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> CN bookkeeping’s suspect... IMO Americans are biased to overweight this. It doesn't matter as long as China can keep up appearances better than other countri

> CN bookkeeping’s suspect... IMO Americans are biased to overweight this. It doesn't matter as long as China can keep up appearances better than other countries for long enough. Investors will happily invest in a bubble believing that they are smart enough to get out before everyone else if things go south. Bad bookkeeping doesn't keep the NBA and Activision from kowtowing to China, I don't see why it would keep people from investing there either.

ISL 7y ago
One of the many Buffett-isms is to only make investments where, if the market were to close for five years, you'd sleep well. It is that premise that shapes my investing theses relating to China.
- chepaslaaa 7y ago
  If investors were all as wise as Buffet time arbitrage wouldn't be a thing.
diminoten 7y ago
Americans aren't the only ones to overweight the shady monetary policy in China, and as a result it'll not become the defacto standard like the US Dollar is, as long as that shadiness remains.
- bduerst 7y ago
  Such as who? I agree with GP and still think this is biased projection. Factors such as growing trade control over APAC and a middle class larger than the population of the U.S. only speak in favor of the Yuan. Also, what you call shady currency control can be viewed as a be a signal of ensuring stability.
awinder 7y ago
1. Yeah plenty of non-Americans think this too, _maybe_ if you said “westerners” it’d be defensible, but it’d still be wrong. 2. The nba & activision are selling goods to China, or maybe they put a little money into real assets to reach that audience. They’re not investing in Chinese financial instruments which is what the entire thread is about
- mc32 7y ago
  Exactly, now if they were paying the nba etc with 30 year Chinese non transferable bonds the parent would have a case.
  - landryraccoon 7y ago
    Why would investors not want to invest in a country that flush with liquid cash? I don't see how this is an argument that investors wouldn't see China as desirable.
    - awinder 7y ago
      Because Chinas current market system is just about a decade old. https://en.m.wikipedia.org/wiki/Chinese_accounting_standards https://en.m.wikipedia.org/wiki/Chinese_accounting_standards By all means, investors want to put money into China. It’s the amount of money you want to put into an immature market that is the question. And that’s not a dig and it’s not jingoistic, it’s just a fact, when you run a large market for over a century you kinda build solid foundations that can’t just be replicated on the spot. China’s market developing is a great thing but it’s just too young to seriously think it’s ready to be a reserve currency today.
- landryraccoon 7y ago
  If China has enough real money to bend the NBA and Activision doesn’t that imply that the bookkeeping isn’t fake - CN’s success is real, not imagined?
  - mc32 7y ago
    No, it’s like a car dealership not extending credit to someone with bad credit but who will gladly take a bank check.
    - landryraccoon 7y ago
      I don't see the distinction. If they have Activision, Apple, Tesla and Disney as customers why wouldn't banks, financial markets and investors trust them? I would argue they already do, I highly doubt China has trouble floating debt or attracting foreign investment right now.
jariel 7y ago
No, they won't 'happily invest' in China at all. The RMB is a fully politicised/made up currency - which is fine for them, but toxic for outsiders. The CCP decides what happens there with the click of a button. There are capital controls, arbitrary confiscations, no accounting principles, opacity at all levels. Gov owns all the investment banks and controls lending. It's all magic. China wants the RMB to be a global currency but nobody will touch it until it becomes 'credible' - but the magical properties are just too 'powerful' for the CCP to ever let go of, and as long as it's magic, it's no good to you and I, so it's unlikely it will ever happen. The only path I see is 25 years of really consistent and reliable management on their behalf AND a major degree of seigneurage in their region of influence - by that I mean Vietnamese, Indian, Japanese etc. businesses and governments forced to hold sums of RMB just for the purposes of operations with China. The more seigneurage, the more 'apparently consistent' China is - the more people will take it on. But otherwise, no. The USD has a long, long way to go before it starts losing real trust. I can't imagine how much debt the US could take on before people really think it becomes a problem. If a lot of 'very bad things' happened at the same time - say major war, economic crash, political dysfunction (much worse than Trump), shenanigans at the Fed ... then we might see something happen. Remember that the ECB does not want people flooding into their currency either. Everyone is already playing a game of 'devaluation->competitiveness'. More likely we would see more diversification in other currencies and in other assets. I fear countries that have opened their borders to capital will face punishing real-estate prices from here on in. London, New York, LA - pretty much every Canadian city (Canada is boring and stable, just what every corrupt international business person wants) ... A home in Toronto is becoming 'international currency' and it's problematic. As the OP posted - I don't think real estate is going to be the thing that pops. Even as Warren Buffet is hoarding cash (the ultimate bubble signal) - there's nothing on the horizon to indicate a pop. Without a pop, things could go on for quite some time. If we can find a 'new normal' with China trade, and I think we will - and if there's no super major wars (unlikely) ... it may be possible that we're in for a long period of relative 'kind of stability' - fluxuations and pops here and there, maybe some minor stagflation or negative growth ... but otherwise things work out.

