"The China Price" - The best business article I have seen in years.
- Thread starter SouthAmerica
- Start date
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March 26, 2008
SouthAmerica: In October 5, 2007 Brazzil magazine published a 4-part series of articles detailing a plan for Chinaâs $ 200 billion dollars investment in Brazil.
The Smartest Thing China Could Do Right Now: Invest US$ 200 Billion in Brazil - Written by Ricardo C. Amaral
Monday, 01 October 2007 - Part 1 of 4
http://www.brazzil.com/content/view/9977/80/
Friday, 05 October 2007 - Part 2 of 4
http://www.brazzil.com/content/view/9979/80/
Thursday, 11 October 2007 - Part 3 of 4
http://www.brazzil.com/content/view/9983/80/
Tuesday, 16 October 2007 - Part 4 of 4
http://www.brazzil.com/content/view/9985/80/
Since these articles were published 6 months ago so far 2,700 people did read Part1 and 2 and 5,000 people did read part 3 and 4 of these articles.
Note: In one of the comments following the articles a reader said why should China invest in Brazil when there are better investments in the United States â I guess the reader was implying Chinaâs investment in The Blackstone group.
Here is what happened to Chinaâs $3 billion US dollars investment in Blackstone on June 25, 2007 when that company went public at $ 35 per share â since then the investment it has not done very well since that stock has been trading around $ 16 per share only 9 months later.
Chinaâs original investment at the time of The Blackstone Group IPO on June 25, 2007:
85,714,000 shares @ $ 35 per share = US$ 3,000,000,000 ($ 3 billion US dollars)
Chinaâs current value of the investment as of March 26, 2008:
85,714,000 shares @ $ 16 per share = US$ 1,371,424,000
US dollar vs. Brazilian real:
In June 2007 the Brazilian real was trading at around 2 reals per US$ 1.00
In March 26, 2008 the Brazilian real was trading at around 1.73 reals per US$ 1.00
The US dollar declined by 14 percent versus the Brazilian real during that 9 month period.
US dollar vs. euro
In June 2007 the euro was trading at around US$ 1.34 per euro 1.00
In March 26, 2008 the euro was trading at around US$ 1.58 per euro 1.00
The US dollar declined by 18 percent versus the euro during that 9 month period.
In a Nutshell: In terms of the euro and the Brazilian real the Chinese government investment loss during that period it is even greater.
The only way China could have done worst than that it is if China had invested in Bear Stearns stock instead of The Blackstone Group.
I wonder what is going on during the high level meetings in China when the Chinese officials discuss their $ 1.3 trillion investment in the United States. With the US dollar in free fall and the Federal Reserve undermining in every way possible the value of the US currency â my guess is that the Chinese government must be very unhappy with the $ 1.3 trillion dollars investment that they have made so far in US dollar assets and by the end of 2009 the Chinese government will have accumulated about $ 2 trillion US dollars in fast declining assets.
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March 26, 2008
SouthAmerica: In October 5, 2007 Brazzil magazine published a 4-part series of articles detailing a plan for Chinaâs $ 200 billion dollars investment in Brazil.
The Smartest Thing China Could Do Right Now: Invest US$ 200 Billion in Brazil - Written by Ricardo C. Amaral
Monday, 01 October 2007 - Part 1 of 4
http://www.brazzil.com/content/view/9977/80/
Friday, 05 October 2007 - Part 2 of 4
http://www.brazzil.com/content/view/9979/80/
Thursday, 11 October 2007 - Part 3 of 4
http://www.brazzil.com/content/view/9983/80/
Tuesday, 16 October 2007 - Part 4 of 4
http://www.brazzil.com/content/view/9985/80/
Since these articles were published 6 months ago so far 2,700 people did read Part1 and 2 and 5,000 people did read part 3 and 4 of these articles.
Note: In one of the comments following the articles a reader said why should China invest in Brazil when there are better investments in the United States â I guess the reader was implying Chinaâs investment in The Blackstone group.
