Saturday, December 13, 2008

Stock Jock

The pic above shows the year-to-date trend for the Taiwan stock market. It peaked in May when Ma was inaugurated and has been in a free fall since then, plummeting from over 9,000 to under 5,000 yesterday. It fell another 3.7% on Friday, in fact.

With all the news about China's plunging economy, and of course the US, now a train wreck, Taiwan is headed for more bad news over the next couple of years, until (if and when) the global economy recovers. Nevertheless, "maverick" investment guru Jim Rogers, whose appearances here in Taiwan generally make the local news, had this to say in a CNN piece the other day:

What I've been buying recently is agricultural commodities. I've also been buying more Chinese stocks. And I'm buying stocks in Taiwan for the first time in my life. It looks as if there's finally going to be peace in Taiwan after 60 years, and Taiwanese companies are going to benefit from the long-term growth of China.

We've had peace in Taiwan for decades here, Jim. The war guys are on the other side of the Strait. Taiwanese companies have already benefited from growth in China for more than a decade -- in fact they are one of its most important drivers, investing there for the last 15 years or so. And finally, it should be noted that "Taiwan" and "China" aren't going to "make peace," but the KMT and the CCP are going to sit down and dicker on how best to deliver Taiwan to China.

I know market trends today don't predict what will happen tomorrow, but I'd have to question whether now is the right time to get into the stock market here in Taiwan.

UPDATE: As commenter pointed out below, this isn't the first time Rogers has said "it's the first time...." UPDATE 2: As commenter pointed out below, a real stock analyst says casual investors are losing millions here. That ties in with what I've been saying, that it looks like certain entities are pumping Taiwan to make a killing on the little guy. Note that I am not accusing Rogers of anything here.


Richard said...

I wonder where all those "experts" and Cramer-like gurus (as you say) went, that were saying to buy Taiwan stocks back in the summer when they were only down about 10-15% at that time on an investment in the TAIEX.

Funny thing is, Jim Rogers stated he started buying Taiwan stocks back in March/April, right after Ma was elected. I clearly remember the name Jim Rogers also as I remembered the "first time in my life buying Taiwan stocks"-line.
See here:

Although, I do like that article overall, the predictions in the subtitle, "Dow 4,000. Food shortages. A bubble in Treasury notes." is what I expect in the next years to come. The Dow 4,000 prediction may be as early as next year. Food shortages, may take a little longer.

Michael Turton said...

Those gurus fled, Richard. I'm convinced all that talk of "booming market" was just another pump-n-dump on small investors, and also to help Ma.

Thanks for the reminder on Jim Rogers saying that before. I had some dim memory of that.

Other than that comment on Taiwan, yes, it is a good article.


Anonymous said...

Dr. Terrance Odean of the Haas Business School of UC Berkeley (California) was here in Taipei on Dec 4 delivering a paper on Taiwan's day traders.

Odean is a leading researcher into financial behavior.

Here's a credible expert telling it like it is: casual investors have been losing millions on the TSE.

Here the link to his papers:

Anonymous said...

Okay, you can't go after Jim Rogers for being wrong short-term on Taiwan (it looks like it will be quite awhile before anyone who invested then makes their investment back), but then wallow in the predictions of the demise of the US--Because they've been as wrong as the predictions on Taiwan and China.

There is something trendy about being cynical about the future of the US. It's some combination of international, cosmopolitan liberal and libertarian "I'm stocking a bunker in the mountains of Montana". Europe was ecstatic when the financial crisis really started spiraling out of control in August-September.

Can you read this article on a German vision of a multipolar financial world with a straight face? About how the crisis is a US manufactured crisis? How much have real estate prices come down in the UK, Ireland, Spain, Eastern Europe, etc.? What happened to the twin locomotive theory (US + China)? Why is the country of Iceland bankrupt? Why are all the European banks being destroyed (there are a few exceptions of course, but there are in the US as well)?

Europe was so arrogant just a few months ago. I'm curious; where is that stupid grin now?

In this time of crisis, everyone has fled emerging markets for the relative safety of the US and Japan. Where else would you go? Seriously, where?

The cries over US gov't debt are greatly exaggerated also. It's bad, no doubt. But think about it, if you can get a 0% interest rate, why not? Given inflation, people are paying the US gov't to borrow their money!

