KWEB

The Chinese Market Is Rigged

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The Chinese equity markets do not reflect reality. The government has made it so. Trading on hundreds of  Chinese-listed stocks has been halted or suspended during the past few weeks, short selling (or even selling by large shareholders) has been banned, and as much as 10% of GDP has been pledged to prop up Chinese shares, and the list of government intervention goes on and on. The Chinese equity markets are “rigged,” and the government holds all the cards. Even so, share prices won’t stop falling. There may be nothing left to stop them. The writing has been on the wall for years that a bubble had been forming in China. As when everyone was on margin and “playing” the … Read more

Alibaba Shares Disappoint

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No need for boo-hooing BABA just yet. We’re aware of the poor performance of Alibaba’s shares, and we’re as disappointed as any. But we haven’t gone sour on the firm.  Chinese stocks (FXI) recently entered a bear market as the Shanghai Composite Index has dropped over 20% from its June 12 peak. The market is now in the midst of what most call a “self-correction,” as Chinese equity valuations have become out of touch with underlying fundamentals, though we maintain our view that both Alibaba and Baidu (BIDU) remain significantly undervalued. The People’s Bank of China, in an attempt to halt the recent slide in share prices, cut both its one-year lending and deposit rates by 0.25%. In addition, the … Read more

Yikes! Investor Expectations

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A few days ago, I received an email from a valued member of ours. He said that our call on Ford (F) was wrong because we removed shares from the Best Ideas portfolio too early. Another member mentioned a couple months ago that we removed Baidu (BIDU) from the Best Ideas portfolio too early, and he was extremely disappointed for this reason. One of our most valued financial advisor clients, whom said that our call on a certain industry had saved him millions in client assets, decided to cancel his subscription due to a structural shift in his business to ETFs. The puzzling part of all of this, however, is that our call on Ford reaped a ~35% gain, the … Read more

Europe and China

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Europe and China are on high alert. European Central Bank President Mario Draghi made it known that the ECB will do everything in its power to “expand its asset purchase programs if inflation fails to show signs of quickly returning to the ECB’s target.” Just a few weeks ago, Draghi had sent shudders through the global equity markets with his view that “without reform, there can be no recovery.” It appears that significant and aggressive monetary action may be the only option for a European continent that could once again be headed into recession and/or deflation. This announcement won’t be the last that we hear regarding moves to aid the European economy. Iron ore prices have been in free fall … Read more

ICYMI: Time to Consider Buying Chinese Equities? Not Exactly.

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This article was originally published August 26, 2021. Image Shown: Shares of Alibaba Group have plummeted over the past year in the wake of Beijing’s crackdown on China’s domestic tech and fintech titans. By Callum Turcan Many would argue that the key event that kicked off Beijing’s ongoing crackdown on its domestic tech giants started back in October 2020 when the once domestically revered entrepreneur Jack Ma, the founder of e-commerce, fintech, payment solutions, and cloud computing giant Alibaba Group (BABA), gave a speech critical of Chinese regulators. A WSJ article published August 20, Jack Ma’s Costliest Business Lesson: China Has Only One Leader, covered the situation in great detail. Mr. Ma noted at the time that he viewed Beijing’s … Read more

Valuentum Weekly: Yields on New Series I Savings Bonds Have Soared!

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The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever! — —– — Markets  — The Dow Jones, S&P 500 and NASDAQ futures are all indicated up Sunday night (March 13), but that may not mean much when trading kicks off tomorrow. The start to 2022 has been one of the worst stretches during the past decade, but broader … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more

Worst in Energy Not Over, Stay Away from Leveraged Enterprises, Seeds of Financial Crisis Sown?

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Image Shown: The energy and banking markets continue to be experiencing pain. Since we removed the Energy Select Sector SPDR (XLE) and Financial Select Sector SPDR (XLF) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio, the XLE has fallen more than 50% and the XLF has fallen 13%, while the SPY has held up roughly 2%. We continue to believe staying away from energy and financials/banks will be a source of significant alpha. These are challenging times. The oil price swoon has complicated an already-dire situation with COVID-19. We’re seeing cracks in the credit markets, and the European banking system is far from healthy. The US banks may face knock-on impacts from energy loan defaults and hold … Read more

Update on Wuhan 2019 Novel Coronavirus Outbreak: 31,000+ Infections, 630+ Deaths

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Image Source: 2019-nCoV, Centers for Disease Control and Prevention The number of infections and deaths related to the Wuhan 2019 Novel Coronavirus has surged since our last update, but we maintain our view that investors should keep a level head. We continue to wait to add protection to the newsletter portfolios as the market absorbs a massive liquidity injection from the PBOC. By Brian Nelson, CFA The week of trading ending February 7 was a very strange one. Last Sunday, one could have only expected that given the news related to the Wuhan 2019 Novel Coronavirus outbreak, the bad news related to airlines (JETS) and aerospace players–Boeing (BA), in particular–and the speculative frenzy associated with Tesla’s (TSLA) rise, that the … Read more