China Infrastructure: God or Country

By Andy Carpenter

Dear Reader,

The concept of impermanence can drive a man crazy.  It can cause him to lay awake each night and wonder which thought will be his last. 

Add that to a biological experience – human life.  It’s one that none of us actually asked for … an unfathomably random event.  Consider that and perhaps you might begin to explain what would drive a man such as Eliot Spitzer to risk it all with a 22-year-old prostitute.

Some people cloak their fears in the warm embrace of a religion.  Shinto, Jew, Tao, Muslim, Christian, Buddhist … they all explain some purpose to this mess we live.  It’s not luck of the draw.  Rather, it is God’s will that we are not cats or huskies or dung beetles … that we struggle.

I suspect Eliot Spitzer addresses his fears by creating a hyper life.  One in which each moment has to be extra amplified in a manic effort to deny tomorrow.  It’s his answer to the question of impermanence.

So, we should enjoy a moment of Schadenfreude, then leave the poor schmuck alone, lest we invite scorn and public humiliation at out lowest moments.  It’s a lesson Governor Spitzer likely learned this week.

Still, how we react to someone else’s anomie is what separates us from nature’s scavengers.  Compassion would put CNN out of business.

The Church of Sangfroid

A foundation built upon religion is, of course, what State-sponsored Communism lacks.  So in that sense, China is more Spitzer-like as it moves forward at warp speed.

If the Chinese want to kick someone’s ass, it will not be because God wants them to.  Unlike the warring Gods of Christiandom and Islam, China will need no heaven-sent message to go after what it wants.

But China is smart.  It is focused on its domestic economy.  And though its land mass is nearly as large as the U.S. and it is actually surrounded by the world’s bad guys, China spends about 10 times less each year on defense than the U.S. does.

Next year, China will spend $58 billion on defense.  It’s estimated that the U.S. will spend nearly $200 billion in Iraq and Afghanistan alone.  And when you add in U.S. nuclear arms projects, its $600 billion FY 2009 defense budget will represent 47 percent of the world’s entire defense spending.

Of course, critics of both U.S. and Chinese defense spending will insist that each budget does not account for the countries’ black budgets.  So be it.

In the end, however, when China wants to stimulate its economy, it can throw billions at federal infrastructure projects, such as the nearly $80 billion it will spend to build 97 new airports across the country.

Heck, it has already spent hundreds of billion during the past 15 years to build more than 30,000 miles of interstate-like highways.  Another $200 billion is on the books for another 25,000 miles or so.

China also just broke ground on a $30 billion Beijing-Shanghai high-speed train line.  It’s the most expensive project in China's railway history.

Then there’s the Beijing Capital Airport expansion.  It took the Chinese less than four years and $5 billion to open its new dragon-shaped, two-mile long terminal.  It’s a project that saw a third airport runway built in record time as well.

China is also set to throw other billions at a huge expansion of its seaport capacity.  The central government predicts container throughput will increase by 85 percent between 2010 and 2020.

Perhaps by then, the U.S. will have finally captured Osama bin Laden.

Verge Asia Blog

Finally, here are two items you missed if you didn’t visit my Verge Asia blog this week.

Have Chinese investors gained a risk-reward maturity?

Some may bemoan the fact that China Railway Construction rose by a smaller-than-expected 28 percent on its debut in Shanghai.  But maybe it’s a sign that the Chinese are becoming investors and not traders.

After all, a 28-percent jump would be considered a fast start anywhere else.  Or maybe the Chinese are learning how to diversify.  They already loaded up on CRC’s rival, China Railway Group, which jumped 69 percent on its first day of trading in December.

Still, Railway Construction's public offering raised $5.4 billion.

By the way, China Railway Construction built the world's highest railway in Tibet.  The train traverses an altitude so high that its passenger cars offer oxygen.

And …

One of the year’s best lines was penned by wine writer Jennifer Rosen of localwineevents.com.

In a piece about the reasons some people suffer red wine headaches, she wrote, "... I'm not a doctor, though I play one in the bedroom..."

Have a great weekend!

You can visit my Verge Asia blog each day at vergeasia.blogspot.com.

Respectfully,

Andy Carpenter

P.S.  To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com.

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Thank You, Nathan J. Anderson

By Andy Carpenter

Dear Reader,

Back on January 24, I noted that insiders held 67 percent of Fushi Copperweld’s (FSIN) shares.  I came up with that number by using some publicly available financial sources and a calculator.

If you’ll remember, that was the piece in which I also noted that the company’s President sold 90,000 of his shares just after the stock had dropped from its historic high.
 
Well, wouldn’t you know it, I got a snippy and quite long email from Fushi’s IR representative on Wednesday.  Actually, to be accurate, his name is Nathan J. Anderson, Director of Corporate Investor Relations and Corporate Development.

But I am considering referring to him as Nate the IR guy because of the tone he used – trying to cause both IDE and me to lose face or mianzi (丢面子) – while writing me in his official capacity as FSIN’s Director of Corporate Investor Relations and Corporate Development.

Here’s how he started:

I had this misfortune of having a friend of mine forward me the link to your article titled “Somewhere In China “Enron” Lurks” this morning.  I have never heard of nor visited the ‘Investor’s Daily Edge’ before, and I dare say I shall visit again, well, unless I am looking for comedy that is.

But let’s try to forget the glaring typos, rhetorical gaffs, and grammar fluffs, because what follows is the crux of Nathan J. Anderson’s concerns.

Perhaps the information was not available to you at the time, however, a quick check of Thomson financial will show insiders currently hold around 50% of shares outstanding, of which Mr. Fu Li [Fushi’s CEO and Chairman] holds a large majority of these.  Considering that he is the founder and majority owner of the Company at the time it went public, this should not come as a surprise.

In this case, by the way, the “hold around 50%” is actually 57 percent, according to publicly available sources.  But I suspect I know where Nathan J. Anderson lives, so plus or minus seven percent is dead-on math in his neck of the woods.  Of course, getting it that close does involve the toes.

So, there you have it.  The official statement from Mr. Nathan J. Anderson, Fushi Copperweld’s Director of Corporate Investor Relations and Corporate Development.  It’s not 67 percent, rather AROUND 50 PERCENT (actually 57 percent) OF EVERY DOLLAR INVESTED IN Fushi Copperweld FLOWS DIRECTLY INTO THE POCKET OF THE COMPANY’S CEO.

As a reference point, I should note that all Berkshire Hathaway insiders (including those who own a minimum of five percent) only own 19 percent of Berkshire.  At Microsoft, insiders (including those who own a minimum of five percent) only own 13 percent of the company.  At Apple Inc., insiders (including those who own a minimum percent) only own one percent of the company.

So, I extend my heartiest thanks to Nathan J. Anderson, Fushi Copperweld’s Director of Corporate Investor Relations and Corporate Development, because when he tried to make IDE and me lose face, I got to turn the other cheek and take another bite out of a very tasty apple.

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