Joey, Your post reached me precisely at the time I was studying CCI as a possible short. Here I present what IMO is the big picture (This is still at the idea stage, I have to study the details/facts to see if they fit my framework). I am trying to capitalize on my direct experience with the Venezuelan crisis of the 80's which I witnessed first hand during the 83-86 period and have followed from the US since then.
If the Asian crisis follows a similar pattern to the SA crisis of the 80's, bankers will be caught again with an even larger portfolio of non-performing loans to the Asian region as compared to SA (Mexico, Venezuela, Brasil, Argentina, etc.). The end result, however, may be much uglier as we are talking much bigger bucks here.
I speculate that complacency was the name of the game when making decisions on loans to the fast growing companies in these economies, a significant fraction of these loans will be non-performing. I suspect that A GREAT DEAL of corruption was going on and is going on in the public and private sectors of these economies (this is what happened in Venezuela and the country is still trying to recover). IMO quite a bit of the money lent to the private and public sectors in these countries is sitting in the offshore accounts of government officials and corporate officers. Just like in the US's S&L crisis a significant fraction of these loans went into financing enterprise and real state developments whose key objective was to enrich the promoters through pocketing the loan proceeds and not from achieving adequate returns on investment. A lot of the industrial development was probably carried out without much regard for achieving a meaningful return. This may be one of the key reasons for Asian imports being so cheap, these companies were being capitalized by borrowing and stock issues rather than through internally generated cash flows.
When the large banks come knocking at the doors of these institutions, they won't find neither assets to grab nor anyone to blame. I am not implying that all the businessmen in these countries are crooks, not all the money was stolen but I think negligence in the use of easy money may have been present. You see substantial evidence of these in the Boston area where the kids of many of these so called industrialists go to school. In the parking lot of the university where I teach, It is not uncommon to see 18 year old Asian kids driving cars in the 50-100K range, some of them with
not just one such cars but several!
This is my hypothesis. I will now check whether the facts confirm it. I will study carefully the SEC fillings of CCI (and possibly CMB
and others), the recent developments, layoffs, bad news related to Asia, seem to indicate the situation is much worse than it looks. In the mean time, CCI's and CMB's price charts are dancing in the stratosphere.
Pancho
BTW I found these news interesting:
yahoo.com
Clinton is a lucky man! |
