rofgile (99.10)

My biggest / best time investment is learning Mandarin Chinese.

November 15, 2009 – Comments (7)

十一月十五号

China is the world's largest growing economy, and will be a major player in the global politics of the biggest empires (US, Europe, Russia, Japan).  The Chinese economy can be expected to grow by multiples of their current GDP over the next fifty years.  Few other countries have this potential for growth and increased global recognition.  However, I still haven't put any money into any Chinese corporation. 

This is for two major reasons:

1.  I only invest in companies that I think will not have negative effects on the world.  I can't invest in a PetroChina that is busy making major deals with countries like Sudan, or invest in the Chinese Google that will play a part in maintaining Chinese propaganda.  Many of the companies that might be profitable investments (namely resources, energy, construction, etc) will likely be involved in corruption, damage to the environment, damage to local populations without legal representation, etc.  I don't want my money to support that.

 2.  Information is the most important good for investing correctly.  I gobble up information, and voraciously read newspapers.  You have to be able to collect enough information to make a better valuation of a stock that the mainstream valuation.  Is a company worth more or less than what people currently value it - that is my major question in investing.  So, how can any American (especially the maintainers of the Motley Fool) make good assessments of Chinese companies?  The typical American investor has three major handicaps on the information front:

 A) Chinese companies don't have as transparent accounting reports as companies on American exchanges.

 B) I don't understand any other country as well as I do America (where I live) - and much of the time I hardly feel I understand America, and where it is headed.  Since I don't live in China, how can I understand if a company is legitimate or a scam, if there is real demand for a product or if there is just a glossy surface that looks nice.  Many people are now reporting that malls in China are empty, but new malls keep being built.  Companies are buying cars and trucks, but the gasoline usage doesn't add up with all the purchases reported.  If we aren't inside China - how can we really know how healthy their economy is?

  I often make investment decisions after getting out, and seeing how healthy things look around me.   In the last few months, I've seen people shopping, buying cars, and houses.  To me that has said that while overall things still look bad, there have been real improvements (and I invested accordingly - along with investing based on economic indicators that I felt were trustworthy).  I can't look around and see if people are really shopping in China, or losing their jobs.  And I can't trust their government's economic indicators (as their are incentives to report more positively from the lowest government position to the highest).

C)  I read lots of American sources for investing and world information.  Among these are the NYTimes, Barron's, WSJ, CAPS, Google News.  The ability to gather information is amazing nowadays.  I doubt we've ever had such a large number of well-informed (maybe not large percentage-wise) investors in the markets.  However, I can't read Chinese newspapers or blogs.  How can I really have an understanding of their stocks?  Its like going into a casino (with China, literally!) where all the other players get the real rules, while you get only enough to play.  Eventually you will lose all your money in that environment.

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  China will likely be a place to invest money one day for me.  But not today, or for a long time.  Meanwhile, I've been investing in China in a different way.  I've been learning mandarin Chinese over the last five years.  I'm still awful at the language, however.  I know probably 100-200 characters well, and can understand maybe 300 spoken words.  Its getting easier though, the more I practice.  I've found some cool tools lately to help learn.  My favorite three are Pimsleur Mandarin (I/II/III) - I highly recommend that one, TVUplayer - you can watch Chinese television, and my newest favorite toy is the Nintendo DS with My Chinese Tutor.  The Nintendo DS game is excellent!  I got it for $8 on Ebay, and I've already learned 30 written characters with it.  Such a good return on an investment!

  My strategy is akin to investing in a company that has a large debt, which they continually are paying off every month.  You hold a company like that for the long term, because they are investing in themselves, setting themselves up for the future.  It might seem like they aren't earning much money because its going to their debt, but every dime spent increases the companies underlying value.

 I've got a debt from the American public education system.  We don't learn useful foreign languages that will be needed in the future.  I had 4 years of Spanish in HS, other students had German.  Those are not the important languages of the future.  The two most important languages will likely be English and Mandarin Chinese.  I am predicting a future where most business will have a Chinese financier, Chinese manufacturing involved, or a Chinese consumer.  You want to have a business job in that world?  If you are an average American you better start doing your homework now.  There will be plenty of well educated Chinese citizens that will be fluent in both English and Mandarin.  These are your future competitors in getting a job.  

 So, I'm working to pay off my debt.  For me, its not so bad.  I love the written language of China.  I think it's the most beautiful in the world.  The spoken isn't.  But I love the writing.  Hopefully someday I'll be able to pick up my Chinese newspapers, and read the business section and understand.  

 Have a nice weekend, and 再见!

 -Rof

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  P.S. - Did you read about China asking the US to raise its interest rates?  Sounds like they are getting worried about a bubble - and I don't think its a bubble in the US market - but Chinese stocks and property.  Because their currency is pegged, when we get loose on monetary policy they get the inflation!