Monday, November 29, 2010
Wednesday, November 24, 2010
Tuesday, November 23, 2010
11/23/2010 7:45 AM EST
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The China bulls -- and I am one -- would say that most of these IPOs have been ready to go for the last couple of years but haven't been able to get out of the chute due to the general uncertainty in the markets. The majority of these companies stuck in the IPO pipeline are best-of-breed, technology-related names.
For any of these company's related to the Web, the broad macro trends (i.e., the rising-tide theory) are recited in their F-1 filings with the SEC by rote: only 400 million Chinese out of a total population of 1.3 billion are online and their overall purchasing power is still small, but rising quickly.
One Chinese company that held its IPO last week is Bitauto Holdings (BITA - commentary - Trade Now), the product category leader for Internet-based auto information and marketing in China. And, of course, China surpassed the U.S. last year as the top car-consuming country in the world.
Bitauto's shares debuted on the NYSE at $12 each, and they continue to hover around that point to this day. This company, which was brought public by Citi (C - commentary - Trade Now) and UBS Investment Bank (UBS - commentary - Trade Now) is not widely known in the U.S., so I'll provide some details here.
Thursday, November 18, 2010
11/18/2010 5:30 PM EST
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However, given some time to study the report, Sina investors saw that the short-term hit to the company was primarily due to stricter government rules and regulations affecting the fourth quarter. Yet, for 2011, the company was continuing to expect strong growth.
The whole portal space in China has been buoyant this year. China has seen media ad spending jump by 18%, thanks to big events like the recently closed Expo in Shanghai and the current Asian Games in Guangzhou. Big portals are having a big second half of 2010. NetEase.com (NTES - commentary - Trade Now) is up 27% in the last six months.
Of all the Chinese Internet stocks, Baidu (BIDU - commentary - Trade Now) is the best known to U.S. investors. It's now trading around $110, giving it a $37 billion market capitalization. Once Google (GOOG -commentary - Trade Now) exited the mainland earlier this year, Baidu stepped on the gas pedal, and it hasn't looked back. The stock is up 153% for the last 12 months and -- would you believe -- it is a 10-bagger from about two years ago, when it closed at a low of $10.91 on Dec. 5, 2008.
Wednesday, November 17, 2010
My friend Mark at Fund My Mutual Fund put up a series of recent ABC News videos on life in China today. Having just got back from there, I can attest that these are very representative of what's going on there. They are really worth watching.
Of the current set of modern hedge fund managers, only John Paulson yields more Google hits than Soros, with 2.6 million hits. Soros has about 10 times the number of hits as the man David Rosenberg calls the best money manager in the world: Paul Tudor Jones. David Einhorn has only 225,000 hits and Bill Ackman generates only 84,000 hits. Eddie Lampert, who was once declared the next Warren Buffett, has only 32,000 hits.
Of course, past performance -- and hits on Google -- by no means indicate future performance. Yet, these hits indicate how often the broader media pay attention to the views of these managers as a part of the public discourse on our financial markets.
Popularity of these managers is why CNBC and other media outlets pay so much attention to their 13-F filings, which disclose how their portfolios change each quarter. For example, earlier this week, we found out that John Paulson trimmed his Bank of America(BAC_) stake last quarter and sold his entireGoldman Sachs(GS_) stake. David Einhorn bought more Apple(AAPL_).
To the Journal's credit, it also referenced that it was Soros' hedge fund -- Soros Fund Management -- which made other moves. In one paragraph, the Journal uses Soros and his fund interchangeably: "The value of Mr. Soros's stockholdings was $6.7 billion at the end of the third quarter. The fund reported stockholdings worth $5.1 billion at the end of the second quarter."
However, in an hour long discussion with Reuters' Chrystia Freeland in September, where he discussed his macro views on gold, the U.S. deficit, and Europe's debt problems, Soros admitted during a Q&A session afterwards when asked about one of his fund's stock positions that he wasn't involved in the day-to-day decisions of the fund. Therefore, he couldn't discuss a specific stock.
Monday, November 15, 2010
11/15/2010 5:00 PM EST
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There are many merger arbitrage hedge funds still betting that a deal will go through. However, based on the Canadian government's rejection of the proposed deal a few weeks ago, I'm not so sure it will happen.
Many were surprised by this decision. Countless articles have pointed out that this was only the second time since the 1980s that the Canadian government has ruled out a proposed deal. However, there's been little analysis into why the deal was ruled out and what it might mean for future deals.
