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My biggest / best time investment is learning Mandarin Chinese.

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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!

7 Comments – Post Your Own

#1) On November 15, 2009 at 4:22 PM, portefeuille3 (98.55) wrote:

I think Spanish is and will be more "useful" than Mandarin. U.S. Americans (that are not recent immigrants) somehow appear to be the most language ignorant people in the world so if you will be able to speak any language other than English you will be quite talented by U.S. standards, hehe ...

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#2) On November 15, 2009 at 4:26 PM, portefeuille3 (98.55) wrote:

talented -> "skilful"

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#3) On November 15, 2009 at 4:56 PM, DivMonk (63.76) wrote:

Good post overall.  I made the mistake of picking German to learn in high school, which is entirely unhelpful.  English and Chinese are important languages to know, and in some places of the world, Spanish is very important as well.  (Like in America, it's really helpful to know Spanish in some parts.)

"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."

This is noble, but I dont' necessarily see how, by investing in a company, your money supports the company.  Unless you buy the stock in an initial public offering, your money goes to the last person who owned the stock.  There may be some indirect consequences of owning the stock (for instance, you drive the stock price ever-so-slightly higher which that company likes), but overall, you're not supporting it.  That being said, I don't buy companies I don't like because I don't want the mental contradiction of desiring growth from a company that I don't want to grow.  For instance, Phillip Morris International might be a profitable investment, but I don't want to find myself hoping that more people smoke cigarettes, so I don't even consider investing in a company like that.  Even though an investment in the company wouldn't help them spread, it still wouldn't be right for me.  

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#4) On November 15, 2009 at 4:57 PM, rofgile (99.31) wrote:

Portefeuillio, do you think that Latin America will be a source of large economic development in the next fifty years? 

If so, what do you think would drive this?

I see some countries that will do well (such as Peru), but this is not because of strong industry within the country, but as a side-effect of China's growth.  Countries such as Australia, Peru and various african nations are becoming the suppliers of the resources China demands. 

Latin america's future is quite murky to me right now.  I see lots of politcal instability, a culture of corruption, and a lack of industry and idea development (excepting Brazil - which is not a spanish speaking country).  

---------

 China's got a strong future because:

 A) a largely homogenous ethnicity across its large country, with few predicted problems of civil war in the next fifty years.  Mongolia, Tibet, Yunnan, and the western provinces could have some strife.  

 B) a rising middle class and urban population, mimicking the 1950's in the US.

 C) strong manufacturing and exports, mimicking post WWII - US.

 D) leadership (not democratic and not nice) that plans in terms of decades, rather than election cycles.  

 E) developing educated population of scientists and engineers that will have stable civil life and good prospects inside Chinese society.

 

(Sorry for the lists.  My brain is thinking in lists today, I guess).

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#5) On November 15, 2009 at 5:03 PM, rofgile (99.31) wrote:

InvestingMonk,

 You might have a better perspective than me.  I guess I just don't want to have part-ownership of any group that effects change in the world that I don't support.  I'm still trying to parse ethics and investing.  I do believe there is some level of "support" you give a company buy purchasing its shares - perhaps only by the buying pressure that could bouy the value of share's worth -> and indirectly the money/power of those owning shares in said company.  Perhaps it is just that I don't want to invest in companies I would hope would fail because of what they are doing in the world (even if they never will due to high profitability).

 On the flip side, it is possible through ownership in a corporation to use voting rights to change its direction (Though you need a pretty large share to become activist in this way - not my league).  

 I've always liked buying companies that I think do something "neat", ever since I was a kid and my dad let me buy some shares of Galoob (micro machines... those were the days).

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#6) On November 15, 2009 at 5:05 PM, portefeuille3 (98.55) wrote:

If you were to know Spanish and would spend a few more hours you could quite easily understand Portuguese, Italian, French and from there you could try German, Dutch, Swedish, whatever. With Mandarin you are likely stuck with Mandarin.

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#7) On November 16, 2009 at 11:15 AM, kdakota630 (29.59) wrote:

I have 3 kids all under the age of 5 with a 4th on the way and I've been seriously considering having them learn Chinese, although portefeuille3 makes a good point.  I had a friend a while back who was Portuguese (born in Canada but parents spoke it regularly) who said he could understand (but not speak) Spanish and probably Italian.

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