ebook essays pieces of the puzzle
Tuesday, May 24th, 2011
open and closed

We now revisit a posting from April Fool’s Day, which featured a chart that is updated above with some additional information.

The topic was Chinese stocks that had been halted at that time.  The chart showed the total returns since mid-2010 for four of them (CCME, NIV, CAGC, and CIL) — two of which are now trading again.  Look carefully in the lower right and you’ll see where they landed.  Also included this time around are the returns for the Shanghai Composite and another high-profile suspension, Longtop Financial (LFT), which was halted last week.

What we know and what we don’t know was the subject of an essay I did on this firm-level phenomenon and something of still-greater import, the possibility that we aren’t getting the whole story when it comes to macro information about the country either.  (Predictably enough, I referred to it as the China syndrome.  Among other postings of note on these issues was “The Red Collar Crime Wave” by The Reformed Broker.)

The news is not getting better in this regard.  How do you say “patsy” in Mandarin?  (Chart:  Bloomberg terminal.)

up on the farm

Speaking of “what we know and what we don’t know,” very often proponents of an investment idea push the theme without examining the underlying economics.  That’s fine:  People are free to invest without doing the numbers and sometimes the theme trumps all anyway.  But at a price, it becomes very risky business.  Is that what we have today up on the farm?  Rather than starting your analysis with expectations of demand from China, you might put together a little spreadsheet on what it would take for the buyer of land today to make a competitive return over the next many years.