FYI:
Regards,
Ted
June 2, 2016
Dear WEALTHTRACK Subscriber,
How important are dividends to stock returns? Everyone knows the answer to that one! When dividends are reinvested they have contributed at least 40% to stock returns historically. What about stock buybacks? How valuable are they? That’s a much more controversial strategy. Financial thought leader and WealthTrack regular, MichGlobal Financial Strategies at Credit Suisse ael Mauboussin, the head of has co-authored a thought provoking piece about “some common misperceptions” about the value of dividends and buybacks. The short research article is worth reading and their conclusions are worth considering.
It’s currently pledge season on public television, so WEALTHTRACK might not be airing on your local channel. Consequently we are revisiting some interviews that are of ongoing interest to investors. This week, we are discussing China.
The once unquestioned bullish case for China, that the Chinese century was at hand and that the Chinese juggernaut would dominate the world economy is now being challenged. Positive headlines about China are few and far between these days.
“China’s Reckoning”, as a Wall Street Journal headline put it, came to a head last summer, when China unexpectedly devalued its currency, the renminbi.
Its benchmark, Shanghai Composite index experienced a sharp correction in a matter of days, after soaring to new multi-year peaks above 5000 in June of 2015. A year later, the composite remains 40% lower, trading under the 3000 level.
The correction last summer occurred despite a two month, government led stock purchase program, totaling $200 billion dollars, to prop up the market. That was followed by the detention of top officials from several investment firms who were under suspicion for possible insider trading, market manipulation and spreading market rumors. For a while, the Chinese government seemed out of control in its actions.
Perhaps one of the most dramatic examples of Chinese policy gone awry was its 35 year old one child policy which it recently eased. It’s been a disaster on several counts. It cut the birth rate so dramatically that the younger generation is not replacing the older. China’s working age population, ages 15-64 years is drastically shrinking. According to the United Nations, the 65 plus population will jump 85% to 243 million in 2030.
Another social cost yet to be calculated is the millions of males with little hope of finding a mate and starting a family. In 2008 the one child policy had resulted in the birth of 120 boys for every 100 girls. That number decreased to 116 boys to 100 girls by 2014, but it is still far below the World Health Organization’s natural rate of 105 to 100.
Is China’s much heralded economic miracle over? How bright or dark is its future?
We’ll hear from Andy Rothman, an experienced China hand and Investment Strategist at Matthews Asia, which is a U.S. pioneer in Asia-focused investing. He oversees the firm’s research on China’s economic and political developments and provides in-depth analysis on Asia.
Prior to joining Matthews in 2014, Rothman spent more than 20 years in China, most recently working in the private sector as a macroeconomic strategist and before that in the U.S. Foreign Service, including a posting as Head of the Macroeconomics and Domestic Policy Office of the U.S. Embassy in Beijing.
We also have an EXTRA interview with Rothman, available exclusively on our website. If you miss the show on Public Television because of pledge or your own busy schedule, you can always watch it at your convenience online.
Have a great weekend and make the week ahead a profitable and a productive one.
Best Regards,
Consuelo
