September 08, 2007

China Stock Market Bubble, Bubble Trouble?

posted by MR WAVETHEORY at 9/08/2007 05:43:00 AM
Everyday, China stocks are hitting new highs with regularity that reminds me of the 1999 bubble. It's so simple to make money in Chinese stocks that I have started to wonder how long this can continue to go on.

Back in May, former US Federal Reserve chairman Alan Greenspan warned that the Chinese stock market could undergo a dramatic correction. They did. Then, shortly, they proceeded to go even higher. Shorting the Shanghai index? Big mistake. Result: More people are piling in!

Some would argue that the China Bubble started just yesteryear. Hardly is that the case as yoda would say. It started in 2004 with the IPO of China Green. China Green, what's that? That's what I asked too. Turns out it is a seed and fertilizer company! Don't laugh. As an investor more astute than me observed back in 2004, "Though China Green’s business literally involves small potatoes – cubed and shipped in plastic bags – its initial public offering in Hong Kong was anything but. Retail investors put in bids to buy more than 1,600 times as many shares as were available, making it the most oversubscribed IPO ever in Hong Kong. The stock jumped 58% last Tuesday, its first trading day." IPO price: around 1 HKD. Today's price: 6 HKD. Net profit: 500%. Do you believe me now?

And the bubble can start to pop now that we're heading into an election year. “If there were a prospectus for the Chinese economy, it would need to warn of a high dependence on sales to America. China exported $125 billion worth of goods to the US in the first 10 months of last year and imported just $22 billion. The resulting trade surplus equalled an extraordinary 9% of China’s entire economic output during this period. That has turned Chinese exports into obvious targets during an American election year." Forget the Olympics of 2008. It's election 2008 here we come. Say hello to tariffs and trade wars!

Politics aside. The Chinese stock market trades at an average of 42- times earnings, making the Chinese market the most expensive of the world's major markets. The S&P 500 peaked at 44-times P/E during the Nasdaq dot com bubble. The Nikkei bubble of the late 80s peaked at a P/E of 78. At the height of the frenzy in 1989, PE ratios of Taiwan's listed stocks averaged more than 100 (in contrast to 13 in the United States and 10 in Hong Kong). Taipei Business Bank's shares traded as high as 358 times its annual earnings,

All you need is a massive amount of sell orders as wikipedia describes.

One possible cause for the collapse of the NASDAQ (and all dotcoms) were massive, multi-billion dollar sell orders for major bellwether high tech stocks (Cisco, IBM, Dell, etc.) that happened by chance to be processed simultaneously on the Monday morning following the March 10 weekend. This selling resulted in the NASDAQ opening roughly four percentage points lower on Monday March 13 from 5038 to 4,879-the greatest percentage 'pre-market' selloff for the entire year.


And that was the beginning of the end.

Morgan Stanley says the end is near, calling recent growth in Chinese share prices “inflated,” yielding a stratospheric aggregate price-to-earnings ratio estimated at 58, using operating earnings as the proper yardstick for valuing China's popular A-shares, a stock class reserved for domestic investors. Apparently, much of the earnings growth is due to non operating items like ... you guessed ... investment gains.

Even the Shenzhen stock exchange came clean in their mid year report on company earnings. According to the report, the interim profit figures relied too much on yield of investment in the securities market and the prospects of a continued profit increase is doubtful. The contribution ratio of business revenue to profit fell 27 percent year-on-year while that of investment yields to profit soared 50 percent, said the report. Yes, the car guy is spending more time trading stocks than building cars. Big mistake.

If that's not enough, China's premier Wen Jiabao, “I want to tell you frankly that China is still a developing country with a large population, a weak economic foundation and underdeveloped productivity. This is a reality that has basically remained unchanged,” he said. Dude, you're the premier. I thought you were supposed to be the cheerleader.

September 07, 2007

Citic Securities Is Now Worth More Than Nomura Holdings

posted by MR WAVETHEORY at 9/07/2007 03:43:00 AM
Pop Quiz: Who's the fourth largest securities / stock broker in the world?

The answer: Citic Securities Company Limited (Shanghai 600030.ss)

I just learned recently that Citic surpassed Nomura Holdings (the largest securities broker in Japan) in terms of market cap. Citic's market cap is $37 billion vs Nomura which is $35 billion. The firm trails only Goldman Sachs Group Inc. (NYSE GS), Morgan Stanley (NYSE MWD) and Merrill Lynch & Co. (NYSE MER) in market value.

