China

China’s Golden Week Retail Sales Remain Strong – No Hard Landing

October 11, 2011
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China’s Golden Week Retail Sales Remain Strong – No Hard Landing

China’s Golden Week is one of two major 7-day national holidays in China. The two holidays are the Lunar New Year which begins sometime in January or February and Golden Week which starts in early October. The idea of a week long holiday is to provide an opportunity to take time off from work and travel. Although businesses and government officials have a holiday, the retail sector stays open during both of these holidays which make them important for retail sales. Lunar New Year is more important because there is a gift giving tradition associated with Chinese New Year but Golden Week is a very important fall shopping week as well. A number of companies have come out in China and provided indications of strong sales during the week....

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China PMI – No Evidence of a Hard Landing

October 2, 2011
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China PMI – No Evidence of a Hard Landing

China’s official PMI was released over the weekend (after financial markets closed on Friday) and the September data point came in slightly higher than last month and slightly higher than expected. The total manufacturing PMI index came in a 51.2 which is the strongest month of the past 4-months. As important as the slight uptick, the gains were broad with improvements in the key categories. Total PMI rose to 51.2 (50.9 in Aug) Output rose to 52.7 (52.3 in Aug) New Orders rose to 51.3 (51.1 in Aug) Export Orders rose to 50.9 (48.3 in Aug) Backlogs rose to 48.9 (47.6 in Aug) Employment rose to 51.0 (50.4 in Aug) In short there was some modest yet broad improvement. While a PMI reading of 51.2 is weak for China,...

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China Hard Landing Fears – The Reality and The Preposterous

September 30, 2011
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China Hard Landing Fears – The Reality and The Preposterous

Slowdown fears in the market have shifted to China. The past two days has seen the start of a shift in sentiment with China exposures viewed more as risk than as opportunity. There is clearly some slowing in China, and there should be, because the government has been trying to slow the economy to help contain inflation for the past year. China starting to slow is a positive because it helps inflation remain under control which is a key element towards China achieving its multi-year economic plans. Over the latter half of this week, the fear has shifted that the slowdown is no longer orderly and that it is accelerating towards a hard landing in China. If this were to be true, it would dramatically increase the chances of...

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Chitaly Starts to Mambo Italiano – China in Talks To Buy Italian Sovereign Debt?

September 12, 2011
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Chitaly Starts to Mambo Italiano – China in Talks To Buy Italian Sovereign Debt?

I mentioned this possibility over a month ago on August 5th, in the story “Chitaly – China to Purchase Italian Sovereign Debt?” Headlines just hit that Italy is in talks with China to directly buy Italian bonds according to the FT. This headline caused an immediate lift to depressed markets which is quickly getting faded. I believe this may actually transpire because it accomplishes two aims. Most clearly, it helps Italy fund its sovereign debt, which they had some trouble doing today as evidenced by the 1-YR note auction going for 4.15% this month vs 2.96% last month. Secondarily, China is desperate to maintain the euro, because this is the only other major currency which has the potential to be investible for large quantities of FX reserves. To the extent that China runs a...

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It’s Time to Buy in Hong Kong

August 31, 2011
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It’s Time to Buy in Hong Kong

After a brutal correction in both prices and valuations it is time to get long(er) China geared Hong Kong listed equities. I believe the timing is right because the single largest risk factor, inflationary pressure, is in the process of peaking, and is likely to abate moving forward. China growth persists at a 9% clip and I believe this growth rate is likely to slow gradually. Through a combination of currency appreciation, higher real interest rates, and credit constraints (the growth rate of credit) China will start the gradual process of focusing on domestic demand. Valuation is on the side of real investors as the H-Shares (HSCEI index) are at ex-crisis lows and sub 10x forward earnings. This is a 30%-40% valuation discount to what is “average” over the...

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China Rate Hike Cycle Over?

August 11, 2011
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China Rate Hike Cycle Over?

Markets are on edge. This type of volatility is wrenching. It weighs on professional investors, it interjects more emotion into the investment process, while elevating stress, and causing people to lose sleep. The above is natural as money is made or lost at an outsized pace in hourly timeframes. This phenomena is measured by the VIX index which has surged to over 40 this week (was 15-25 the majority of the past couple of years). When you are stressed, tired, and emotional, you don’t think or research as clearly. Things get missed. There was some subtle news in the past week about August 10th being a key date for the People’s Bank of China with respect to making a decision on rate hikes. Stories were out last week from Xinhua...

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China Inflation – Non-News News

August 8, 2011
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China Inflation – Non-News News

The Chinese CPI is not an apples-to-apples measure relative to the CPI (consumer price index) that is reported here in the US. Some are attributing the overnight leg-down in the S&P futures (down another 24 or 2.25% at 11:00pm) to the fact that Chinese inflation came in at 6.5% when the consensus was 6.4%. Crackerjack says: “bullocks”. This is just some more good old fashion market panic in our opinion. Chinese food inflation came in at +14.8%. Certainly high, but food inflation is much more volatile and both weather, crop, and commodity price dependent (notice how all commodities except for gold have been collapsing the past few days). Chinese inflation ex-food is running up 2.9%. Not too much different than inflation in the US, nor should it be with...

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Chitaly – China to purchase Italian Sovereign Debt?

August 5, 2011
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Chitaly – China to purchase Italian Sovereign Debt?

Crackerjack continues to hold the view, that what transpired in the markets is a crisis of confidence, more so than an actual crisis. There is a big and important difference. During the real-deal 2008-2009 economic crisis you had actual insolvent institutions as the value of mortgage securities declined when the US housing market imploded. The sovereign debt crisis in Europe is also a real crisis as it relates to Greece, Portugal, and Ireland (these countries can never pay back what they borrowed) but these economies aren’t big enough to tip the world into a global recession. While Spain and Italy have numerous longer-term structural issues which need to be addressed, these nations have ample ability to pay their actual agreed upon debts so long as the interest costs are manageable. Italian...

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Welcome to Crackerjack Finance

July 29, 2011
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Welcome to Crackerjack Finance

Crackerjack Finance holds the view that superior investment results come from three areas: knowledge, perspective, and disciplined research. After growing weary of financial websites and blogs that either a) regurgitate headlines or b) scratch the surface with quick-and-easy investment recommendations, Crackerjack was conceptualized in order to provide deeper investment analysis with regard to the broad economy, overall markets, sector themes, geopolitical implications, and company/stock research. Crackerjack believes in an open forum where analysis can be exchanged and stand on its own merit. The idea is to create a forum for passionate investors. Crackerjack believes in anonymity so ideas can be evaluated, shared, and debated freely. All investment ideas will either be from Crackerjack’s founders or from outside submissions that are vetted by Crackerjack. Investors are encouraged to take ownership...

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