Are We Finally Waking Up to THIS Real RISK? Chinese Stocks Worth Nothing?!

In this video I'll show you an excerpt from a talk Robert Vinall recently gave in which he discussed the similarities and differences between Russian and Chinese stocks. And we’ll also discuss what Charlie Munger thinks about Chinese stocks. But to give you some context here: Basically, ever since the Russian invasion of Ukraine, Russian stocks have been absolutely crushed. Russian stocks that were considered to be worth multiple billion dollars just a few weeks ago are now only worth pennies (at least Russian ADR shares) following the global economic sanctions imposed on Russia. And it almost seems like the horrific actions of the authoritarian state Russia highlighted the risks associated with Chinese stocks. As Perth Tolle recently described it in an interview with Morningstar, "From an investment standpoint, the biggest concern is not Russia, which is 3% of most benchmarks, but China, which is more than 30% of most emerging-markets indices. That's a huge concentration risk."

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You might want to call it the risk associated with certain emerging markets equities and with Chinese and Russian stocks “Autocracy Risk”. But what exactly is autocracy risk and how likely is it that Chinese stocks will follow the same path as Russian stocks and will they eventually be worth nothing?

Autocracy risk may best be illustrated by the performance of Chinese for-profit educational companies. Investors were making good money for a while. In fact, for many years, the education tech sector was thriving and worth tens of billions of dollars. If you invested in the stock of the New Oriental Education & Technology Group, for instance, you basically 20x-ed your money over a 15 year period. But when Chinese regulators banned companies that teach the school curriculum from making profits, raising capital or going public, the Chinese stocks operating in that industry effectively went to zero.

And another example of this phenomenon in the investing world are Russian stocks. Those who invested in Russian stocks simply missed the risks that come with investing in Russian equity markets. Russia's attack on Ukraine is an extreme example of the geopolitical risks that come with investing in autocratic countries and investors owning Russian stocks got burned and lost a lot of money. At first, the Russian stock market has effectively been closed for around three weeks. But eventually, trading resumed and the dramatic sell-off of Russian equities may best be illustrated with the MOEX Russia Index that at one point was down more than 50% despite the fact that even before the Russian invasion, Russian stocks were trading at a steep discount.


Chapters:
0:00 Intro
2:00 Autocracy Risk
3:00 Autocracy Risk Example
3:50 Must-watch analogy
4:37 What about Russia?
5:57 A wake-up call?!
7:05 One end of the spectrum
8:48 A different view!
10:10 Charlie Munger
11:58 $15 Trillion Economy?!
13:00 Robert Vinall
15:44 Interesting data points

DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.

Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.

In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.

I hope you enjoyed the content!

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