Tuesday, July 17, 2018

Business news



Free trade

It works fine for the multi-national corporations (and the investors) and the world’s consumers by producing the best products from the best components from all over the world with the cheapest and educated labor force.

China’s advantages

·         All low-wage countries such as India have labor cost advantage. Most cannot compete with China as the government has not provided infrastructure such as electricity and roads to bring the products to the port.
·         Dying and working is a choice for some citizens in many countries, but not for today's China unless you are a Chinese basher.
·         If they can send man to space, most likely they can build a good toaster. China needs brand names to offer these products at higher prices.
·         China's success is due to government policy and hard work of her citizens. The lifting of embargo 35 or so years ago started the process. Uncle Deng had the vision and it worked.
·         China is moving to the next phase of a developed country. It has happened many times from Japan and South Korea. However, we have not seen this scale yet.

China collapse?

Germany learns the problems with refugees. It is late but better than never. If they do not fix the problems, it could collapse.

The collapse of USSR is also due to the temporary low prices of the energy and lumber and other resources Russians depends on after the huge military expenses.

China does not have to keep up with anybody but herself. If you have been to China in the last 3 years, you would not think it will collapse. I have heard this 10 years ago, 5 years ago and even 1 year ago. It has not happened so far.

Free trade

Free trade works if all parties play fairly. You do not want to grow sugar cane in Alaska or dump the chicken feet (a Chinese delicacy) to the ocean. US has been treated unfairly by her trade partners for a long time and Trump finally stands up at the risk of losing a lot of votes.

1.       Deficit with China is huge but exaggerated. Take out the components that are not made in China and the design costs. Include the Chinese tourists, college to Chinese, our product profits in China such as cars and phones that are assembled in China and our fast food chains... and that should cut down the deficit.
2.       Banning core technologies to China is not a long-term solution. If you understand China more, the rise of China is not avoidable now. Need to be codependent and co-benefit.
3.       Take out the barriers of our products to China.
4.       Check why we're not competitive in some sectors. We cannot solve the lower wages from many foreign countries.

Many of the above are relevant to Canada, Mexico and EU.

Close our doors to all trades


We can tell the world we do not want to trade any more. US is one of the few countries that can do so. We would enjoy a $50 toaster and the house price would appreciate due to lack of Canadian lumber.

Pruitt resigned

How many Trump's top officials have resigned? Shame, greed, sex and the press all play a role in many cases. All high-profile politicians are scrutinized and our free press is always finding juicy materials.

Tariffs

Tariffs on 500B Chinese goods vs 50B on US goods. We've the upper hand.

Even with the tariffs and depending on the rates, Chinese goods would still be competitive and hence the consumers will suffer. Tariffs are a kind of tax. The Chinese auto components also make our cars more expensive and same for the lumber from Canada.

Embargo

Embargo used to work when EU were our puppets.

British stocks

You have been warned a long years ago not to buy and/or unload British stocks. Many do not agree with me. See what will happen when the massive exodus of corporations to EU would happen.

China and trade war

China will lay out the long term solution to US trade wars. The two countries are co-dependent and should be mutual beneficial on trades as illustrated in my book "Can China Say No?" She can in 10 years or so but not now.

Two different investors

Speculators buy the trend and investors buy for the long haul.

In another words, speculators base on momentum and investors base on value.

Or, it is short-term trade vs. long-term trade.

Both can make money if they are good in either strategy.

Check out my books “Buy high and sell higher” and “Buy low and sell high”.

Misc. news

Have not heard of CA for a long while. They are into mainframe software and mainframe has been declining for more than a decade. The fundamentals look great.

Small jet planes may have no future. Boeing is smart not to invest themselves. The Brazilians and Canadians take note. Last month, I took one using propellers from Boston to Toronto. Nice view in low altitude. I prefer to go to first class than flying my own jet for safety if I have money to throw around or tax write-off. Many major airports have been too crowded.

Why FB got fired from a country that has no effect on the Cambridge Analytica? Could be the name Cambridge.

ZTE can breath easier and concentrate on its 5G research. China will speed up the core technologies. In 10 or so years, China can say No to us.
Jul 12, 2018.

