

TIP384: Evergrande, Alibaba, and the Collapse w/ David Stein
Oct 3, 2021
David Stein, former chief investment strategist with deep insights into Chinese markets, discusses the current state of Chinese stocks and their historical valuations. He explains why some investors, like Charlie Munger, remain bullish while others express caution. Stein delves into China's staggering debt issues, particularly highlighting Evergrande, and the potential for market collapse. The conversation also addresses regulatory challenges for tech giants like Alibaba and the implications of China's new currency, offering critical investment strategies for navigating this complex landscape.
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Chinese Stock Valuations
- Chinese stocks aren't historically cheap, despite the 2021 tech downturn.
- Several valuation metrics suggest prices are higher than historical averages, unlike the expensive US market.
US vs. China Valuations
- US stocks look expensive with a Shiller PE of 37, but low interest rates offer some justification.
- China's earnings yield relative to its bond yield suggests a more attractive valuation than the US.
Bull Case for Chinese Equities
- Some investors are bullish on Chinese equities due to China's large economy and relatively small stock market capitalization.
- They believe the market is undervalued compared to its economic potential, similar to past situations like Japan.