Citic Securities just raised $3.3 billion. The stock has been on a tear lately rising from around 10 RMB to 80 RMB in a year after trading as high as 94 RMB last month. That's close to a 10x return!

Anyone think there's a bubble? Bueller? Anyone? Bueller? Anyone? Anyone? Please raise your hands.

BarackObama.com Leads HillaryClinton.com in Web Traffic

posted by MR WAVETHEORY at 9/07/2007 03:31:00 AM
The numbers are in! BarackObama.com is trumping HillaryClinton.com in terms of traffic according to Nielsen. Nielsen's ratings are kooky so I would take it with two grains of salt. The Nielsen numbers show Sen. Barack Obama led both the Democrat and Republican packs when it came to traffic, with some 717,000 unique visitors to BarackObama.com last month. Hillary Clinton and John Edwards took second and third place with 437,000 and 348,000 uniques, respectively. That's close to a 2 to 1 lead! Wow!

With the average visitor spending over 8 minutes at HillaryClinton.com, Senator Clinton was the top Democrat in terms of user engagement. She edged out Obama's 7:53 minutes. In contrast, visitors to JohnEdwards.com typically spent just 3:43 engaged with his campaign and policy information.

That may have something to do with the Obama Girl video which sent traffic and searches for Barack Obama way up! And traffic is still rising even after Obama Girl dumped Obama for Hillary!

September 06, 2007

ValueClick Burns Advertiser Big Time Out of $10,000

posted by MR WAVETHEORY at 9/06/2007 09:00:00 PM
Pablo Palatnik got burned big time by ValueClick, Inc. (Nasdaq VCLK). Pablo bought $10,000 of advertising from ValueClick. Over the course of 3 days, ValueClick proceeded to put his ads on a bunch of junk websites that incentivized users to sign up for free stuff. ValueClick launched the campaign on Friday afternoon and with nobody in the office over the weekend, ValueClick proceeded to put Pablo's campaign on a bunch of sites that generated useless leads:

The campaign was launched and the leads did in fact come in. ValueClick decided to start the campaign on a Friday (leaving us no room to stop the campaign with a 72 hour clause during the weekend), and approximately 300 leads or so came in over the course of the next few days. As marketers our eyes lit up, and we thought: “that’s it, our client is going to love us!”

The results were in…and they were horrific! Nearly EVERYONE (i.e. 99%) our client had called (and they did call all the leads, unfortunately for us) said they were filling out what they either thought was a survey to win a prize, had no idea what our client was offering, stated they never filled anything out of that sort, et cetera.

What a horror story! After they campaigned, ValueClick refused to issue the refund because the traffic was valid. Apparently, there is a difference between promotional traffic and incentivized traffic! I can't tell the difference but maybe you can:

ValueClick generates leads from sites such as http://www.myshoppersrewards.com/ and according to Scott Spaulding, director of sales at ValueClick, this is in no way incentivized traffic but “promotional traffic.”

Right. And then in the Terms and Conditions, this is what they say:

“To receive the incentive gift you must: 1) Register with valid information; 2) Complete the user survey; 3) Complete at least two (2) Silver offers Page, two (2) Gold offers Page, and two (2) Platinum offers Page; and 4) Refer one (1) unique household that also must complete these requirements. Purchase may be required. Purchase may be required. Please read Terms & Conditions for details. Upon completion of all requirements, we will ship the incentive gift to you with free shipping.”

Right, so the 4th word in the sentence is incentive! Hint hint ValueClick, you might want to change the Terms and Conditions so it says "promotional gift"!

There is alot of talk about ValueClick getting acquired in the press these days. The stock popped to $35 when Aquantive was picked up by Microsoft and has since cratered to $20. Maybe it will happen, maybe it will not. But I'd think twice about it after reading this advertiser's complaint! At the very least, I doubt it will be done at a huge premium.