Here is what happened to Chinaâs $3 billion US dollars investment in Blackstone on June 25, 2007 when that company went public at $ 35 per share â since then the investment it has not done very well since that stock has been trading around $ 16 per share only 9 months later.
Chinaâs original investment at the time of The Blackstone Group IPO on June 25, 2007:
85,714,000 shares @ $ 35 per share = US$ 3,000,000,000 ($ 3 billion US dollars)
Chinaâs current value of the investment as of March 26, 2008:
85,714,000 shares @ $ 16 per share = US$ 1,371,424,000
US dollar vs. Brazilian real:
In June 2007 the Brazilian real was trading at around 2 reals per US$ 1.00
In March 26, 2008 the Brazilian real was trading at around 1.73 reals per US$ 1.00
The US dollar declined by 14 percent versus the Brazilian real during that 9 month period.
US dollar vs. euro
In June 2007 the euro was trading at around US$ 1.34 per euro 1.00
In March 26, 2008 the euro was trading at around US$ 1.58 per euro 1.00
The US dollar declined by 18 percent versus the euro during that 9 month period.
In a Nutshell: In terms of the euro and the Brazilian real the Chinese government investment loss during that period it is even greater.
The only way China could have done worst than that it is if China had invested in Bear Stearns stock instead of The Blackstone Group.
I wonder what is going on during the high level meetings in China when the Chinese officials discuss their $ 1.3 trillion investment in the United States. With the US dollar in free fall and the Federal Reserve undermining in every way possible the value of the US currency â my guess is that the Chinese government must be very unhappy with the $ 1.3 trillion dollars investment that they have made so far in US dollar assets and by the end of 2009 the Chinese government will have accumulated about $ 2 trillion US dollars in fast declining assets.
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May 6, 2008
SouthAmerica: I posted this information on the Al Gore thread, but I guess many Chinese would not read that thread.
Here is a portion of my posting that mentioned China:
John McCain understands wars, and he has the mindset of the cold war.
Lets turn the clock back and fight wars around the world, give tax breaks and charge it all on the credit cards of future American generations.
Under a John McCain administration Americans will be able to accumulate another $ 5.7 trillion dollars in debt on top of the $ 10 trillion that already has been pissed away.
I just want to remind the Chinese, since they are one of the major lenders for the US government that there was another Empire that collapsed using that same strategy â In the 1700âs France was the major world power until they decided to finance the US independence war (does 1776 rings a bell?) â by 1787 â 1789 France was in the middle of a major financial crisis that ended up on the history books as The French Revolution.
One of the major causes for that French government financial crisis it was the money that they pissed away helping finance the American Revolution of 1776.
I wonder if China wants to follow the same path that France followed during that time.
The Chinese has accumulated so far $ 1.6 trillion dollars in US government debt, and before you know that amount it will be $ 3 trillion dollars in a fast declining currency.
The United States can count with one thing for sure â people donât learn from prior history and they repeat the same mistakes of the past, and thanks God for all the greed suckers that it will continue financing the US government for many years to come and it will accumulated a ton of fast declining value US dollars.
Yes, the French Empire collapsed after they financed military spending and a revolutionary war in the United States.
The American Government must be happy that they found another sucker â China - to finance the US defense spending and its military adventures around the world.
For the United States it is the second time they project military power financed by another country â and the first time around the story did not ended well for the French.
But today China has not achieved the status of an Empire as yet â and they already have put in motion the strategy to create a new Chinese Revolution (Just keep in mind the financial crisis that brought about the French Revolution).
.
May 6, 2008
SouthAmerica: I posted this information on the Al Gore thread, but I guess many Chinese would not read that thread.
Here is a portion of my posting that mentioned China:
John McCain understands wars, and he has the mindset of the cold war.
Lets turn the clock back and fight wars around the world, give tax breaks and charge it all on the credit cards of future American generations.