Yuan appreciates

I remembered I got 8 Yuans for 1 USD years ago. Today’s 6.67 is still low compared to before.

Higher Yuan is good for tourists to China (bad for tourists from China), good for Chinese export (bad for our export to China), bad for Chinese in buying our companies, good for Chinese debt payback...

Every country 'manipulates' her currency.

Trump and NATO

The sucker who is on a diet always picks up the dinner bill for the other fat guys and the two ladies. No more sucker! No more Mr. Nice Guy!
Jul 12, 2018.

EU

EU depends on energy from Russia. Pipeline is the best way to transmit oil and gas to EU from Russia.

Why we defend EU, Japan...whose wealth is about the same as ours? It made sense in the past but not anymore. Our leaders have closed their eyes too long.

A hug for a better world

I hope Trump and Xi would hug each other and declare victory. A trade war cannot be good.

Xiaomi

Is XI #3? By volume or by dollars in sales (not by profit for sure)? Or Chinese brands only? If they have not started research on G5, they are too late even with all the money in the world. From the fundamentals, it is not a buy to me. Potentially, it might.

Their phones cannot be marketed in the US as they're too similar to iPhone (at least in the user interface).
Jul 10, 2018.

Surface Go

I do not think Surface Go can compete with PS4 or iPad.

RIP Surface Go (to hell). What a waste of money to market an inferior product without looking at the details. Do market research first.

Tablets were originally commercialized by Microsoft and they had their version of iPod. You need passion to create a worthy product, not just filling the management's objective. When they do not learn from history, they will repeat history.
Jul 10, 2018.

Trade war effect

I wonder what will happen to our companies including Starbucks, McDonald's, GM and Ford who are doing business in China in the potential trade war. With the new tariff, Tesla will have a hard time to compete with Chinese cars in China even assembling the cars in China.

Ford's and GM's profits in China are more important. It could have saved GM from bankruptcy that would cause US esp. its investors a lot of money and jobs.
Jul 9, 2018.

Mobile phones

The ranking of mobile phones is interesting. It is by volume, so Apple is #2 behind Samsung.

China has several in the top 10 including Huawei, Oppo, Vivo, Xiaomi, ZTE and Lenovo due to her huge internal market. LG is #9. Alcatel is #10 indicating EU is losing the market share.

Xiaomi has the poor timing in listing its stock in Hong Kong. It needs cash for research and development against its competitors especially in the 5G products.
Jul 9, 2018.

Cruise ship profits

The two factors:

1.       When the baby boomers cannot enjoy trips that are physically challenging, cruises are better for them.
2.       Asian cruises are getting more profitable with the increasing middle class esp. from China.

The neutral:

1.       They try to squeeze every penny.
2.       Quality of entertainment and food are both decreasing for making extra bucks.

Jesse Livermore

He could be our greatest trader in our generation. However, he died almost bankrupt, committed suicide and called himself a loser (from my memory).

It is better to be a turtle investor as described in my book "The Complete Art of Investing".

Sunday, July 15, 2018

Chinese dumpings


A foreigner (to Chinese) describes dumpling as tasty inside. The lettuce (bamboo leaf for wrapping) is too tough (not supposed to eat) but dental floss is provided.

When you ate the dumpling, his office was packed with foreigners looking for an UFO eating lunch?
From TV just now: Shanghai Small Dumpling (小籠包) is a meat ball wrapped with pasta according to a modern Marco Polo. They give you a container () to take home the left over and soup inside so you do not have to order a drink. It is a Chinese dish of all-in-one.

Is FXI a good buy?


As an investor, I would predict how the China’s stock market would fare in this trade war.

YTD performance of FXI (an ETF for Chinese largest companies) is about minus7% while that of SPY is about 5%. P/E of FXI is 10 while that of SPY is 24.

FXI would purge when the trade war is in full-fledged. Bet your money at your own risk as the outcome of the trade war is not predictable.

The exception is when “E” is increasing fast as indicated in the early recovery of the stock market. To illustrate, the highest of P/E is 124 in May 2009, and it is the best time to buy stocks in recent years.