Speaker 1 (00:00):
Hi guys. I’m Tim Melvin. Welcome back to a better way to wealth. Now, today, we’re going
Speaker 2 (00:04):
To talk a little bit about Chinese stocks listed in the United States. Now, you know, for a long time, China has been the great growth story and you just had to own those big, super exciting Chinese tech stocks. Then recently we have seen the Chinese government cracked down hard, offering out new regulations for who can and cannot be listed in the United States. And what kind of information that these companies have to provide to the gut, to the Chinese government. They even destroyed an entire industry where they decided that no Chinese company that engages in tutoring and education systems can be for-profit where there was a handful of those things that traded here in the United States. They were absolutely decimated. So data privacy laws are also coming into play because the only people that China wants collecting data on Chinese citizens is China, not corporations. So
Speaker 1 (01:01):
Ben, some issues Chinese stocks have gotten hit
Speaker 2 (01:03):
Pretty hard. There’s another big problem looming for Chinese companies. And that’s getting, let me make sure I get this term right. It’s common prosperity is the term that the communist party is using. And what that means is, is that as China has gone to a capitalist form of communism, a lot of people have gotten very rich. I mean, there’s a lot of people in China, big market, lots of folks to sell to. So folks have become billionaires. Large companies have grown pretty much out of nothing. So common prosperity is saying, Hey guys, if you were one of the lucky ones that made an enormous amount of money, it is your duty as a citizen of China to give a lot of that money back to help other people have the same opportunities that you did. And by the way, we don’t just mean some money.
Speaker 2 (01:50):
We mean a lot of money. So common prosperity is sort of an excess voluntary tax. And it’s, we’re not going to tell you what the taxes, but if you don’t pay enough, you’re really going to have a problem with this. So that’s another company facing Chinese companies. The big problem is the United States has said that if you’re a company from China listing the United States, sometime in the next three years, you have to go through a complete and exhaustive audit to prove that your books are in records are real because I can tell you that’s been a problem with Chinese stocks for many years. It’s one of the reasons that I won’t touch a Chinese stock period because I don’t think the books are accurate for the vast majority of them. There is no way the Chinese government is letting China-based companies undergo a strict audit by United States officials.
Speaker 2 (02:43):
It’s not just accounting problems that they’ll find got to remember a lot of the technology that they have was in fact stolen from other nations with a great deal of it coming from the good old us of a no way. Does China want us able to prove that in the court of world? So everybody’s wondering, is this the time should I bottom fish China here? And let me just ask you a question, guys, why are we buying China at all? Okay. China is not a friendly nation to the United States. They, if you look at the there was a summit with him in Alaska earlier this year, I think it was March if memory serves and there’s transcripts of it only widely available on the internet. And if you read this, the Chinese diplomatic officials are, they talk down to the United States, diplomats. They are very aggressive in their posture and they really take after the United States on things like the use of our military around the world, they attacked us on human rights issues.
Speaker 2 (03:43):
Stop and think about that for a second folks. This is a government that engages in slaughter in one region of its country. They’re attacking us on, you know, on human rights issues. And we really didn’t push back. They were also attacking us very much on some of the things that we’ve done in our, in the economy, in the United States to not grow as fast as Chinese growth, but they’re very harsh. They talk down to us completely. They make it clear. They are not afraid of us. They have every intention of absolutely dominating the United States over the next 50 years, both militarily and economically, they have a 50 year plan. We’re sitting here arguing about how many genders there are in the United States. So they’ve got kind of a leg up on that. Why would you give any money to companies that are going to provide some sort of benefit to accompany that you guys, maybe you don’t have to call them your enemy, but they’re sure not your friend.
Speaker 2 (04:41):
Eventually they will be our enemy in many ways. Why invest in that? The MSEA China index is now down 30% on the year. And I don’t think that’s enough. I think it knows to go down more to properly reprice the risk that is in the Chinese markets. Now, now Charlie Munger is a big fan of China. He’s made a lot of money over there. Investing with a fellow that runs a hedge fund and investor over there. Now, I think he thinks and hopes that China and the United States will settle their differences because it’s in our best interest because of trade. I was willing to almost believe that until she’s in pain, took office. Now he’s got office pretty much for life. He intends to win and to win. He has to beat the United States. And if that means he has to break some marketized with us, I believe he’s going to do it.