ISL 7y ago

One of the many Buffett-isms is to only make investments where, if the market were to close for five years, you'd sleep well. It is that premise that shapes my investing theses relating to China.

chepaslaaa 7y ago
If investors were all as wise as Buffet time arbitrage wouldn't be a thing.

diminoten 7y ago

Americans aren't the only ones to overweight the shady monetary policy in China, and as a result it'll not become the defacto standard like the US Dollar is, as long as that shadiness remains.

bduerst 7y ago
Such as who? I agree with GP and still think this is biased projection. Factors such as growing trade control over APAC and a middle class larger than the population of the U.S. only speak in favor of the Yuan. Also, what you call shady currency control can be viewed as a be a signal of ensuring stability.

awinder 7y ago

1. Yeah plenty of non-Americans think this too, _maybe_ if you said “westerners” it’d be defensible, but it’d still be wrong. 2. The nba & activision are selling goods to China, or maybe they put a little money into real assets to reach that audience. They’re not investing in Chinese financial instruments which is what the entire thread is about

mc32 7y ago
Exactly, now if they were paying the nba etc with 30 year Chinese non transferable bonds the parent would have a case.
- landryraccoon 7y ago
  Why would investors not want to invest in a country that flush with liquid cash? I don't see how this is an argument that investors wouldn't see China as desirable.
  - awinder 7y ago
    Because Chinas current market system is just about a decade old. https://en.m.wikipedia.org/wiki/Chinese_accounting_standards https://en.m.wikipedia.org/wiki/Chinese_accounting_standards By all means, investors want to put money into China. It’s the amount of money you want to put into an immature market that is the question. And that’s not a dig and it’s not jingoistic, it’s just a fact, when you run a large market for over a century you kinda build solid foundations that can’t just be replicated on the spot. China’s market developing is a great thing but it’s just too young to seriously think it’s ready to be a reserve currency today.
landryraccoon 7y ago
If China has enough real money to bend the NBA and Activision doesn’t that imply that the bookkeeping isn’t fake - CN’s success is real, not imagined?
- mc32 7y ago
  No, it’s like a car dealership not extending credit to someone with bad credit but who will gladly take a bank check.
  - landryraccoon 7y ago
    I don't see the distinction. If they have Activision, Apple, Tesla and Disney as customers why wouldn't banks, financial markets and investors trust them? I would argue they already do, I highly doubt China has trouble floating debt or attracting foreign investment right now.

jariel 7y ago

No, they won't 'happily invest' in China at all. The RMB is a fully politicised/made up currency - which is fine for them, but toxic for outsiders. The CCP decides what happens there with the click of a button. There are capital controls, arbitrary confiscations, no accounting principles, opacity at all levels. Gov owns all the investment banks and controls lending. It's all magic. China wants the RMB to be a global currency but nobody will touch it until it becomes 'credible' - but the magical properties are just too 'powerful' for the CCP to ever let go of, and as long as it's magic, it's no good to you and I, so it's unlikely it will ever happen. The only path I see is 25 years of really consistent and reliable management on their behalf AND a major degree of seigneurage in their region of influence - by that I mean Vietnamese, Indian, Japanese etc. businesses and governments forced to hold sums of RMB just for the purposes of operations with China. The more seigneurage, the more 'apparently consistent' China is - the more people will take it on. But otherwise, no. The USD has a long, long way to go before it starts losing real trust. I can't imagine how much debt the US could take on before people really think it becomes a problem. If a lot of 'very bad things' happened at the same time - say major war, economic crash, political dysfunction (much worse than Trump), shenanigans at the Fed ... then we might see something happen. Remember that the ECB does not want people flooding into their currency either. Everyone is already playing a game of 'devaluation->competitiveness'. More likely we would see more diversification in other currencies and in other assets. I fear countries that have opened their borders to capital will face punishing real-estate prices from here on in. London, New York, LA - pretty much every Canadian city (Canada is boring and stable, just what every corrupt international business person wants) ... A home in Toronto is becoming 'international currency' and it's problematic. As the OP posted - I don't think real estate is going to be the thing that pops. Even as Warren Buffet is hoarding cash (the ultimate bubble signal) - there's nothing on the horizon to indicate a pop. Without a pop, things could go on for quite some time. If we can find a 'new normal' with China trade, and I think we will - and if there's no super major wars (unlikely) ... it may be possible that we're in for a long period of relative 'kind of stability' - fluxuations and pops here and there, maybe some minor stagflation or negative growth ... but otherwise things work out.