December 23, 2007
Sterilizing Misperceptions
A couple interesting things from Arjun Divecha in this week’s Barron’s. First, on the Chindia “misperception” –
“India has benefited hugely from this misperception of “Chindia.” By linking China and India together, people think that India is in the same league as China when, in fact, it is not. Let me give you a few numbers: In global zinc consumption, China consumed 29%, India consumed 3.8%; aluminum, China consumed 25%, India consumed 2.6%; oil, China consumed 9% of global oil, and India consumed 3% of global oil. These countries are not compatible. They are not even in the same league. India has got a whole lot of capital that it would not have gotten if people had thought of it separately. India is where China was 15 years ago in terms of per capita consumption. It is a great growth story, but equating it with China has meant a lot of global liquidity has flowed to it and helped India’s performance. It has made Indian stocks quite expensive, and that’s why it is our least favorite country. The economic story is terrific, the valuation story is not.”
Second, on the possibility (ha! why hedge?) of a bubble in China:
“China we don’t like, either. Although, I want to caution you on China because China could be in the beginning stages of a fairly large bubble. I’m not predicting it. I’m just saying it’s a possibility. There is a huge flood of money coming into the country as exports lead to massive amounts of capital inflows…so large the central government has not been able to sterilize them … The money supply has been growing at the 15% to 17%, about in line with GDP growth. But now it has suddenly stepped up to 25% or 30%, and in the last few months inflation has gone up to 6.9% in China.
That in and of itself could be a problem, but that is not what I’m focused on. I am focused on short-term interest rates at 3½%. If you are a saver in China, you are getting 3½% from the bank while inflation is at 6.9%. You can’t take money out of the country. So what are your options? Real estate and the stock market. That is why the stock market has gone up so much this year. This trend isn’t changing any time in a hurry.”
Related: Losing Less Money on Chinese Bank Deposits — Yippee!
(This is my last issue of Barron’s since I’ve canceled both it and wsj.com anticipating Rupert’s making them both free soon.)
December 24th, 2007 at 3:44 am
There is absolutely no way Murdoch makes Barron’s free. Better resubscribe.
WSJ is another matter, it’s primary competitor is NY Times and it’s now free on the web.
December 24th, 2007 at 4:28 am
Two of my favorite China videos:
http://tinyurl.com/2fgq8q
http://tinyurl.com/2y4lfz
Plus, I heard the other day that China currently has FIFTY airports under construction vs. zero in the US which hasn’t built a new one in many years.
There may very well be a bubble in China, and there may be something happening there that mankind has never experienced before. Or both.
December 24th, 2007 at 8:56 am
@mh497: If Rupert doesn’t make Barron’s free, I’ll resubscribe to it alone only for $20 or less.
@Cap: It’s both.
December 24th, 2007 at 10:17 am
Comparing WSJ.com and NYT is like comparing apples and oranges. People will pay for financial news, but won’t pay for general news. The NYT could never come close to getting the paid subscribers The WSJ gets. Murdoch will give that up even though it will cost him in the short term. But the NYT being free isn’t a factor, IMHO.
December 24th, 2007 at 11:08 am
John: When I originally subscribed to wsj.com for $99, Barron’s was bundled with it for free which I thought was a good deal and went a long way towards my being able to justify the $99 expense. When they unbundled Barron’s and squeezed another $20 out of me for it, I thought, OK, I can deal with that. But now that I’m dropping wsj.com, I won’t subscribe to Barron’s alone, especially not for $89 (I think that’s what they charge for it?). Once Rupert frees wsj.com, it’ll be darned interesting to see how many people subscribe to Barron’s.
December 24th, 2007 at 12:09 pm
CM: As a subscriber to WSJ.com, Barron’s Online and FT.com, I certainly wouldn’t mind them all becoming free! :-)
December 24th, 2007 at 12:11 pm
John: Yes, but I know you’re happy and willing to pay for all of them too … you’re not as cheap as me. :-)
December 24th, 2007 at 12:42 pm
I combine cheapness with the attitude that, buy the time it makes the papers it’s already in the stock! Plus, if it’s groundbreaking or important, it’ll be in the Friday afternoon CNBC “Barron’s Preview” or on Seeking Alfalfa or elsewhere, for free, PDQ.
The War Street Urinal lost me as even a “free” reader with their editorial/opinion page about 7 years ago. All of a sudden, with a different Prezzicritter in oriface, they went from being an attacker of big government and intervention to being an apologist for big government and intervention - showing their true colors as not being driven by ideas, but by partisanship, and therefore intellectually dishonest.
I do take the FT, because for some reason news doesn’t cross the pond very quickly … and I got paper delivery (printed in Houston) and web for a super discount …
December 24th, 2007 at 12:49 pm
Bill: I agree for the most part. With Barron’s I only focus on the interview and ignore the rest. With the WSJ I do article specific (usually China-specific) searches and scan the headlines of each section. Now that I have access to a Bloomberg, the WSJ is almost completely irrelevant (a day late on everything that matters).