Where is the Google Jet Flying Larry and Sergei Today?

posted by MR WAVETHEORY at 9/06/2007 07:48:00 PM

FlightAware shows that the Google Jet is flying from Seville, Spain to Great Falls, Montana. The Google Jet which carries Larry Page and Sergei Brin was in Seville for a sales conference. Their twin engine 767-200 gets to take off and land at Moffett Field (public property) which is a short 5 minutes from Googleplex. Taking off from government owned military air bases - uber cool. Using tax payer property for personal enjoyment and satisfaction - no so cool.

Track the Google Jet [FlightAware]

Vanessa Hudgens Blows Her Top Off for Zac Effron - High School Musical Starlet Gives Disney A Heart Attack

posted by MR WAVETHEORY at 9/06/2007 07:13:00 PM


Vanessa Hudgens is the starlet behind High School Musical which is a family friendly movie about the trials and tribulations of growing up from Disney. Unfortunately, the High School Musical gravy train may be coming to a halt after her publicist revealed that Vanessa took some unwholesome photos of herself and they have been leaked the National Inquirer. The Walt Disney Company (NYSE DIS) is not particularly fond of advertising its involvement in distributing non-PG fare to kids - hey, what do we know? They own Miramax! Anyways, Vanessa Hudgens photos are spreading all around the internet and there are rumors that Disney might dump her over the kinky photos.

MTV and US say the Vanessa Hudgens photos are for real. "It is unfortunate that this has become public," an unnamed rep for the 18-year-old singer/actress said in a statement released to Us Magazine. The picture appears to have been taken in a bedroom or on-set production trailer. Standing and pulling her hair back with one hand, a smiling Hudgens shares the frame with a bed, wooden dresser — and nothing else. Sounds to me everyone is trying to blow the top off of this issue - no pun intended. After all, this kind of fare is freely available on cable television!

Vanessa is in the middle of negotiating her contract with Disney for High school Musical 3 and of all times, this is probably the worst to be doing something like that. For all I know, Disney is trying to negotiate the ransom to secure the photos before the viral Myspace crowd gets a hold of them! I doubt her hormone happy teeny bopper fans could care less! Bring it on!



Quick Hits That Caught My Eye

posted by MR WAVETHEORY at 9/06/2007 02:46:00 AM
Hedge fund manager Seth Tobias found dead in his pool in Florida.

Michael Lewis of Moneyball fame and Liar's Poker laughs in the face of subprime lenders: This is what happens when you lend money to poor people.

What stocks do Bill Clinton and Hilary Clinton own? Boring large caps like GE, Cisco, Biogen Idec.

Wachowski Brothers Become Wachowski Sisters

posted by MR WAVETHEORY at 9/06/2007 02:38:00 AM

VH1 is reporting that the Wachowski Brothers are officially no more. Apparently, one of them, formerly a "he", decided to become a "she." Larry Wachowski has become "Lana" Wachowski according to film junkies. As if it's not already confusing enough, some unofficial entertainment outlet VH1 reports that the new name is actually "Linda" Wachowski. You will recall that the Wachowskis were the geniuses behind the Matrix movies which bend space and time. I guess gender bending was not too far off.

Cheetah Gym Robbed by Employees - Owner Fires Everyone

posted by MR WAVETHEORY at 9/06/2007 02:12:00 AM
When employees take cash from customers and literally put it in their own pockets, all I can say is "Wow!" That's what Cheetah Gym's owner claimed happened to him at his Chicago based gym. Cheetah's owner, David Wilshire, posted on his website that "Cheetah Gym has been closed due to employee theft and graft. The degree of corruption was enormous. I was left in a position where I could trust no-one or anything. Most of the problems were at the Bucktown facility. Edgewater, I believe, was relatively free of graft. The scams ran the gamut but it looks like I was the sole victim of theft. However, I urge you to get fraud protection as a precaution." Employees were “wiping out petty cash or just stealing deposits — not even taking deposits in,” he said.

David's response to the theft? He fired everyone!

September 05, 2007

Popcorn Lovers Risk Getting Popcorn Lung

posted by MR WAVETHEORY at 9/05/2007 04:12:00 PM

The popcorn industry doesn't want you to know a dirty secret: that eating microwave popcorn can give you lung disease. Workers at popcorn flavoring plants have reported getting severe lung diseases from exposure to fumes coming out of the popcorn flavoring. A worker in California says it got so bad, she got popcorn lung and could no longer breathe.

