May Day kicks off a week-long holiday in China so we’re going to Hainan Island to make sandcastles. The last time I went to Sanya was in 1990 so I expect it has changed a little bit. I plan to make a full report on the trip, including pictures, once we return.

I’ll be back next week. See you then!

Here are the (lightly edited) bits I found interesting in this week’s issue:

“In this day and age, there are still companies where the investor-relations person doesn’t speak English. It gets back to my original point of why Europe is so compelling, because it is disjointed and disorganized and there is no consistency from one country to another.” — David Marcus, interviewed by Sandra Ward

“In addition to Google, which doubled over the twelve months, the spring ‘05 [Big Money Poll] pans included notable winners such as Apple (up 82%) and Starbucks (up 56%) … the managers’ six-month favorites rose an average of 8.72% … their pans rose 9.13% … the S&P 500 index rose 8.3% in the same six-month period.” — Jack Willoughby [Who can’t help laughing when reviewing these results? And the number of bulls in their new poll terrifies me. ;-)]

“‘We will not buy rich bonds just for the sake of holding bonds,’ says Greg Habeeb, who also heads Calvert’s taxable fixed-income group, overseeing more than $5 billion. Today’s high prices and low yields on many bonds have ’surprised’ Habeeb, who also notes that in the fixed-income market, there’s ’simply not enough supply to meet excessive demand fueled by increasing world wealth.’ He explains that ‘emerging-market money,’ ‘oil money’ and wealth created by a global real-estate boom have helped build an appetite for dollar-denominated securities. ‘I’m not sure that this phenomenon changes soon, but the markets will always find fair-value levels in time,’ he says.” — Jennifer Ablan [Habeeb sounds like he knows what he’s doing.]

“Last week brought a sense of déjà vu from the ‘Seventies in the histrionics over oil and gasoline prices. The same nonsense about ‘price gouging’ and calls for a windfall- profits tax reappeared as if unearthed from a time capsule with a disco ball or an execrable Eagles album. The only thing missing was gas lines of that era, which should tell you something. Aside from spot shortages resulting from the change in government regulations that eliminated the MTBE additive, there was plenty of gasoline available. And though it’s back above $3 a gallon, it’s less than a latte. It’s just we got used to gas being less than bottled water.” — Randall Forsyth [Glad to see that Forsyth, like the Dude, “hates the f—ing Eagles, man.”]

“Gold at $2,000 is merely the January 1980 high of $850 in 2006 dollars. Indeed, you can get to $2,000 through two different back-of-the-envelope calculations: Money as measured by M2 is 4.6 times greater than in January ‘80. And over the same period, real gross domestic product has risen nearly 2.2 times. So the ‘net’ increase in the money supply is the difference between 4.6 and 2.2, or 2.4; and 2.4 times $850 is a little above $2,000. Or, more straightforwardly, the consumer price index is 2.4 times higher than it was in Jan 1980, and 2.4 times $850 produces the same result.” — Gene Epstein [Hmmm, Epstein tries to quantify animal spirits?]

Copyright © 2006 Dow Jones & Company, Inc.

China Central Television (CCTV) is building a spectacular new complex in the heart of the Central Business District (CBD). This is one of the last old buildings that is being razed to make way for it. The residents have made a very public protest about the compensation they apparently were paid: 4500 yuan is about $563 per square meter. This is indeed very little money, and won’t buy you anything within the Fifth Ring Road in Beijing now.

The vertical white banner reads: “Only 4500 Yuan Per Square Meter Compensation from CCTV: Where’s the Justice?” (”Wu Fa Wu Tian” is an ancient Chinese saying which could be directly translated as “no law, no limits (on power),” so I took some liberties with the translation.

The other characters say: “Get out!” (to CCTV), “Protect Human Rights,” “Cheating and Oppressing the Common People,” “No Way to Live,” and “Heaven’s Law Won’t Allow It!”

At the other end of the spectrum, this is a new building in our development that is being delivered today. Over 120 units priced at well over 10,000 yuan per square meter, 100% pre-sold. It’s located less than ten minutes from the CCTV complex. I estimate that about 60% of the apartments are held by “investors,” so the occupancy rate will be about 40% — not unusual.

The Healthcare SPDR (XLV) reversed, which meant a small loss for the long position established last November.

The countertrend move in the US Dollar that began last May is over, and the downtrend has reasserted itelf. Look for the Dollar Index to return to around 80. It’s not a question of ‘if’, but ‘how quickly’ it will get there.

Wall to wall Financials, again. I’m glad the Chairman is on top of things.

Jayhawk China Fund (started in 1996)

Jayhawk China Fund (Cayman), Ltd. This Cayman Island’s Limited Liability Company focuses on investments in China. The manager expects to invest the majority of the Fund’s capital in the shares of China and Hong Kong issues but may from time to time invest in other Southeast Asian markets including closed-end funds. These include but are not limited to equities listed on the Shenzhen & Shanghai stock exchanges, Hong Kong Listed “H” shares and “Red Chips,” and other China related Hong Kong listed stocks.

Kent McCarthy has an impressive resume, but I don’t see why he’s interested in China specifically. Maybe he had a lot of Chinese-American private clients at GS in San Francisco?

The Financial SPDR (XLF) and Regional Bank HOLDR (RKH) were both prominently on my new highs list. These two ETFs have been doing about as well as the S&P 500 since the bottom of the bear market (October 2002) — no better, no worse. I’m watching for a breakout in relative performance as money rotates into the financials.

(If you don’t understand what “relative performance” is, read this chat transcript.)

Next step in pirating: Faking a company, by David Lague

Counterfeiters set up what amounted to a parallel NEC brand with links to a network of more than 50 electronics factories in China, Hong Kong and Taiwan. In the name of NEC, the pirates copied NEC products, and went as far as developing their own range of consumer electronic products - everything from home entertainment centers to MP3 players. They also coordinated manufacturing and distribution, collecting all the proceeds.

Counterfeiters carried NEC business cards, commissioned product research and development in the company’s name and signed production and supply orders. They also required factories to pay royalties for “licensed” products and issued official-looking warranty and service documents.

Some of the factories that were raided had erected bogus NEC signs and shipped their products packaged in authentic looking boxes and display cases. NEC said about 50 products were counterfeited, including home entertainment systems, MP3 players, batteries, microphones and DVD players.