China to Benefit from Crimean Crisis. Bear Case Scenario for Western Economies $DJX, $SPX, $SPY, $XLF, $BIK, $OIL, $GAZ, $FXI, $EWH

The west will continue to isolate Russia. This means reducing purchases of Russian energy and other commodities. Russia will of course become desperate for foreign reserves. The ruble does not buy that much.

China is sitting on top of a very large amount of US Dollars and other hard currencies as well. They clearly need commodities and will do business with the Russians after extorting some excellent pricing. Continuing on this diabolical thread the Chinese will only be too happy to supply Russia with goods that Russia can no longer import. All at a substantial mark up.

If its good enough for Wal-Mart it probably will be welcomed in many parts of Russia. What China cannot manufacture they will import and sell to Russia.

So commodities exporters may find some unusual competition that they cannot match. Also China after decimating western manufacturing with cheap labour will market to Russia. If production bottlenecks develop the Chinese will increase prices to the west and suck more hard currency out.

China will also benefit from cheap Russian oil and gas. A cost advantage that western economies will not have. This will be a strategic advantage.

George Gutowski writes from a caveat emptor perspective.

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Bear Case Scenario Hollysys Automation $HOLI, $GE, $UTX, $MMM, $ABLZF

Hollysys Automation (Nasdaq:HOLI) is about to reveal earnings. Ponder this Bear Case Scenario

Hollysys does not trumpet any sales outside of China. Given china’s propensity to export and generate foreign exchange this may be a comment of their inability to compete globally. Their customers are all based in China. Corporate communication does not mention their ability to compete against established global giants with proven technology.

R&D spend is anemic when compared to the resources of global competitors. They have not come out with proprietary products which may suggest they spend time copying.

While debt is being paid down it is difficult to not notice that non current assets are rising dramatically and accounts receivable are also growing. will they be caught in a China liquidity storm.

China exposure may be viewed by some as a major negative.

George Gutowski writes from a caveat emptor perspective.

Google still does not know where the chop sticks are. Is that Bullish or Achilles Heel $GOOG, $FB, TWTR, $BIDU, $YHOO

Google (Nasdaq:GOOG) is surging, charging and bulling; creating a lot of excitement. Longs and Bulls are making money. Today. Just remember while you guzzle victory’s champagne. Google still does not have China figured out. They still have not recovered  from what Beijing views as intransigence.

If they cannot establish a large foot print in China they will be missing a critical piece which others will capture. Global scale means global as in planet earth. Global does not exclude China. If Google can skate that one on side than $2,000 a share will be cheap.

Google does not know where the chop sticks are.

George Gutowski writes from a caveat emptor perspective.

US Steel Gambles Shareholder Equity with High Risk Interest Rate Strategy. $X $SLX

US Steel (NYSE:X) is attracting a lot of long players because of its high level of short sales. Short sales are bullish because they ultimately have to be covered. At 28.46% that’s a lot of short covering coming up. Also the Canadian labour Union has come to its senses and is reporting back to work. The Canadian mill is very efficient and will create better margins.

Here is the snake that can will bite. US Steel needs steel prices to go up. So if you’re not an economist that means demand is stronger than supply. US Steel needs this and one day it will be true. That’s why steel is cyclical.

In the meantime US Steel has approximately $4 Billion of debt which they must roll over. They do not have the cash flow to seriously knock it down. This debt is the beginnings of malignant cancer. For every one percent (1%) pop in the interest rate they will pay $40 million more per annum. If you believe rates will rise and bonds will fall then US Steel will be caught.

Steel prices have to go up more quickly than interest rates. That’s one hell of a high risk business plan best executed in complex hedging strategies not by running a steel fabricator. When one commodity must go up faster than another you have no control over operations and returns.

So the shorts must eventually be covered. But watch interest rates. There will be some serious bumps on the road which will allow the shorts to cover rather nicely.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Syria Will Cause Commodities Deflation Read How $VXX $VIX $GLD $JJC $JJM $JJN $JJT $JJU $FOIL

Connect these dots. Syria gets punched in the nose, hard real hard. Iran comes on the scene and gets kicked in the balls with no remorse. Iran stops sending oil to China. China shakes, shimmies and weaves about. In the mean time as China slows down they reduce demand for commodities. Copper, Tin, Nickel, Aluminum and a host of other commodities stay in the ground. Commodity prices fall hard and splatter.

