Tesko jer je batica zesce iskompleksiran.
Btw, Jimmy nije batica!
He is the man!
Dzimijevo nepostovanje sagovornika (bez obzira koliko njegovi postovi bili tacni i postovi sagovornika nebulozni) i nacin komunikacije je strasan i morao bi se dovesti u red
Pises dobre tekstove
Nego da nastavi Jimmy
Jim Chanos Says China’s Bad Debts Dwarf Greece and Spain’s
Jim Chanos spies trouble ahead for China’s banks.
Veteran US investor Jim Chanos has a pretty impressive record of spotting – and profiting from – investment disasters in the making.
He is widely credited as the first person to short Enron, the seemingly solid US energy conglomerate that blew up spectacularly in 2002. He was also one of the first to spot the US housing bubble, which he began shorting in 2005.
And with the economic news coming out of China steadily deteriorating, it seems Chanos may have got another huge call right.
Chanos has been warning that the Chinese economy was due a crash for the last two years. At first, few people listened to him, especially when he admitted that he had never been to the country. But now, with even Chinese leaders admitting that growth will slow, Chanos’s view has become a lot more popular.
In one particularly infamous quote, Chanos said China looked like ‘Dubai times 1,000 – or worse,’ referring to the country’s real estate boom. Now that his take on that sector seems to be coming good, he’s delivered another pithy quote on the banking sector.
One of China’s main problems is ‘bad credit and credit extension that makes Greece and Spain look like child’s play’, Chanos said in recent interview with Opaleque TV. Too much money has been lent for construction projects in particular that will never make big enough returns to repay the original debt.
Chanos isn’t just negative about China’s macro-economic prospects. He is even more scathing about its companies. ‘When you get to the micro of individual companies, they look even worse. The accounting is horrible, they all seem to have negative cash-flow, non-collectable receivables… they all seem to not earn their cost of capital.’
But while this may not be good for China’s economy, it throws up lots of good investment opportunities for him, he says. Kynikos Associates – a hedge fund Chanos founded in 1985 – has short positions on several China-related stocks, which means he will profit if their value falls.
After starting out shorting ‘property companies, developers, cement companies, steel companies, as well as the original iron ore minors in Australia and Brazil’, he has added the Chinese banks too, because they are ‘the nexus for… all of this credit-driven investment.’
Zju, pa ovo je neviđeno!
China Is in Midst of `Greatest Bubble in History,' ex-LTCM's Rickards Says
China is in the midst of "the greatest bubble in history," said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.
The Chinese central bank's balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.
Fortis's Wallach Interview on Emerging Market Stocks
March 16 (Bloomberg) -- Gabriel Wallach, head of global emerging market equities at Fortis Investments, talks with Bloomberg's Susan Li and Paul Gordon about the outlook for emerging market stocks and his investment strategy. (Source: Bloomberg)
"As I see it, it is the greatest bubble in history with the most massive misallocation of wealth," Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China "is a bubble waiting to burst."
Rickards joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China's economy. The government has raised banks' reserve requirements twice this year after economic growth accelerated and property prices rallied.
China has pegged the yuan to the dollar since July 2008 to help exporters weather the global recession. The central bank buys dollars and sells its own currency to prevent the yuan strengthening, driving foreign-exchange reserves to a world- record $2.4 trillion as of December.
The Shanghai Composite Index of stocks jumped 80 percent last year and property prices rose at the fastest pace in almost two years in February, helped by a record 9.59 trillion yuan ($1.4 trillion) of new loans in 2009.
The World Bank indicated today that China should raise interest rates to help contain the risk of a property bubble and allow a stronger yuan to help damp inflation expectations. The nation's "massive monetary stimulus" risks triggering large asset-price increases, a housing bubble, and bad debts from the financing of local-government projects, Washington-based World Bank said in a quarterly report on China released in Beijing.
Rickards said leveraged speculation in the stock market, wasteful allocation of resources by state-owned enterprises, off-balance-sheet debt through regional governments and the country's human rights record are concerns.
