Potentially Big Investment Ideas March 2015

President Putin attends Russian Interior Ministry Collegium meeting

 

There are a number of big events happened recently:

 

1. Mr. Zhou Xiaochuan’s 2nd rate cut in 4 months, likely will hurt China fatally and irreversibly. TopCools think that will speed up the collapse of Chinese economic bubble. Due to total M2 at 250% of GDP, moreover the local gov use their land-selling as collateral to get Trillions RMB loan, once home price go down, that income can go to zero. There is no way the local government can pay back banks these gigantic loans. We see Yuan risk collapse under the devaluation wave around the world. We started short YINN and long YANG. Once a currency is seriously overvalued, more print only accelerate the collapse(the later is what is different this time around), there is a straight line to recession without a turning back.

 

2. Iran likely will sign nuke deal with US, West because low oil price + sanction hurt Iran badly, plus US want to isolate Russia; Russia~Ukraine peace seems hold, and they signed gas deal. TopCools think the incentive to pressure Oil, Iran, Russia has reduced, partially because Wall-street & Saudi have covered their short/put position on oil. We re-entry RUSL at 23.38. The murder of Kremlin critic Boris Nemtsov likely be the last thing to pressure Putin to act not like a rogue. Nevertheless, we like the RSX P/E at 5 when RUSL at 23.4 and the fact Russia gave free home to every of its citizen when Soviet broken. That is a sharp contrast with China selling public asset/home to Chinese at top price of the world and stock P/E average > 20(both Soviet and China used to be 100% national/gov owned housing). We think the best trade is short YINN; long YANG, RUSL at this March 4, 2015.

 

Holding RUSL, YANG has some benefit: they are index and not likely go to zero, as they are stressed heavily and they provide big upside. risk/reward ratio is similar but better than options.

 

TopCools Editor. Mar 4, 2015 (Disclaimer: we are not interested in politics other than profit from politics events).

 

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