Weekend thoughts w/e Apr 19 2008

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Currency effects
While we are heading to $4 gas (partly thanks the weak dollar), not all are victims of this trend. Think Google or IBM. Google (GOOG) and IBM reported blow out earning, while cell phone maker Nokia (NOK) reported so-so earning (or outlook) last week. One key difference is the reported currency, Google and IBM reported results in USD, while NOK reported in Euro. We all know Dollar lost a lot ground to Euro in past year, since GOOG and IBM did a lot business in Europe (and internationally), their earning and earning growth is exaggerated by the depreciation of dollar. Nokia is hit by the opposite force. A more important question to ask is: can the dollar continue to slide vs. other currencies? Personally I would not bet on GOOG or IBM if their growth is mostly from the currency effect

ICBC, Goldman Sachs, China Invest Co. and Blackstone

China Stocks

A daunting task for QDII & China Invest Co.

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No. I’m not kidding. Big money (billions of dollars) usually is a good thing, but not easy if one wants to beat market return in a certain time. You can ask Charlie Munger (Berkshire’s vice chairman) and he will tell you Berkshire is going to make a (market+2%) annual return from now on, according to the Q&A of his latest annual conference. For reference, Berkshire (BRK.A) has beat S&P 500 by 10% compound-anually for last 40 years.

Now Mr. Lou Jiwei, head of China Invest Co., will manage a $200 b fund. He can buy half of Exxon Mobile or GE using that money. Or, if Warren agrees, Lou can buy the whole Berkshire.

QDIIs, China AMC, China South, and Havest will each have $3 to $4 billions. Today I heard Shanghai Intl Fund Management Co. 上投摩根 attracted CNY 100 b ($13.5 b) subscription for its QDII focus on Asia pacific. They are both having the problem of “starting big”. A problem nice to have, nonetheless it IS a problem. One thing for sure is QDII can not expect to get the return of their sister funds investing in domestic A share, many of which already got +100% year to date (YTD).