"Take Russia and China together, neither of them is really deserving any investment" except for short-term speculation, Rickards said. India and Brazil are two of the "real economies" among the developing countries, he said.
Kako je samo pogodio, pokidao je
Why is China expensive?
A declining labor supply, rising wages and an appreciating currency are among the key reasons production costs are rising fast in China. Increasing land costs and the fact that SMEs find it difficult to obtain capital, are making the situation worse.
This article, which is an excerpt from the report "The End of Made-in-China?" published by Silk Road Associates, examines the top five factors that are pushing up China's manufacturing costs.
China's youth labor supply has started to decline
It was once popular to talk of China's endless supply of cheap labor. Not anymore. Labor supply has shrunk dramatically over the past decade.
China's youth demographic is expected to decline by 44 million over the next 10 years, according to the United Nation's population projection division. Indeed, the average Chinese national is 35-years-old, compared to the average Cambodian (23 years) and average Bangladeshi (24 years).
The result is massive labor shortages. Officials in the southern Pearl River Delta, for instance, estimate the region suffers a shortfall of 600,000 workers. Or take the example of a major manufacturer of butane lighters who recently remarked to us that in spite of automating part of his factory floor and cutting his employee numbers in half, the average age of his staff has gone from 20-years, to 30-years, and now 50-years, as he struggles to find enough labor.
The situation is especially worse for factories producing low-value goods as they are either unwilling or unable to pay higher wages and it is common to hear of suppliers turning down orders from foreign buyers for fear that they will be unable to attract sufficient staff to fill the order on time.
China's wages are rising
Labor shortages have contributed to rising wages. Today, China's average manufacturing wage ranges from $200 to $550 (or higher). Moreover, the total monthly salary is likely higher as benefits-ranging from starting bonuses, performance bonuses, and marriage leave-are rising faster than monthly wages.
The result is that China's wages are now on par, or significantly higher, than wages in the rest of the region. For instance, monthly wages in Bangladesh are around $55 per month and similarly low in Cambodia ($100) and Vietnam ($100). Only Thailand, among the low-cost producers, has higher wages.
China's government has added to the pressure by hiking minimum wages in an effort to reduce income inequality, thus adding to wage cost pressure. Minimum wages have, on average, risen from $59 a month in 2000 to $166 a month in 2011. (The figures are calculated at constant 2011 USD/CNY rates; otherwise the increase in wages would be even larger, from $45 to $166).
To be fair, wage rates do vary across the country. Minimum wages are 30% higher in the coastal provinces ($187) than they are in the western provinces ($143). Wages can even differ between cities with minimum wages in Shenzhen at $234 in 2011 as against $203 in the rest of Guangdong province.
Nonetheless, the pressure on wages is clear and growing, whether because of market forces or government policy.
China's currency is appreciating rapidly
The Chinese renminbi has meanwhile appreciated a median 22% against 13 Asian currencies in the past five years, so impacting the country's competitiveness. The gains are even larger against some of China's lowcost competitors. For instance, the Chinese renminbi has appreciated by more than 44% when compared to the currencies of Bangladesh, Cambodia, India, Laos and Vietnam (as the graph shows), a significant move when added to the country's rising wages costs.
Such rapid appreciation may slow in the coming years, as the trade surplus narrows and the currency nears its fair value. Indeed, while nominal appreciation has been slower than critics in Brussels and Washington might like, real appreciation (adjusting for the country's relatively faster inflation rate) has been rapid. Nonetheless, the damage is already done and a strong Chinese currency is another reason for the gains made by other low-cost manufacturers.
China's land and other production costs are rising
China's economy is also starting to face serious shortfalls in a variety of production inputs, resulting in rising production costs.
For a start, a large share of the population is concentrated along the coastal provinces (27% of the population) intensifying competition for inputs. Export production is even more concentrated, with just three coastal provinces- Guangdong, Zhejiang, and Jiangsu-accounting for 60% of total exports.
