SuperModels columnist Jon D. Markman is on vacation this week and next, so he has turned the column over to his alter ego, Modelman, to answer reader mail.
: A friend just sent me an article on your coverage of the
Chinese currency debate. Your research and analysis were great, but one thing I wish people would do when reporting trade-gap figures is to openly state which source they are using and the potential for bias. For example, U.S. trade figures count transshipment mark-ups (mark-up by a third party en route to the United States) that have no benefit to China. About 80% of U.S. imports use this method, so you can see how a distortion starts to take place.
The Chinese side is no better, and they do not count exports to Hong Kong that end up in the U.S. as exports to the United States. The fact is, trade-gap figures are highly politicized, and I wish people would acknowledge this more. ... I believe you are spot on in pointing out that the U.S. administration wants very much to distract the public from these woes and is looking for any and every reason to blame others other than themselves.
-- John Chan, president of Shanghai consulting firm ChinaStreetSmart
: A key reason for the recent crash in U.S. Treasuries, according to a plausible rumor recently circulating, was a buyer's strike on the part of the Bank of China to protest the Bush administration's campaign to cajole Beijing to revalue the yuan upward. If true, it would show how relevant the Chinese currency debate is to something as basic as American mortgage rates -- which shot up to a one-year high as bond prices plunged. It's an interesting coincidence that bond prices improved in the past week as U.S., Japanese and Korean officials cooled their anti-yuan rhetoric.
As for your first comment, virtually all economic numbers, not just ones reflecting international trade, are politicized in some fashion. The Clinton administration turned the practice into an art. Combine politics with seasonal effects and neurotic bureaucracies that alter their counting methodologies as often as they change assistant deputy undersecretaries, and it's a wonder that economists are
able to understand what's happening.
This is one reason that most large fund managers don't depend on government statistics; they have their own economic-measurement analysts who provide them with more consistent data, or rely on research companies such as ISI Group and the Economic Cycle Research Institute to do independent data-gathering and analysis for them.
: On Oct. 16, 2002, you ran a column called
Trading the S&P's Terrible $2s. I never saw the follow-up column at the end of the year. Any chance you could let me know what happened to the stocks you recommended? Also, do you have an updated list of stocks trading on the
Index that are less than $5 today?
-- John Bisacca
: A few days after the market rebounded sharply from a spike low in October last year, I suggested that bulls with a taste for risk consider buying the lowest-priced, highest-beta, most-heavily shorted stocks in the S&P 500 Index. Collectively, the 14 stocks listed are up 163% since then vs. a 17.1% gain for the broad index. That includes a 100% decline in the value of
, which declared bankruptcy last month.
This strategy is really intended for episodes of extreme panic when the market has plunged and then begun to recover. If you believe that's the current condition, I've listed the current stocks that meet the criteria below.
Jon D. Markman is senior investment strategist and portfolio manager at Pinnacle Investment Advisors. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at
email@example.com. At the time of publication, his fund was neither long nor short any stock mentioned in this column, but positions can change at any time.