Under a John McCain administration Americans will be able to accumulate another $ 5.7 trillion dollars in debt on top of the $ 10 trillion that already has been pissed away.
I just want to remind the Chinese, since they are one of the major lenders for the US government that there was another Empire that collapsed using that same strategy â In the 1700âs France was the major world power until they decided to finance the US independence war (does 1776 rings a bell?) â by 1787 â 1789 France was in the middle of a major financial crisis that ended up on the history books as The French Revolution.
One of the major causes for that French government financial crisis it was the money that they pissed away helping finance the American Revolution of 1776.
I wonder if China wants to follow the same path that France followed during that time.
The Chinese has accumulated so far $ 1.6 trillion dollars in US government debt, and before you know that amount it will be $ 3 trillion dollars in a fast declining currency.
The United States can count with one thing for sure â people donât learn from prior history and they repeat the same mistakes of the past, and thanks God for all the greed suckers that it will continue financing the US government for many years to come and it will accumulated a ton of fast declining value US dollars.
Yes, the French Empire collapsed after they financed military spending and a revolutionary war in the United States.
The American Government must be happy that they found another sucker â China - to finance the US defense spending and its military adventures around the world.
For the United States it is the second time they project military power financed by another country â and the first time around the story did not ended well for the French.
But today China has not achieved the status of an Empire as yet â and they already have put in motion the strategy to create a new Chinese Revolution (Just keep in mind the financial crisis that brought about the French Revolution).
.
.
Jayford: and why do you think the Chinese so happily fund the US debt? they'd be toast without US consumption. they are HEAVILY export dependent, and although they have the largest banks in the World now, almost all of them are insolvent, propped by the gov, which HAS to keep growth in double digits just to employ the massive number of people entering the job market each month.
China is a massive house of cards. When it goes thump, it will go hard.
*****
May 6, 2008
SothAmerica: Talking about an insolvent banking system, and a financial system propped by all kinds of government gimmicks and intervention that without that massive help would have collapsed just like a house of cards.
There is a very sick puppy that comes to mind and that puppy is not called China.
*****
Jayford: yep, the US would get hammered also, but unlike China, the US has a massively broad economy. Actually, its economy is still ranked as the most competitive on earth.
*****
SouthAmerica: As long Americans can wear things made by the services industry such as software, movies, and other types of services- Americans will be in good shape.
Since a large portion of things that Americans consume today are produced in China.
*****
Jayford: Collapse the currency, which is what a debt default would do, and it would be even more so after a period of pain. There would have to be major reform, because without reserve currency status the US couldn't run up such massive debt, but it would be a good thing in the long run.
*****
SouthAmerica: Very soon Americans will not be able even to finance its defense spending and the long-term adventures around the world.
*****
Jayford: China is not going to have anything resembling an Empire SA (other than a massively polluted domestic landscape and bucket loads of dollars). I give em a decade max before the whole thing blows up. its unsustainable. If you don't believe my econ analysis, i can post about a dozen articles for you on this. Pretty much common sense actually.
*****
SouthAmerica: You are right if the Chinese continue to follow the current America obsolete systems.
But if the Chinese are able to see the light and leepfrog their system into the future then their society it will be light years ahead of the US old mindset.
Americans have the illusion (like yourself) that they are inventing many of the latest hot technologies when the truth is many of the new technologies that Americans think that were invented here in the US have been invented in Taiwan by the Chinese and they just build the new gadgets and market it under US brand names.
.
Jayford: and why do you think the Chinese so happily fund the US debt? they'd be toast without US consumption. they are HEAVILY export dependent, and although they have the largest banks in the World now, almost all of them are insolvent, propped by the gov, which HAS to keep growth in double digits just to employ the massive number of people entering the job market each month.
China is a massive house of cards. When it goes thump, it will go hard.
