Getting Down From My Pulpit
Today I wanted to get down from my pulpit and dive into some actual research and analysis. I was planning on a comparison of three Australian telecommunication companies, Telstra (TLS.AX), iiNet (IIN.AX) and M2 Telecommunications (MTU.AX). However, “The China Bubble’s Coming — But Not the One You Think” by Vitaliy Katsenelson has delayed my decent into details.
Katsenelson’s article is a good read and the conclusion is the most likely long term outcome. However, it gave me the shirts.
“All in all, this spells trouble — a big, big Chinese bubble. Identifying such bubbles is a lot easier than timing their collapse. But as we’ve recently learned, you can defy the laws of financial gravity for only so long. Put simply, mean reversion is a bitch. And the longer excesses persist, the harder the financial gravity will bring China’s economy back to Earth.”
There is no point in writing or reading an article that says China’s growth can’t continue at 8%+ forever. Of course it can’t. Beyond that certainty, things get considerable more complicated and I don’t think anyone can reliably forecast the outcome. China is moving from the agrarian age to the industrial age and on to the information age in the blink of an eye. In two decades they will have done what the rest of us took two centuries to achieve. Anyone who says they can reliably predict the outcome of that is full of it. There is no need to ever time crashes or for that matter to predict anything in markets. Simply have a rough idea of possible outcomes and their probabilities then watch and respond.
Sentences like the following by Katsenelson’s, are based on deluded arrogance that our Western way is the best way, it also verges on racial vilification. Those thinking they have moral and philosophical superiority need to look in the mirror. “If the Chinese government decides to build a highway, it simply draws a straight line on the map. Any obstacle — like a hospital, a school, or a Politburo member’s house — can become a casualty of the greater good. (Okay — maybe not the Politburo member’s house).” This is trash 60 minutes style writing, I shouldn’t be reprinting it. So enough said on that.
Here is an old watchlist of mine for Chinese ADRs, or if you want an Excel version of it grab it from here.
For my own reference here is a conversation on the Chinese bubble, from back in October 2007. There are some worthwhile comments on that thread.
Anyway, how about that Telstra! Up 10 cents, 2.88%, thus far today. I no longer hold my largest position in Telstra, which I commented on back here. I sold some Telstra to free cash up for all the recent SPPs. I was hoping to buy it back again around the same price, but with the markets renewed enthusiasm in Telstra and the ex-dividend date now less than a month away that doesn’t look likely. Hence why I’ve decided to compare the three aforementioned telcos.
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