Industry Canada -- the Canadian equivalent of the Federal Trade Commission (FTC) -- has to sign off on any foreign buyout of a Canadian company. The organization actually green-lighted the BHP deal. It was the Minister of Industry, Tony Clement, who blocked the deal -- and it came down to politics.
The federal Conservatives have led the country -- fairly well when you consider Canada's position today relative to the rest of the world -- as a minority government for the last four years. They are widely expected to call another election in the next six months.
It became clear weeks ago that many Western Canadian business leaders weren't behind the BHP takeover. They basically didn't like the future it presented to many of them -- most of whom lead energy or agricultural companies that potentially could be attractive buyout candidates in the future. They have seen dozens of acquisitions of mid- to large-sized Canadian companies out over the last 15 years, and they have seen those companies basically become branch plants or branch resource locations (where key executives remain abroad and local Canadian jobs are lost). What's more, the key resources fall under the control of some foreign company.
Friday, November 12, 2010
Thursday, November 11, 2010
However, the crafting of the end-of-summit "declaration" starts a few hours after the leaders first sit down to talk. The final details are hammered out by underling administrators showing complete unanimity by all parties.
Recall that it was expected that the Toronto summit would center on countries pressuring China to let the yuan float upwards. The night before the event started, the Chinese government announced it would be open to such flexibility. The country offered no details on how or when it would make such adjustments (although it has followed through modestly since then). The announcement was sufficient to deflect attention from the issue for the meeting.
So, despite the recent rhetoric about the risk of future "currency wars" among countries trying to increase competitiveness, or the supposed anger by foreignfinance ministers over the Federal Reserve's decision last week to proceed with a new program of quantitative easing, or calls for China to -- again -- raise the value of the yuan against the dollar, I expect little discussion of these issues in Seoul or in the final statement.
So much of the public talking points we hear -- whether it's from Treasury Secretary Timothy Geithner, President Barack Obama or the Chinese government -- relating to these issues is mere "political theater" meant to score points with the public back home that government officials are doing something in their people's best interest.
So, rather than paying attention to these issues, it will be more interesting to monitor some of those that are less popular, but potentially significant, that don't attract attention from the folks back home and, therefore, can truly be issues where coordinated agreement can occur.
I think very highly of Canadian central banker Mark Carney. A Goldman Sachs(GS_) alum, he is a straight-talker and eminently reasonable, in my view. While young and early in his tenure at the bank, he is already highly regarded by Federal Reserve Chairman Ben Bernanke and other central-bank peers.
Wednesday, November 10, 2010
After a life in academia studying the Great Depression and -- more recently -- Japan's travails from a 20-year deflation slide, Bernanke has good reason to fear an economy falling back into a quicksand pit.
Bernanke knows two things about his public perception. First, he, like politicians, gets no credit for any actions he took that prevented problems from happening two years ago and second, there's an inherent bias that the Fed and certainly among the mainstream press and the public to fear inflation much more than deflation.
As late as early September 2008, Bernanke was fighting fellow Fed governors' hearts and minds against the imminent threat of inflation. Runaway inflation is a much easier concept for Glenn Beck to diagram on a chalkboard compared to runaway deflation. What's the schematic for that?
So, three cheers for Bernanke taking action last week. He and the Fed governors have a dual mandate: full employment and price stability for the US economy. Given the data and where we are in this recovery, the Fed made the right call.
But Ben Bernanke doesn't have responsibility for the rest of the world and, unfortunately, there will be challenging unintended consequences of his actions last week on other emerging economies.
Specifically, China and other economies -- like Hong Kong -- with their currencies pegged to the US dollar will feel added inflationary pressures on their already strong economies. Simply put, Bernanke's explicit prescription for healing the U.S. economy is now gas being poured on to already hot economies who bounced back remarkably quickly from the crisis two years ago.
In a recent letter to his investors, renowned hedge fund manager Paul Tudor Jones complained about the Chinese yuan's peg to the US dollar: "On January 1, 1994, China devalued its currency by 50% in a single day, and since then has experienced a manufacturing boom. After 15 years of impressive productivity gains relative to its trading partners, though, it now resists the smallest appreciation.... "As someone who has traded foreign exchange since 1980, I believe the RMB/USD rate is currently the single most important of all exchange rates. It not only drives the largest foreign trade relationship in the world, it also drives virtually every other exchange rate globally. Dozens of other emerging market countries suppress their exchange rate against the US dollar because the RMB is effectively pegged to the dollar."