Ortiz, 44, is among a group of California food-flavoring workers recently diagnosed with bronchiolitis obliterans, a rare and life-threatening form of fixed obstructive lung disease. Also known as popcorn workers lung, because it has turned up in workers at microwave-popcorn factories, the disease destroys the lungs. A transplant is the only cure.


The popcorn industry has been covering it up popcorn lung disease for years and the flavoring manufacturers have been doling out hush money for years. That's because popcorn manufacturers try to cut cost by using artificial (read: fake) butter in their products called diacetyl.

Since 2001, academic studies have shown links between the disease and a chemical used in artificial butter flavor called diacetyl. Flavoring manufacturers have paid out more than $100 million as a result of lawsuits by people sick with popcorn workers lung over the past five years. One death from the disease has been confirmed.

The greatest risk happens to people who eat popcorn everyday according to the FDA.

Dr. David Weissman, head of NIOSH's division of respiratory diseases, said the key difference between homes and the factories where popcorn lung has been found is in the level of exposure to diacetyl. For example, he said, sickened quality control workers at a Jasper, Mo., popcorn factory popped hundreds of bags a day in their testing, not just one or two.

The disease is officially called bronchiolities obliterans and according to Wikipedia, this disease is irreversible and severe cases often require a lung transplant. Evaluation of interventions to prevent bronchiolitis obliterans rely on early detection of abnormal spirometry results or unusual decreases in repeated measurements. Symptoms include:

* dry cough
* shortness of breath
* wheezing

The symptoms can start gradually, or severe symptoms can occur suddenly.

I think I'll pass on the popcorn!

September 03, 2007

Singapore Airlines Makes A Cool $1 Billion in 1 Day on China Eastern Investment

posted by MR WAVETHEORY at 9/03/2007 12:49:00 AM

Want to see what men look like when they are about to make a cool $1 billion? The picture above: the guy from Singapore airlines, CEO Chew Choon Sheng, and the guy from CEA Li Fenghua, chairman of CEA, shaking hands! Welcome to the old boys club of China!

Singapore Airlines announced their investment in China Eastern Airlines Corp Ltd. (ADR) (NYSE CEA) yesterday and today, when the Hong Kong stock market opened, the shares practically doubled (HK 0670.HK). That's probably the fastest $1 billion that any strategic investor has ever made - that I know of! Crazy times! China Eastern Airlines is traded in Shanghai (Shanghai 600115.ss), Hong Kong, as well as New York. The Shanghai shares nudged up about 10% on the news which is hardly worth a mention, but the Hong Kong shares went up 80%! Talk about inefficient markets!

I wrote about this company yesterday when they announced the investment and I postulated that this would be a wonderful investment. Little did I know how quickly and how wonderful it would be! Making $1 billion on paper in one day is no small feat unless you're Merlin the magician! Kudos to Temasek and the team at Singapore Airlines. This one deal will now cover the writeoff and losses they made on their Air New Zealand and Virgin Atlantic Airways investments!

Let's take a look and these divergent markets!

Shanghai China Eastern - RMB 10.56 +.96 (+10%)
Hong Kong China Eastern - HK 6.67 +2.94 (+78%)
New York China Eastern - $48 (No trade until Tuesday due to Labor Day holiday)

Forbes says the HK China Eastern shares surged as much as 88%. Bloomberg says there will be more mergers in China - including Shanghai Airlines.

The government is pushing airlines to merge as it opens skies to overseas rivals. China's five largest carriers, including Shanghai Airlines, all rose by 10 percent daily limit today in Shanghai.

My bet is that the New York China Eastern shares will open at around $100. The float is only 3.8 million shares in New York which means some potentially explosive trading on Tuesday. It's a truly OMG moment! Woe to the poor fools who shorted 50K shares of CEA before the halt. Whoever said never a borrower nor a lender be was a wise man indeed!

PS Update: As much as people (aka Americans) complain about insider trading in China, I have to give kudos to China Eastern Airlines for halting the stock while they negotiated the deal with Singapore Airlines, so that there couldn't be any sort of funny business going on with insider trading. The China Securities Regulatory Commission deserves a round of applause for their good work and vigilance in patroling market activity. On the same note, the SEC could have done a better job in recent months. For instance, the SEC could have halted Dow Jones stock before the talks with News Corporation proceeded and saved alot of investors good money and made money for them too if they had done their job! There's something that Americans can learn from the Chinese.