Land scarcity has inflated land prices and is pushing manufacturers further into the interior. Of course definitions of the 'interior' can differ widely: to some that might mean 100 kilometers west of the city of Guangzhou, while to others it implies moving 1,000 kilometers to an inland province.
Higher land prices are just one reason for the overall rise in China's production costs. But relocating factories further away from coastal ports also raises transport costs and lengthens supply chains. The latter is especially important given that China's ability to deliver rapidly is a major competitive advantage.
Restrictions on polluting industries are also tightening in part because of water scarcity. The authorities in southern Guangdong province, for instance, are relocating heavy metal factories to purpose-built industrial parks further inland where waste-water treatment facilities are more readily available.
China's SMEs find it difficult to obtain capital
Automation is a logical response to rising wages. Yet, most SMEs find it difficult to obtain bank credit, as the state-banks prefer to lend to blue-chip state-owned firms. Indeed, recent surveys show that borrowing from family and friends accounts for 25% of SME financing in Zhejiang province.
Unofficial banks account for 21% of SME financing, but their interest rates can range from between 30% to 100%, or more, implying that such credit is more likely used as working capital to fill orders, rather than finance capital equipment, such as buying arc welders in order to automate production lines.
In the past, firms might more readily invest their free cash flow in capital equipment. But the pressure on margins as a result of rising production costs means there is less cash available. (Equally, many firms would rather invest in the property market where returns were, until recently, much higher.)
Zhou Guanxin, head of Zhejiang's Federation of Commerce and Industry, summed up the challenges recently while speaking with reporters from the 21st Century Business Herald last month: he noted that China's SMEs have "no heart to turn, no ability to turn, and nowhere to turn to".
A sad malo najnovijih novosti
Dok nam Kina slabi, usporava i priprema se za eksploziju milenijuma, a EU se onako na finjaka reformiška, druga strana naše divne plave planetice nam se javlja sa drugačijim okicama
SATURDAY, JANUARY 26, 2013
The Next Boom
By KOPIN TAN |
Cheap natural gas and increasingly competitive labor costs are bringing factories -- and jobs -- back to the U.S.
As the only industrialized superpower not decimated by World War II, the United States once made nearly 40% of the planet's goods. These days, that number has shrunk to 18%. We make American Girl dolls in China, Levi's jeans in Mexico, and enough movies in Vancouver to nickname it Hollywood North.
After decades of outsourcing, however, the U.S. is quietly enjoying a manufacturing revival, and companies like Apple (ticker: AAPL), Caterpillar (CAT), Ford Motor (F), General Electric (GE), and Whirlpool (WHR) are making more of their goods on American soil again. It isn't just U.S. companies that are drawn to our cheap energy, weak dollar, and stagnant wages. Samsung Electronics (005930.Korea) plans a $4 billion semiconductor plant in Texas, Airbus SAS is building a factory in Alabama, and Toyota . wants to export minivans made in Indiana to Asia.
The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent. Unlike oil, gas isn't easily transported across oceans, and a result is some of the world's cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan. Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally -- a boon for a country that had gone from exporting American goods to exporting American jobs.
The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron's has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses. "The U.S. is the Saudi Arabia of natural gas," declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. "And Middle America is my favorite emerging market."
Our energy boom got cracking with fracking, a controversial process in which pressurized fluids are pumped through rock formations, often a mile or more under the ground, to extract oil and gas. Critics condemn fracking, which they contend causes environmental harm, but even they agree that it's led to an abundance of cheap gas. Over the past six years, U.S. production of petroleum and natural gas has jumped from 15 million barrels of oil-equivalent a day to 20.1 million, a 20-year high. Over the same period, imports have fallen from 14 million barrels a day to below eight million, a 25-year low.
It's a sign of the times: Graduates from the South Dakota School of Mines & Technology -- acceptance rate: 88%; mascot: Grubby the Miner -- now command a median starting salary 16% higher than that of Yalies.
