About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, March 04, 2010

Downgrading China

I am putting the China stock market on furlough for a while. My
primary concern is that with wages rising at a far faster rate than
the inflation measures, and with pressure continuing to find new
hires on the policy front, the "safety valve" for containment is
likely business profit margins, which are sure to contract in such an
environment. The broad macro data clearly point to a price/cost
squeeze for companies. Continuation of this process over a period
of several years will prove debilitating for corporate China.
Rectification of the squeeze will involve some combination of wage
growth restraints and stronger pricing. Such would help out the
business sector, but would also put pressure on social and state
economic policies.

I am well aware that China's economic statistics lack transparency
and that its stock market does not always conform to custom when it
comes to economic fundamentals. But, if China wants my money,
then they can play the game my way. Such is the freedom a
discretionary player like myself enjoys.

I like the volatility of the China stock market and with new funds and
ETFs available, the market presents a high growth, high beta profile
that has its uses. I know I will return to it.

Shanghai Composite Chart.

1 comment:

Chris said...

Peter,
I've been in Oklahoma all my adult life. Lived in Sand Springs and fished Lake Keystone back in '81. Now in Edmond. Spent some time on Tenkiller myself this past summer. I've been in the HVAC industry for the past 25 years. Now working in Service Sales for a Mechanical Contractor. Keep posting, seems you have alot of knowledge to share.
Thanks,
Chris