September 02, 2007

Watch Shanghai Kiss Online on Joox.Net Starring Hayden Panettiere

posted by MR WAVETHEORY at 9/02/2007 07:22:00 AM
Fans of Heroes will want to watch Shanghai Kiss online which stars Hayden Panettiere. It's a romantic comedy slash straight to video independent film that was just released. Shanghai Kiss is about an an Asian-American actor, living in Los Angeles, who is forced to reconsider his roots as well as the possibilities afforded him after suddenly inheriting his grandmother's home in Shanghai. When he visits Shanghai to sell his grandma's house, he falls for a beguiling Chinese girl.

Ken Leung plays Liam Liu, a likeable, struggling L.A. actor who inadvertently finds himself as the object of affection for a pretty Beverly Hills teen (Hayden Panettiere, NBC’s HEROES). Their relationship is innocent; he drives her to school every morning, and enjoys her company, but doesn’t feel fully himself around her. When Liam inherits his grandmother’s home in Shanghai, his visit to China and introduction to Micky (Kelly Hu)—a woman who captures his imagination like no other—force him to reconsider his Chinese roots. Caught between two worlds (and two women), Liam must now sort out the complicated desires of his heart, and find out who he really is. (Asian American Film Festival)

The film won rave reviews at the 2007 Asian American Film Festival, and I can see why. The producers and directors touched upon so many issues that are relevant to kids growing up today. Shanghai Kiss tackled a complex plot and succeeded in bringing forward issues like the explosive issue of a young adult dating a teen, a Chinese American trying to find his roots in China while learning to accept that he is more American than Chinese, and an ethnic actor who faces cultural stereotypes struggling to find work in L.A - all in a light hearted way!

The best part is that the film is available online uploaded by a character named hades - whether inadvertently or not, I found it online searching Google BlogSearch for Shanghai Kiss. The full movie is a few fundred megabytes and you can view it streaming.

Watch Shanghai Kiss Online
(joox.net)

China Eastern Airlines Sells Stake to Singapore Airlines - After 3 Month Trading Halt

posted by MR WAVETHEORY at 9/02/2007 04:35:00 AM
China Eastern Airlines Corp. Ltd. (ADR) (NYSE CEA) has been halted since May 25, 2007. Normally, when a stock is halted from trading for over 3 months, something bad happens, like the company goes out of business. In China Eastern's case, something good happened. China Eastern, which has been losing money hand over fist and is the never do well of the Chinese airlines, has raised $1 billion from Singapore Airlines Ltd. and Temasek which the Government Investment Corporation of Singapore's investment arm. This couldn't be more ironic because Singapore Airlines (SG S55) is also the world's most successful airline and the largest airline by market cap! Paired up with the orphan child of the Chinese airline industry, one can only hope that it will turn things around at CEA.

Bloomberg says that Singapore Airlines has a history of making poor strategic investments. In fact, they cite how Singapore Airline's investment in Air New Zealand was made just before it went into bankruptcy reorganization. Forbes writes that Singapore Airline's 49% stake in Virgin Atlantic Airways is another black mark on their investment track record. It's fair to say that Singapore Airlines is probably better as airline operators than as airline investors. At least, that's what the CEO was trying to suggest when he stated that he will be very hands on in managing and operating China Eastern.

I doubt a turnaround at CEA will be easy, but Singapore Airlines is the best there is in the airline industry so if anyone has a chance, it is Singapore Airlines. They have a 25% stake (less economically, but from a control perspective, Temasek and Singapore Airline's stake really should be regarded as one block of stock). That is sufficient to get the ball rolling, but what is disconcerting is that they only got 3 board seats. You see, the board at CEA is only getting expanded from 11 seats to 14 seats. To really make things fair, the investors really should have gotten 4-5 seats. After all, the investors are bringing in $1 billion dollars! Whoever negotiated the deal really should go back to the drawing board and think about the value they received and the value they gave. All in all, I think CEA will turnout to be a good investment. CEA's hub is based in Shanghai which is becoming the financial center of China and Asia. The Singaporeans have the wind behind their backs this time around and it's good to own one of the top 3 airlines in China!