If China is smart they will try to buy the miners at depressed prices. They will deal directly with cash impoverished host countries who will see their royalty revenues drop dramatically. Mines will be reverse purchased allowing mining companies an exit from poorly producing properties.

Connect the dots.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

War with Syria-China Damages $VXX $VIX $DJX $SPX $FXI $EWH $OIL $GLD

War with Syria is almost a safe bet. Syria’s sponsor and pay master will not stand by idly and watch the Alawite’s lose control. They cannot go to other clients and ignore losses in Syria without putting up a fight.

While Iran will be nasty it will not ultimately destroy the US. Iran’s best bet will be a shadowy terrorist war trying to hurt America. But how to bring Iran to its knees. It takes money to be a terrorist. That means oil sales. Much Iranian crude goes to China. By boat through the Straits of Singapore.

The sudden disruption of oil supplies will disrupt the Chinese economy. Plants will shut or reduce. Public energy consumption will be curtailed. Brownouts and long line ups at the gas pumps. It will pay to be a member of the communist party just for the gas privileges.

Reduce China exposure or if you are brave enough short. In the meantime China will be throwing around its huge reserves of western currency especially the US Dollar buying up whatever oil it can get its hands on.

Watch for selective destruction of Iran’s oil infrastructure. Opportunistic. Much of the infrastructure is old and crumbling. Destroy enough to cripple the Mullahs and spark an overthrow. Then bring in Western Oil Technology and bring everything up to date. About a year for the round trip.

In the meantime China takes it on the nose so sorry. Globalism is a double-edged sword.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Jim Rogers did what with smallcap Fab Universal. Watch Black Swan. $FU $GOOG $YHOO $FB $AMZN $NFLX

Fab Universal (NYSE:FAB) announced that the very famous investor Jim Rogers long beloved by Financial TV has joined the Board of Directors. Fab is a small cap trading under $5. They are in the digital media space in China and creating lots of cash flow. So why would Jim Rogers accept a seat on the Board. He is rich and another buck may not be as exciting as it used to be. If he truly believes in the potential and no one doubts his integrity why not just buy a lot of shares, let the market know you are long and wait to cash in.

The Chinese market is seductive and enigmatic. Digital is a real play for the future. Jim Rogers is long recognized as an astute commodities investor and China is a huge commodities buyer. So he gets into China with a digital play. Google (Nasdaq:GOOG) has difficulties in China. Yahoo (Nasdaq:YHOO) has stubbed its toe in China and is still not sure if it was cheated outright or just diddled a little in the back seat of puppy love. But someone with deep pocketed books will most likely appreciate all the heavy lifting that`s been done and open up the cheque book. Amazon (Nasdaq:AMZN) Netflix (Nasdaq:NFLX) Facebook (Nasdaq:FB) are all looking for big bold plays and think nothing of billion dollar acquisitions. So on a current market cap of $72 million the numbers will work out rather well.

The communist party is still totalitarian if it got pushed strongly enough. But the China market is huge and enticing.

Fab Universal is still readily unknown. The Wall Street Journal at time of writing still says no news on Fab for the past two years. So this is what I think Jim Rogers is up to as he swings for the fences.

Buy in and arrange some preferably financing.

Expand services and get yourself on the map. Annual revenues are just in the tens of millions. With a compelling product and enough working capital the China market can be very kind to shareholders.

So as you are expanding and growing and creating cash flow and profits you will attract the attention of the big dogs who will want to buy a growing concern in the China Market. That’s when the take-over offer is made at huge multiples and Jim Rogers cashes in yet again. So far so good. I can just see investors hit the buy button very hard.

Oh look here comes the Black Swan. We may have to wring its neck. The China market is not a private property driven liberal democracy with enshrined rights of ownership. They play by their rules which they make up as time goes on. Fab Universal will need to keep the Chinese political and economic power élite engaged, warm and fuzzy. If Beijing decides it wants to crown another king it will do so. The Chinese consumer will be switched over to other choices and forget about Fab.

The risk is political. We are speaking about media which politicians will watch over carefully. If Jim Rogers understands the China Market he needs to ensure the political factors are well ties down and stay in favourable trends as time goes on.

George Gutowski writes from a caveat emptor perspective.