By 2020, the U.S. will become the world's biggest oil producer, says the International Energy Agency. By 2025, North America will be a net energy exporter, predicts ExxonMobil (XOM).
That edge should remain ours for decades. "It isn't just the huge reserves we have underground," says Tim Parker, who manages T. Rowe Price's natural-resource stock portfolios. "No one else has our predictable cocktail of infrastructure already in place, know-how, a relative abundance of water, and a favorable royalty regime that give landowners a stake in the exploration game." Europe, for instance, is averse to fracking and has little infrastructure; Japan has hardly any shales; and while China has vast reserves, only shales nudging the Yangtze River have enough water for fracking.
Of course, an especially frigid winter could send gas prices soaring, but any such spike should be temporary. Given our expanding reserves and record inventory, commodity strategists expect U.S. natural gas to stay between $3 and $5 per million BTUs for years -- well below prices abroad.
CHEAP GAS ISN'T THE ONLY booster in our tank. In the decade since China joined the World Trade Organization in 2001, that nation has become Earth's low-cost factory. But wages and benefits there are rising 15% to 20% a year, while they're stagnant here. Despite Beijing's efforts to hold it down, the yuan has gained 33% against the dollar since 2005. Industrial land averages $10.22 a square foot across China, but rises to $11.15 in the coastal city of Ningbo and $21 in Shenzhen -- compared with $1.30 to $4.65 in Tennessee and North Carolina. "Within five years, the total cost of producing many products will be only about 10% to 15% less in Chinese coastal cities than in parts of the U.S. where factories are likely to be built," says Hal Sirkin, a senior partner at Boston Consulting Group. Add duties and shipping, and the cost gap shrinks further.
Location-scouting manufacturers also are looking beyond mere costs. Moving part of their supply chains closer to the U.S. -- still the world's biggest consumer market -- helps companies react faster to changes and also speeds innovation, says Gary Pisano, a Harvard Business School professor. Adds Robert McCutcheon, who heads PricewaterhouseCoopers' U.S. industrials practice: "You protect not just the intellectual property of your products, but your processes as well."
BCG's Sirkin conservatively estimates that 2.5 million to five million manufacturing positions will be added by 2020, which could shave two to three percentage points from our unemployment rate, now near 7.8%. We'll also expand exports, at the expense of higher-cost developed rivals, such as Germany and Japan. And U.S. ports stand ready and idle, operating at just 54% of capacity, well below 59% in Europe, 67% in Latin America, and 76% in Southeast Asia.
Busier factories would help the entire country. For every dollar spent on manufacturing, another $1.48 is added to the economy, says the National Association of Manufacturers. Another bonus: Manufacturers account for two-thirds of what the private sector spends on research and development.
And we've only just begun: Abundant gas and a weak dollar are long-term trends, and U.S. wages should behave until unemployment falls well below 6%, says Jeffrey Korzenik, chief investment strategist at Fifth Third Private Bank. "Offshoring had gone on for decades, but the re-shoring trend is only in year two or three."
Cheap energy is a boon for manufacturers, but a curse for exploration companies, and investors are shunning the producers most exposed to slumping gas prices. With 99% of Southwestern's production and reserves in natural gas, you'd think the Houston company's managers would be anxiously sweating over prices near decade lows.
But they aren't. That's because Southwestern is a highly efficient, low-cost producer. It works its 926,000 acres in the Fayetteville shale with operational aplomb, using dense wells, some of its own rigs, and vertically integrated services. The company has another 187,000 acres in the Marcellus shale. At $34, its shares trade at a small premium to its gassy peers but still a discount to its net asset value.
Ken Settles, who co-manages the RS Global Natural Resources Fund, expects gas prices to hit $5 to $6 eventually. "But the benefit of focusing on a low-cost producer is that, even with gas prices below sustainable long-term levels, Southwestern's assets are still profitable and creating value for its owners."