I do agree that eventually, people will find the broader economy safer, and will begin to move out of Treasuries. But to say the US is going down is just an ugly kind of wishful thinking. And if that Doomsday scenario really did happen, I'm not sure what'd really be left of the rest of the world economy either.

The US has serious, serious problems. But so does the rest of the world, as unveiled by this sudden downturn. I can kind of understand what drives people to despise the US; afterall, the demise of NYC as a financial center would create more space for Europe; but I think if you really want to put your money where your mouth is and bet real money (and make something back), it'd be better to take a more rational perspective of things.

Anonymous said...

Anon again, just want to elaborate.

As a percentage of GDP, Japan has more than twice the government debt of the US. The yen has risen to new highs against the dollar. If you want to short someone, go short the yen, and think about the US dollar later.

Given how loud everyone is about the US, I'm just so curious why no one talks about Japan. If government debt is all there is to it, why don't we all go short the yen?

Anyways, just putting out there something a little more connected to economic reality to talk about, rather than this fashionable, but unsubstantiated anti-US cynicism being bandied about.

Chekgiau Ng said...

This might be off topic but since we are talking about investment and 529 plan is one of them. It may be a good time to put some money in 529 plan next year if your kids are more than a couple years from college. But no school in Taiwan is eligible for now.

If universities in Taiwan are serious about teaching in English and admitting more American (instead of Chinese) students, it should apply to be designated as an eligible institution to participate in the (US) federal student financial assistance programs For 2008-2009 school year, US listed 483 foreign post-secondary schools (including Chinese University of Hong Kong) as eligible for their residents to apply their financial aids to and thus eligible for 529 plan expense.

Michael Turton said...

There is something trendy about being cynical about the future of the US.

It's weird that looking at the current US situation of large debts, pervasive mismanagement, shrinking manufacturing base, massive investments in wars abroad rather than capacity at home, and sundry other issues, to call it "trendy" to see those as issues that might affect the future prosperity and power of the US.


Tommy said...

"It's weird that looking at the current US situation of large debts, pervasive mismanagement, shrinking manufacturing base, massive investments in wars abroad rather than capacity at home, and sundry other issues, to call it "trendy" to see those as issues that might affect the future prosperity and power of the US. "

Michael, I do have to agree with him. You are right that there is nothing wrong with being concerned about what these mean for the future of the US. But overly giddy predictions of the decline of the US abound in the media. This is something that many in Europe and Asia look forward to. The giddiness has only started to abate in the last month or so as the Europeans have begun to realise how deep the doo doo is that they are in and the Chinese have begun to realise that they are not immune to some pain. I think of it as the cry of joy you hear from a crowd of spectators that thinks the opposing team will drop the football in the endzone and realises that the ball has actually bounced in the player's hands only to land firmly in his grasp: Yaaaa--aawwwwwww!

Anonymous said...

large debts, ...massive investments in wars abroad rather than capacity at home

There's no point in arguing if you are going to say these things without quantifying any of it. The enormous increase in debt still puts the US in a better position than most developed countries given that the US borrows at much lower rates and is generally much more stable than other developed countries. China and all the other countries holding huge amounts of US debt can't just sell it off nilly-willy unless their goal is to throw all their money away. Like it or not, the US dollar is still a major reserve currency, and through this financial storm, it has only shown increased resilience, not less.

I agree the debts, the spending on wars, is bad for the finances of the US. But how bad? It's important to ask, I think, because what people like Jim Rogers are espousing is something like the US is going to collapse relative to the rest of the world. I just don't see any indications of anything on that scale... maybe you can enlighten me.

pervasive mismanagement
Yep, some real bad scandals, bad decisions, but it looks like people are losing plenty of money because of it, and hopefully have learned their lesson. Rich people are hurting really bad these days.

shrinking manufacturing base
Uh... where's the problem here? Financial services, advertising/marketing, media, the internet industry, are not "real" business? Google doesn't make anything physical so they are...? I just completely don't understand that. What's the issue?

Michael Turton said...

What's the issue? Nothing I guess. I'm just being trendy.

Anonymous said...

Yeah, the shrinking manufacturing base meme is reminiscent of the nativist ideological screed of Michael Crichton circa 1980s. Unless you think the US should do something like screw Taiwan and raise tariffs against it and those other "pesky little upstart" Asian economies.