Scalper1 News
I’m divesting myself of 50% of my U.S. holdings (stocks and bonds) and gently investing it all in China A shares (ASHR) in anticipation of an October 2015 upsurge. I anticipate billions of dollars flowing into China A shares in response to the IMF’s expected decision to make the Reminbi (Yuan) an official reserve currency in October. The operative words are “anticipate” and “expect”. This is NOT a slam-dunk; it’s a high-risk guesstimate. A year ago the IMF came within a whisker of approving the Reminbi to join the basket of official settlement currencies for worldwide debt settlement, bank retention, bond issuance, and credibility. In October of this year, I expect the organization to approve. Already major banks are issuing bonds and settling debts in Reminbi in anticipation. Major indexes and investment funds will pore billions into the China A shares market once the Yuan becomes internationally and easily and credibly convertible. This will occur for two reasons: first, because investors want exposure to the Reminbi in the foreign exchange market; and second, because China is liberalizing its rules to permit foreign investors to own these A shares, i.e. shares denominated in Reminibi. Asia, China, small-cap and development funds have been waiting years for this opportunity to buy the shares of Chinese companies in the currency of the country. And the funds that will be used to make all these new Reminbi investments in China will in large part come out of U.S. dollar investments, just as mine are. Meanwhile, the A share market itself has become particularly enticing of late. The off-putting “bubble” so bemoaned by the talking heads and the financial press has burst, with China’s indexes falling more than 10% since the start of June. That’s officially a correction. Last Friday the Shanghai Composite ended down 6.4% for a single week, with the Shenzhen close behind with a drop of 6%. This week there appears to be a stop to the falling knife: it appears to me the point to gently begin to buy A shares. As a consequence, I expect the China A share market to stabilize between now and October, at which point I anticipate the Reminbi (the Yuan) to rise significantly against the U.S. Dollar, and the A shares market to make real headway. But, as I pointed out, all of this is predicated upon “anticipate”, “expect”….and, I would add, “hope”. Follow my line of thinking at your own risk! But I must say I’ve never bet half the farm before on a single position in my 67 years of investing. I plan to hold this position until January, when I will begin transitioning back into the U.S. market, retaking the same positions I now hold (hopefully in larger measure) as I expect a strong 2016 for the U.S and U.S. stocks. I shall avoid U.S. bonds altogether, as a slough of despond. I doubt that I will hold any of my A shares beyond the October of 2016. Divesting myself of 50% of my U.S. liquid assets is a rash move, clearly not for the faint of heart. At the age of 75 I’m bored with the micromanagement of incrementalist investing. To me, this move looks like a one-time shot at an interesting risk with a limited downside. I simply do not foresee the implosion of the Chinese economy coming about in the next 18 months. After all, we trained their economists! But to say that this trade is not for the faint of heart is inadequate. Don’t put a dime into it that you are not willing — and comfortable — to lose. It’s just that straight forward. And just that much fun. Disclosure: I am/we are long ASHR. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: I am unable to activate the SEEKING ALPHA template to accept ASHR as a ticker. Scalper1 News
Scalper1 News