Southwestern plans to increase 2013 production by 11% to 13%, and analysts see its per-share profit climbing 19% this year. Earnings will grow even more if natural-gas prices rally, but you won't sweat waiting for that to happen.
LyondellBasell Industries (LYB)
Chemical makers guzzle energy and also rely on byproducts from oil and gas purification -- stuff like ethane, butane, and propane -- for raw materials. So the shale boom delivers a double blessing of cheap feedstock and energy. In fact, PwC thinks that we might start seeing more plastic-based substitutes for materials like metal, glass, or wood. That's good news for diversified specialty-chemical giants like DuPont (DD), and also Dow Chemical (DOW), which is investing $4 billion to boost production and build an ethylene plant in Texas that could hire 2,000 workers.
Still, Tim Parker of T. Rowe Price says that the narrower profit margins of more commoditized base-chemical companies might see a bigger boost from the new world order of cheaper feedstock and energy. His pick: LyondellBasell.
Since the Rotterdam-based company emerged from bankruptcy in April 2010, its New York-listed shares have climbed 184%. The shares, recently trading at $62, fetch 10.7 times 2013 profits. LyondellBasell's management team is boosting earnings and returning capital to shareholders through share buybacks and dividends. The stock yields 2.6%. And net profit margins of 5.6% trump the 3.7% average of its peers. With new capacity, cheap feedstock and $14 billion in free cash flow, it can earn $10 a share by 2016 and become a $100 stock, Deutsche Bank analyst David Begleiter maintains.
Steel-making isn't just another energy-intensive business. Steel pipes and products are integral to energy exploration and transportation, not to mention manufacturing and construction. With 99% of its revenue earned in America, Nucor, the largest U.S. minimill operator and metals recycler, is well-hitched to that energy and manufacturing boom.
The steel industry is vexed by excess capacity, and its volatile stocks surge or slide with temperamental economic data. So it helps that Nucor is more defensive than its peers. Wells Fargo steel analyst Sam Dubinsky favors it over the long haul, "due to its lean cost structure and product diversity, both of which have resulted in earnings at the high head of the peer group." Nucor also is most levered to the bottoming construction market. A healthy balance sheet and a 3.1% dividend yield further burnish the appeal of its stock, recently at $47.78.
Is the U.S. really ready to make more things again? The average age of our manufacturing plants is 15.5 years, while our equipment has been around almost six years. Both are near five-decade highs. "Old equipment and manufacturing plants suggest the need for a large replacement cycle," writes ISI. Over the next five years, the research firm expects capital expenditure's share of the economy to rise from 10.2% to 14%, putting it near its early 1980s peak. That's good news for Dover. The conglomerate makes a vast array of industrial products -- from refrigeration systems and specialty pumps to drill bits and bar-code equipment -- making it a proxy for our manufacturing boomlet.
Compared with other economically sensitive stocks, Dover is more diverse and more stable. Management has allocated capital shrewdly, making acquisitions, buying back shares, and lifting return on capital to 12.4% -- a decade high. Dover has a 2.1% dividend yield, and its 9.7% profit margin trumps the sector's average. Yet its shares, at $67, trade at 12.8 times 2013 profits, a discount to the market and other machinery stocks.
Calpine is the largest independent U.S. producer of gas-powered electricity, and runs some of the newest, most efficient plants. Just six years ago, nearly half the nation's power came from coal. But gas' share has swiftly risen from a fifth to a third, while coal's has waned.
The ongoing switch to cleaner natural-gas-generated electricity is one reason why Barron's has been bullish about the stock (see "Calpine Gets Ready to Light Up," July 23, 2012). The company also has unused capacity that puts it in the driver's seat as utilities replace decades-old coal plants.
At first blush, that advantage seems well reflected in the shares, which, at $19, fetch 27.6 times 2013 profit estimates of 69 cents a share. But that seemingly lofty multiple is below its median over the past five years, and Calpine is generating more than $1 a share in free cash flow and continuing to pay down debt. "When power prices are low, Calpine benefits by taking market share from less-efficient producers," says MacKenzie Davis, who co-manages the RS Global Natural Resources Fund. "But it also benefits if power prices rise, since margins and cash flow will improve."