Speaker 2 (05:35):
The thing the bet you’re making when you buy a Chinese stock is that she’s in pain and his government are going to allow you to continue to make money. Because when you own a stock in the United States and something goes wrong, there’s all sorts of, you’ve got all sorts of recourse through the courts through the sec. If something goes wrong with the Chinese company, if they just decide tomorrow, Hey, we’re delisting. All of our companies in the United States, you have zero recourse. You can only make as much money in Chinese stocks as the Chinese government decides they want to let you make. It’s not a great risk reward proposition in, in my
Speaker 3 (06:10):
My eyes and
Speaker 2 (06:11):
You know, the big ones, Alibaba. I heard recommendations constantly last week. Let’s jump on Alibaba. BA BA it’s the Google of China. Well, okay. If you want to be involved in Google, just by Google here in the United States and Google does something wrong. You can go to the courts. You can go to the sec. There’s all sorts of things you can do to make sure that nobody commits fraud and cost you a ton of money. You have an opportunity to recoup any losses caused by that. That is not the case when you buy Alibaba. And by the way, Alibaba is ridiculously unpopular with the Chinese government because Jack ma decided he was important to Chinese society. And he was reminded that. Yeah, no, he’s really not. There’s only one person right now. That’s important in Chinese society. It’s not Jack
Speaker 1 (06:59):
Ma. So if you want to be involved in Asia, let’s look at some other opportunities.
Speaker 2 (07:04):
We’re pretty bullish on, make sure I get these symbols now, Vietnam. And we’re going to have a very good relationship with Vietnam because the enemy of my enemy is my friend, China and Vietnam do not get along. They have not gotten along in decades. They have constant skirmishes over fishing rights in the south, south China, sea and their borders. So Vietnam is growing. It’s kind of doing the same capitalist version of communism that China had done, and you can just buy the whole market through the ETF. The symbols VNM long been bullish on Singapore has one of the best risk return profiles in the entire world. Right now, the ETF symbol there is EWS. And we think that Japanese small caps actually have a much better risk return profile than anything in China at the moment. And the symbol on that ETF is S C J.
Speaker 2 (07:53):
So there’s opportunities to be involved in Asia without necessarily owning Chinese stocks where you’re have no rights whatsoever. And the government has indicated that they’re going to make it a little difficult for you to make money in China going forward. You can also turn your eyes away from Asia and look to an area in the world that has been recovering a bit slower than the United States, but it’s starting to try to come on strong that’s Europe and you can buy some really cool technology companies over in Europe right now. There’s, Clarivate the symbol C L V VT. This is a London based information and service and data analytics company. I’m just checking my notes here. They’ve done research, drug development optimizing online presence, just crunching data to help companies do things better. It’s going to grow at about 20% a year for the next four or five years.
Speaker 2 (08:43):
It’s pretty reasonably priced. And it’s based out as I believe in the Netherlands. So there’s a company I’m sorry, based in London, the next company is paced in the Netherlands and that would be SML Holden’s semiconductor company. These guys are gonna grow at a little over 30% a year for the next five years. Stocks really reasonable price given their potential. They’re the only company in the world right now. That’s making the equipment that’s necessary to build integrated circuit boards as small as they possibly can. If you need that technology. And a lot of companies do got to go to the Netherlands and talk to the folks at AML holding. So there’s two great growth opportunities where you still have shareholder rights of like China that are going to grow faster than China. And probably the stocks have a lot more upside than trying to bottom fish in a corrupt communes nation. Now here’s the best strategy. Ignore China, just stay home here. Nina states use our value momentum strategies that we’ve been outlining over the past couple of weeks. That’s going to make you a lot more money than anything to do was using pain and China and his dislike for the United States and the fact that you only get to make money there if he decides you’re allowed to. So anyway, I’m Tim Melvin, that’s a better way to wealth and thanks for watching.
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