Thursday, June 23, 2011


As previously expressed in this space, the People's Republic of China (PRC) is no friend of the West - or anyone else except North Korea, as it turns out.  (The Vietnamese are learning this the hard way at the moment in a serious skirmish over minerals and energy in the South China Sea - a conflict predicted, incidentally, by Richard A. Clark in his excellent book Cyber War.)  Whether it's government-sponsored hacker groups, second only in prowess to the Russian-sponsored ones, a burgeoning military force, the economic takeover of Africa, or the accounting fraud in Chinese companies that are the darlings of western investors, beware!  More evidence (for those of you who think I'm too hard on China) surfaced when Carson Block of Muddy Waters Research made the news last week with an expose of Sino-Forest, thereby doing the investing public a huge favour in my estimation.  Although controversial (he was short the stock, TRE-T, at the time, and may have been a smidgen over the top with his Madoff analogies), the MWR report was basically correct, and initial denials both by Sino-Forest and mainstream analysts have since fizzled - resulting in losses in some cases as high as 85% of invested capital.  The problem in dealing with a totalitarian state is that, by definition, there is no transparency in their economy or markets.  PRC's ruling elite are trying to keep the lid on overpopulation, the rise of an entrepreneurial class, a severe dearth of females, dwindling food stocks, a demand for energy and jobs they can't keep up with, and worsening pollution.  (Given their problems, I'll take Detroit anytime.  But I digress ...)  The Balf says: Chinese stocks are not good long-term investments.  Get in and - more importantly if you do - get out!

TODAY'S GOOD NEWS:  William and Kate will watch bull-riding and the chucks at the Calgary Stampede in defiance of all the PETA fanatics out there imploring them not to!