We had an insightful meeting at On The Border! We had a total of 5 attendees: (from left to right) Jeff Harrington, Elena Swindull, Kevin Day, VJ Arjan, and Ryan Zamora (who joined us later on).
China - "Cloud Society" To Superpower
Kevin Day, who was there when Nixon opened up China, recounts how far China has come. Back in the 70s, Kevin was in China representing his firm. At this time, China was a rural backwater or “cloud society” totally isolated from the rest of the world since 1949.
Kevin recounts his conversations with the people there who had lived in a bubble their entire lives. While the Americans and Europeans were hoping for another car and another color television for themselves, the Chinese were hoping for another bicycle and another radio. They were literally living a generation behind the West.
Around the time that Mao, affectionately known by the Chinese as the Great Helmsman, died, and with the leadership of Deng Xioaping, China was well on its way to becoming a global player in the marketplace.
Today, the technology gap has in some cases tipped in China’s favor in comparison to the rest of the world. Kevin recalls how some of the best trains and infrastructure in the world, some of which technologically is light-years ahead of the current standard in the United States, is currently in China.
There is hardly a comparison, infrastructure-wise between India and China. It is said that India has the worst road system in the world, next to Haiti. Their trains are a marvel of human nature and ingenuity in terms of human beings usage of space, crammed to the hilt. It is a wonder that there are not more accidental deaths in these precarious situations. The Chinese rail system in particular, which took $250 billion to build, is a technological marvel and deserves considerable praise. It is light-years ahead of the current subway system in place in New York City.
The United States made it to the top by providing lend-lease agreements for its armaments to the Europeans who were in the thick of World War I and II. The European nations ended up owing huge debts to the United States.
How the tables have turned. Today, the United States owes a staggering amount to the Chinese, who have continued buying our debt for two decades now.
The future, nonetheless, looks very bright for the next greatest nation that will at least share the world stage with the United States for the next few decades.
Bernard Baruch, a great speculator during the 1920s, once said that speculation comes from the Latin word speculare, which means to observe. It is a lesson for us speculators to observe, that one must never, ever rest on one’s laurels.
For those who do not heed this advice, fame and fortune cometh and leaveth like the fickle wind.
The Future of Al-Queda
We discussed this at length. The consensus we arrived at was that this organization will plague us for quite some time to come. It is so grassroots and so radicalized that many disenfranchised and frustrated people can find solace in this way of life. According to what the CIA has revealed, some of these recruits have been from the United States.
Currently, the Al-Queda organization is being led by Ayman al-Zawahiri, an Egyptian Islamic theologian and has already sworn death to the Americans and the other Western powers. Cyber-terrorism may become more prevalent in the future.
Kevin Day, however, believes that some of the greatest acts of terrorism may come from ordinary citizens. Due to the ease of technological accessibility, ordinary citizens who want to voice their frustration can cause catastrophic harm. Some examples include, Timothy McVeigh, the plotter of the Oklahoma City bombings.
People Throw Themselves On Their Swords
Be A Buyer In July
Jeff Harrington and Elena Swindull were discussing the possibility of QE3 (quantitative easing) and the effects this might have on the economy. The state of the economy is in shambles today. Although there is stability, unemployment is staggeringly high and home prices have made new lows. It is only logical that the FED continue its quantitative easing policy, although Bernanke has given us hints to the contrary in his meetings.
Kevin Day is convinced that it is time to start nibbling on the financials again and whetting our beaks a little in the emerging markets.
It is time to start buying in July.
Some suggestions include:
Financials
o Wells Fargo (WFC)
o Vanguard REIT ETF (VNQ)
o Bank of America (BAC)
o iShares S&P US Preferred Stock Index Fund (PFF)
o Aberdeen Asia-Pacific Income Fund (FAX)
o Goldman Sachs (GS)
o Morgan Stanley (MS)
o Citicorp (C)
Emerging Markets
o iShares FTSE/Xinhua China 25 Index (FXI)
o iShares MSCI Brazil Index (EWZ)
o Vanguard MSCI Emerging Markets (VWO)
o iShares S&P Latin America 40 Index (ILF)
Some Riskier Emerging Market Plays
o MSCI Indonesia Investable Market Index Fund (EIDO)
o Aberdeen Chile Fund (CH)
Rare Earth Oxide
Jeff Harrington discussed the future demand of rare earth oxides. 98% of this material is currently in China and these oxides are being used from uses are various as hybrid and electric vehicles, to wind power turbines, to lasers and hard disk drives. The company he suggested looking at is Molycorp (MCP), which has had a 40 return over the past year.
The next meeting will be on Sunday, July 3rd, 2011. For those who have not attended a meeting, but would like to attend or if you simply want to be put on the mailing list for these blog updates, please email your wish to VJ Arjan at scarletkings@gmail.com