CF Industries (CF)
Energy can account for nearly 70% of the cost of producing fertilizer, and Jack Ablin, BMO Private Bank's chief investment officer, singles out CF Industries as a big beneficiary of plentiful natural gas.
The company, which produces nitrogen and phosphate fertilizers, earns 85% of its revenue in the U.S. Shares of Deerfield, Ill.-based CF, at $226, have outrun their peers and climbed 73% over the past two years, the latest leg coming as drought sent corn and soybean prices soaring. Fearful that cyclical earnings have peaked, analysts are downgrading the stock, and investors fret that margins and share buybacks will suffer as management spends $3.8 billion to expand its nitrogen capacity.
But any pullback is an opportunity for long-term investors. Cheap gas costs should keep operating margins near a record 50.1%. Tight corn supplies, low water levels in the Mississippi, and a still-dry Corn Belt should support grain and fertilizer prices, and CF's investment-grade credit rating and low debt let it borrow money cheaply should it need to. Its stock trades at just 8.2 times what CF earned over the past 12 months, well below the 12.3 times median since it went public in 2005.
So why aren't American drivers enjoying a bigger windfall at the pump? For one thing, global demand dictates gasoline prices. After decades of ferrying imported oil, our infrastructure also needs to be re-oriented toward redistributing domestically produced natural gas. That benefits master limited partnerships that operate pipelines, and for investors who want to avoid MLPs' complex tax-filing regimes, their parent companies.
Williams gathers and transports natural gas, and owns 78% of its namesake MLP, Williams Partners (WPZ). It has diverse assets, pays a 3.9% yield, and thrives as demand increases for natural-gas processing and infrastructure.
However, 2012 was the first year in the past 13 in which MLP returns trailed the overall stock market's, thanks to weak gas prices, tax concerns, and profit-taking after years of gains.
Williams Partners, which sports a 6.6% yield, fell 22%. Shares of its parent also struggled after it issued stock to help finance a complicated $2.25 billion investment in privately held Access Midstream Partners and the MLP it controls.
Still, the deal boosts Williams' position in the Utica and Marcellus shales, and adds steady fee income that tempers Williams' exposure to fluctuating commodity prices. Investors fret that Williams, which trades at $34, may have to raise more money, but cash flow of about $1.6 billion this year exceeds the adjusted net income of $816 million that Wall Street expects and should more than cover payouts, letting Williams deliver on its promise to increase dividends at a 20% annual rate through 2015.
Union Pacific (UNP)
All manufactured goods must move from the factories in which they're made to somewhere else. Kansas City Southern (KSU), which has a unique North-South network linking the Midwest with Mexico, could benefit from any spillover of manufacturing south of our border. But the king of rail remains Union Pacific.
Spawned 150 years ago, after Abraham Lincoln signed the Pacific Railway Act, Union Pacific's dense network blankets the map west of the Mississippi. Stephens' transportation analyst Brad Delco flags Union Pacific as one of the rail stocks most exposed to energy-intensive groups like autos, chemicals, and steel. It hugs the Gulf Coast, has the largest U.S. chemical franchise among rail carriers, and hogs 75% of the western U.S. traffic for assembled autos and parts. Its relative absence along the East Coast further shields it from coal's dying embers.
Union Pacific shares have run up 44%, to $133, over the past two years, nearly twice as much as the rail group has. But the stock trades at 14 times projected profits, a small premium to its peers, and no higher than its own historical average. Management has lifted operating margins to a decade-high 36%. The stock boasts a 2.1% yield, and the company has paid a dividend every year since 1899, when the steam engine propelled the U.S. to its first industrial boom. The rail giant's in great shape for the next one
Edited by JimmyM, 28 January 2013 - 19:03.