Investing - raring to go

I think i'll still be with the firm for a couple of months and i don't want to invest and risk being investigated by SEC - i know how tightly they monitor. That means all my current research kinda becomes in-actionable immediately. However, it will help me lay the groundwork for when i can transact. Maybe i'll turn the pace down a notch - let's see.

In thinking through the overall strategy of value investing vs trading, i prefer value and that makes sense to me. Find a good, reasonably priced asset, and hold - even in the worst of times.

I also think, though, that there are some obvious short term trades (<1 year) which can provide significant value, at least in the current state of the market. If there is a massive crash, that may go down the drain. And you have to take that loss. These are mainly commodity driven - so steel prices are low now and on the way up - find a good steelco. Or event or earnings driven, like Match - upside from cuffing season and FIFA this year. Simple, short term stuff.

At current level of accessible capital, investing will have to remain a secondary exercise if i live in the US - i need to get a job. If i move to India, i think i can afford a couple of years to get invested. 

China debt - is it a problem?

From 2001-03, US lowered Fed rate so drastically that over the next few years credit flowed freely, more freely than it should. This led to the sub prime crisis in 2007/08. Broad strokes.

In the US, the TARP ($700b, of which ~$400b was actually used) was used mainly for capital purchase (buying book from banks/other investors) via reverse auction, and for injections into banks/FIs and auto companies. The other ARRA $790b was measured as tax cuts, extension of unemployment/edu/HC benefits, and job creation through fed grants, contracts, and loans. Effectively, all of this was channeled through fiscal spending. Yes, QE and low interest rates also followed - and rates are still at super low levels.

Keen to see what such consistent low rates mean for the US - are we in a longer term rally? Or does this implode somehow? Post 2001-era didn't end well. Probably my next post.

Anyway, during 2008 crisis, exports fell significantly and manufacturing stalled in China - like others, China introduced a stimulus package. But they did this out of lending the ~$600bn to local banks which in turn lent proceeds to businesses and individuals. Local govt's couldn't borrow from banks directly so they set up funding vehicles (LGFV) which did the borrowing. 

Chinese debt went from 150% to 250% of GDP from 2007 to now. Similar to US/EU level but far lower than Japan (350%ish). Most of this stems from corporate and household debt - not govt debt - which went from 110% to 225%.

NPAs at Chinese banks are currently ~$225b - two thirds of this debt is at state-owned banks, and lent to state-owned entities. With limited foreign debt (~15% of GDP and ~5-6% of all debt).
China currently sits on $3t of foreign reserves, and its savings rate is 40-45% of GDP.

Overall, given this debt seems manageable by the government, i don't see this as a concern.

However, China's LT bond yield is at 4% (higher than in a ~decade) and is expected to remain at these levels. To curb lending (which has fueled growth) - authorities have mentioned this is the intent - there may be a tighter monetary policy in place. Which means lower growth. 2016 showed us that. 

Low growth may mean lower than now, but still healthy and sustainable EM figure. Unless we see large impact on growth, flight of capital, very low yuan (leading/pre-event indicator, as opposed to growth from exports which becomes lagging/post hoc), there is no alarm here.

What happens if this chain of events occurs is a subject of another discussion.