*****
May 6, 2008
SothAmerica: Talking about an insolvent banking system, and a financial system propped by all kinds of government gimmicks and intervention that without that massive help would have collapsed just like a house of cards.
There is a very sick puppy that comes to mind and that puppy is not called China.
*****
Jayford: yep, the US would get hammered also, but unlike China, the US has a massively broad economy. Actually, its economy is still ranked as the most competitive on earth.
*****
SouthAmerica: As long Americans can wear things made by the services industry such as software, movies, and other types of services- Americans will be in good shape.
Since a large portion of things that Americans consume today are produced in China.
*****
Jayford: Collapse the currency, which is what a debt default would do, and it would be even more so after a period of pain. There would have to be major reform, because without reserve currency status the US couldn't run up such massive debt, but it would be a good thing in the long run.
*****
SouthAmerica: Very soon Americans will not be able even to finance its defense spending and the long-term adventures around the world.
*****
Jayford: China is not going to have anything resembling an Empire SA (other than a massively polluted domestic landscape and bucket loads of dollars). I give em a decade max before the whole thing blows up. its unsustainable. If you don't believe my econ analysis, i can post about a dozen articles for you on this. Pretty much common sense actually.
*****
SouthAmerica: You are right if the Chinese continue to follow the current America obsolete systems.
But if the Chinese are able to see the light and leepfrog their system into the future then their society it will be light years ahead of the US old mindset.
Americans have the illusion (like yourself) that they are inventing many of the latest hot technologies when the truth is many of the new technologies that Americans think that were invented here in the US have been invented in Taiwan by the Chinese and they just build the new gadgets and market it under US brand names.
.
The Chinese are playing their cards perfectly right now.
They're offering cut rate labor and no costs associated with environmental issues, taxes, labor laws, etc., and in return, they're being handed the gift of American, Japanese and German technology - giftwrapped.
You are witnessing the fastest and largest free transfer of technology the world has ever experienced. China is reaping trillions in free R&D.
They're offering cut rate labor and no costs associated with environmental issues, taxes, labor laws, etc., and in return, they're being handed the gift of American, Japanese and German technology - giftwrapped.
You are witnessing the fastest and largest free transfer of technology the world has ever experienced. China is reaping trillions in free R&D.
I recommend Jim Rogers' "Bull in China" book. Lots of good detail and insight about the culture.
2004 ave wage US$0.64/hr
2008 ave wage US$1.25/hr
You would be honking at the workplace if your salary doubled in four years too...especially with the likelyhood that it would double again...and you never have to stand knee deep in cold, muddy, buggy water again.
Also, there is a very real tie to the ancestral work ethic. Compare that to our spoiled princesses & gamers here that have zero view of the future.
China's Communist Leaders understand the futures market. In contrast, listen to the questions Congresspeople ask Bernanke when he reports. Muffler shop owners understand more about economics than 3/4 of Congress.
It's a triple whammy.
T
2004 ave wage US$0.64/hr
2008 ave wage US$1.25/hr
You would be honking at the workplace if your salary doubled in four years too...especially with the likelyhood that it would double again...and you never have to stand knee deep in cold, muddy, buggy water again.
Also, there is a very real tie to the ancestral work ethic. Compare that to our spoiled princesses & gamers here that have zero view of the future.
China's Communist Leaders understand the futures market. In contrast, listen to the questions Congresspeople ask Bernanke when he reports. Muffler shop owners understand more about economics than 3/4 of Congress.
It's a triple whammy.
T
You nailed it. Plus, that $1.25/hour is much more when you realize that 40 oz beers only cost about $0.32 there...(after bargaining, heh).
However, I wouldn't for a second put any true trust in what Jim Rogers has to say about Chinese culture. Westerners are always focusing too much on historical Chinese culture, and don't really realize that it's changing more quickly now than it has in the last 2000 years. Nowadays, college kids are listening to Eminem and competing with Americans for I-bank jobs...