laughter around the room.]
Zulauf: You figure it out. The U.S. dollar will strengthen against other currencies temporarily, until the policy response comes. We are at the very end of the secular decline in bond yields. Yields on less-safe bonds, such as those issued by Greece and Italy, have already bottomed. Bonds perceived as top-quality will see a low in yields later this year. Ten-year U.S. Treasury yields will hit 1% to 1.20% before ticking up to 2.10% or 2.20%. There will be a horrendous move down triggered by intensifying deflationary pressures as money looks for so-called safe havens. I recommend 10-year Treasuries as a trade. When the yield reaches 1.20%, sell.
Investors should own some gold. But gold also will be subject to deflationary pressure and have a cyclical correction. The first part of the correction was the $400 drop to $1,520 an ounce from $1,920. Gold is now bottoming and could retrace half its losses. Then it could decline again in the second quarter, and you could buy it again in the summer. The low will be lower than $1,520. Then gold will rally in the next two years to a new high.
In what form would you buy gold?
Zulauf: I own physical gold, although you can buy the GLD [ SPDR Gold Trust] exchange-traded fund. I hedge my position by selling futures contracts against it, but I closed my hedges recently because a temporary retracement is coming.
Gross: You have more of an emphasis on deflation and I have more of an emphasis on inflation two or three years out. If the 10-year bond yield fell to 1.25% and headline inflation was 2% to 3%, wouldn’t that be bullish for gold?
Zulauf: Yes, but some aggressive players are overinvested in gold. If some other assets go wrong for them, they will be forced to create liquidity and sell their gold positions.
Hickey: That’s what happened in 2008.
Jennifer Altman for Barron’sFelix Zulauf: “I would short the Australian dollar against the U.S. dollar.”
Zulauf: My next idea is how to play the slowdown in China. It will dampen prices for commodities, natural resources and Australian exports. China’s boom was the main driver for the Australian economy in the past 10 years. Australia’s last recession was in 1991. Despite rising exports to China, Australia runs a current-account deficit of more than 2% of GDP. GDP was up almost 2% last year. There is a budget deficit of around 3%. The current-account deficit was easy to balance because there was tremendous investment in the Aussie dollar. It was the so-called high yielder among currencies. Carry traders [who borrow in cheap currencies to buy higher-yielding ones] have bought it, along with individuals and even central banks. Holdings of Australian dollars are widespread, but now the Aussie dollar will suffer.
Why is that?
Zulauf: The strong investment inflow led to credit growth when interest rates already were too low. That led to a tremendous real-estate boom, with prices tripling. If China slows as dramatically, Australia will be hurt. The Australian central bank started raising interest rates in the fall of 2009. They went from 3% to 4.75% in November 2010. Last November they cut them to 4.5%. Now Australia is tightening fiscal policy because it has a growing deficit. The government cut spending, and as we have discussed, fiscal policy works much better in this environment than monetary policy. Short-term interest rates have declined to 3.2% and could fall another percentage point.
There are Australian government-bond futures with a three-year maturity. The yield is the difference between 100 Australian dollars and the futures price, which is currently A$96.84. That means the yield in the futures market is 3.16%, and it could rise by another percentage point in the next 12 months. This is a conservative play and you can lever it. It is a liquid market. The Reserve Bank of Australia will have to cut rates a lot more. Therefore, I would short the Aussie dollar against the U.S. dollar. The Aussie dollar has nearly doubled in the past three years against the U.S. dollar, from 60 cents to $1.02. It could correct by 20%.
Einhorn Ends 2011 Just Over +2%, Closes FSLR Short, Warns On Asia, Mocks “Lather. Rinse. Repeat” Broken Markets
Posted on 18. Jan, 2012 by Wilensky.
Anyone wondering why FSLR just jumped, it is because as was just made known, David Einhorn’s Greenlight has decided to close its FSLR position, after bleeding that particular corpse dry. “Our largest winner by far was our short of First Solar (FSLR) which fell from $130.14 to $33.76 paper share and was the worst performing stock in the S&P 500.” Einhorn also announces that he was among the “evil” hedge funds who dared to provide market clearing transparency and buy CDS on insolvent European governments: “We also did well investing in various credit default swaps on European sovereign debt.” As for losers, Einhorn and Kyle Bass can commiserate: “For the second year in a row, our biggest loss came from positions designed to capitalize on eventual weakening of the Yen.” He summarizes the global economic environment as follows: “The global environment is very complicated. On the one hand the Federal Reserve has taken a much-needed break from quantitative easing (at least for the moment). Accordingly, inflation in oil and food has abated, providing relief to the US economy. Bearish forecasts that the US was headed back into recession proved wrong for the third time since the end of the last recession. On the other hand, Asia appears to be in much worse shape than it was at this time last year and could be a drag on the world economy going forward. Very few people trust any of the economic data coming out of China, making it difficult to gauge the situation there. Some of the smartest people we know have very dim views. The Chinese have been a leading growth engine for the last two decades and are largely credit with leading the world out of the recession in 2009. A change in their economic circumstances could really upend things.” Yet the best thing is his summary of the current investing climate in our utterly and hopelessly reactionary broken markets.
Posted on 20. Sep, 2011 by Harvey Sax.
Jim Rodgers, a peripatetic,bow-tie wearing, prolific financial commentator and author, wrote a book published in December 2007 entitled a Bull in China, Investing Profitably in the World’s Greatest Market. Rodgers was a vocal proponent of the theory that the sun has set on the West and China was the future. No one is in fact more associated with this theory than him. So how well has the investment turned out for his readers. While Rodgers recommended dozens of stocks, many of which are impossible to price, it’s fair to say that when you advocate purchasing more than forty different companies, your returns will have some close affinity to the market at large.
So let’s see how those investments might have fared. Not so good if you look at the Hong Kong Hang Seng Index. On the first trading day of December 2007, the Hang Seng closed at 28,658. Yesterday it closed at 1889.70. That’s down 34% in almost four years. Ok, the Hang Seng is Hong Kong, not mainland China. Well, let’s try the iShares FTSE China 25., the largest Chinese companies. In December 3 2007, it was at 60.07 per share. Today it closed at 35.18. That’s a whopping decline of 41%. In all fairness, the markets are down in this country too. In December 2007, the S&P 500 closed at 1472. Yesterday it closed at 1200. That’s a decline too but a 22% decline is far better than the near 40% decline the Chinese markets had during the same period. Only on Wall Street can Jim Rodgers get invited on TV, lecture all over the world, and be generally regarded by the financial press as an illuminary when you get it wrong by that much. So why should we listen to him now about the U.S., Europe, or for anything for that matter?