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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (39162)	9/8/2010 9:24:55 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 79293

Well, it is tough to evaluate how much system is corrupt systemically, however, IMHO to some point it is. Auditors are shady or able to be bribed, companies lie, companies bribe government officials. - yes to all of those. Not all the time and not all the companies, but yes. I think we have seen at least one example of each in the last year at least. BTW, for some reason Americans think that bribing government officials is a big crime and it always means that the company misleads investors too. That's not necessarily true. From my experience in Eastern Europe and Russia (it may only partially apply to China), the company can avoid taxes, get sweetheart deals, bribe officials and still be OK to shareholders. Yes, the risk is there that they will fleece shareholders too. It's dumb to deny it. But it's not "bribe officials" == "fleece shareholders". :) So why do I invest in China? Because of the huge potential returns. Yes, there are risks of young economy with corruption and non-shareholder oriented managements. But there are also rewards. And things may get better with time. In most of the Eastern Europe they did. In Russia... well not much. :) It is slippery market, where you have to assess the company on ongoing bases and get out if there are too many skeletons. On the other hand, you are paying 2-7 PE for overcapitalized, growing companies. If they manage to grow without stumbling over fraud, corruption, etc. issues, they can lead to multibaggers. And some already did. There are not that many such opportunities in USA. :)