Many investors still have illusions
about investing in China, especially Chinese who know relatively less about the
outside word and who have the blind confidence about government’s ability to
eventually clean the mess. Their number is smaller compared to the time when I
start to turn bearish on China. For example, many still boast to me about how
much return they are getting on their wealth management products. However, they
just do not have common sense (if you read this blog and find me to be too
arrogant, that is because 1) as I said a long time ago, you need to take a
strong stand to be heard; 2) there are just too many irrationality in investors,
many of them are just smart people.) The returns they get could be easily
between 6-10%. If you add 1-2% for the transaction costs, the borrowers have to
pay easily about 8%. For an equity holder who takes more risks, unless they
make higher returns than fixed income claim holders, say 10% or much more if
you understand how much hassles are to do business in China, otherwise why
would they take the additional risks? But have you ever seen many projects
returning that high in China today? So why not just invest in wealth management
products as well and get the safe 6-10% returns, which means no one is out
there generating wealth anymore. A friend told me that years ago, it is very hard
to drive through the main drag in Dongguang, an industrial capital in Pearl
Delta. Now he can zoom through by stepping on the gas without any release in
the matter of minutes.
Is there any contradiction with "Hold your stocks"?
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