MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Posts Tagged ‘China’

Why You Should be Cautious When Your Private Banker Suggests Investing in China

Tuesday, December 14th, 2010

Over the last months we have seen an avalanche of emerging markets investment products. Especially China funds are hustled to private investors. Is this a good idea?

Evidence is mounting that a huge bubble is building up in China. A recent article in the New York Times presents the China skeptic’s case quite succinctly:

“They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”

 

Meeting Jim Rogers

Friday, February 5th, 2010

Yesterday I attended a conference with Jim Rogers, co-founder of the Quantum Fond (together with George Soros) in the seventies, founder of the Rogers Commodities Index, author of various books on commodities and one of the strongest advocates for commodity investments. He certainly has an exceptional investment record and even it is no guarantee for the future following a summary of his outlook for the decade(s) to come:

Favourite Commodity

Currently he is very bullish for agricultural commodities. He predicts a huge shortage to come, since prices are depressed since years, no investments in more farmland have been undertaken and the silos are close to empty. He regards farmer as the big winners of the next decade. He would buy precious metals on dips and predicts that Gold will be double by end of the decade.

Future Role of Commodities

Not surprisingly he regards commodities as the best investment no matter how the economy will develop. In the case of a new boom the demand for commodities (and prices) will go through the roof because the supply site can not grow as fast. If the economy goes down he is certain that the governments around the world will continue to frantically print money. As a consequence the value of real assets such as commodities will increase.

Role of China:

He regards China as the upcoming economic and political superpower, however, pointed out that the GDP of china is still only 10% of the combined GDP of USA/Europe, so investors need patience. He thinks that the China acts strategically far smarter than the US, buying assets (mainly mines, oil/gas fields) all over the world while the US has only one focus: Printing money.

Relations USA and China

In his opinion China needs the US as much as vice versa. However, historically politicians of a superpower challenged by a growing challenger behave irrational so he foresees more frictions to come.

Timing

He never made good experiences with timing and has given-up on it. If he buys an asset he plans to hold it “forever”. He only will start to sell if everybody has commodities in his portfolio and people talk about pork bellies on the street. In his view commodities are far from a bubble and China (except real estate) as well. Main argument is that the actual exposure to these asset classes in the investor portfolios is still comparatively low.

BTW: Rogers moved to Singapore, because in his view Asia is on the development stage of the US at the beginning of the 20th century and he wants to be where the action and future is. So given his background and interests (of promoting his commodity index) no surprises, but he made quite a good case for his view.

 

Back To The Future: Chinese Internet Funds

Tuesday, July 21st, 2009

One of the last developments of the crazy tech stocks boom in 2000 was that banks started to launch very exotic funds on internet stocks. After stocks in traditional markets already went up tenfold and more a new “story” had to be invented: That of still “undervalued” tech stocks in “undervalued” regions. Shortly after the world of triple digit price/earnings-valuations collapsed these funds vanished for almost a decade.

However, just in time for the ten year anniversary of the dot.com-bubble Deutsche Bank launched last week an ETF on Chinese internet stocks. It is correct that neither internet stocks nor China are for investors a foreign territory as they used to be 10 years ago. Because of this familiarity with internet stocks investors nowadays do not accept missing of business models. Consequently, the upside of internet stocks is limited in many cases anyways. But unlike in 2000 this fund is launched in the middle of one of the world’s worst economic crises and not at the end of a bubble.

What does this tell me? Stock markets show cycles and these are about to be repeated. I cannot predict when and in which area the next bubble will build up, but I sure will look out carefully for the launch of funds on “Vietnamese e-commerce stocks”, “Bolivian coffee farms” or “Namibian solar parks”…

PS: With an annual 1.5% management fee the Chinese internet ETF is very expensive. Looks like the bankers thought an exotic ETF can demand an exotic pricing as well. Anohter indication that ETF does not automatically mean low fees.

 
Subscribe