Should I buy Alibaba stock today?


#1

Alibaba seems to have grown in hype in the past few years…

It seems like a killer stock and I was thinking of getting on board…what do people think?


#2

I have been interested in Alibaba for quite some time…but not because I want to buy it!

At the moment, China looks incredibly dicey. Private debt is absolutely soaring that there is striking resemblance between the credit bubble disasters of the noughties and china’s credit explosion.

A graph like this will tell you exactly when things are going to have a crash. However, I do know that the fundamentals do not look great.

Not only is China being pumped with debt, the actual performance of those loans are is very questionable. According to a recent McKinsey report:

http://www.scmp.com/news/china/economy/article/2119504/one-three-chinese-banks-failing-create-economic-value-consulting, one in three Chinese loans do not deliver economic value.

What is the connection with Alibaba? Alibaba has launched a flurry of products in the last ten years to “drive innovation for the future”, at least according to Jack Ma. These companies which include Taobao, AliPay and Ant Financial have very complicated structures which are closely inter-linked with each other, often in peculiar ways. And these connections are unregulated.

To quote, Wei Jiang of Columbia University:

The thing that unnerves me about Alibaba is a product it launched recently through Ant Financial called Yuebao, or “buried treasure” in Chinese. Since it was launched in 2013, Yuebao has grown in to the world’s largest money market with assets of about $165 billion invested in different forms of corporate debt.

The issue here is that global debt has already reached 325% of gdp and the majority of this new debt is chinese:

https://www.reuters.com/article/us-global-debt-iif/total-global-debt-tops-325-pct-of-gdp-as-government-debt-jumps-iif-idUSKBN14O1PQ.

The debt that Yuebao is investing in is more than likely that of chiense banks, or closely related to it.
I am not not alone in thinking this:

Yuebao banking is done outside of regulations: There are no capital requirements or deposit insurance so if something happens, there could be severe social consequences.

So, if Yuebao is selling money market funds secured against banks which are incredibly frothy, Alibaba is dancing on a volcano.


#3

No, I don’t think so :grin:


#4

Not related to Alibaba, but those figures on China look pretty terrifying…

And its also fair to say, that the debt is probably in excess of that.

That is just the amount of debt the Chinese communist party wants us to think is there!


#5

Yes, I agree.

The question is…

is it a danger, or an opportunity?


#6

I remember reading that JD.com has very similar financial concerns, where there is overlap between their “fintech” business and their regular e-commerce company…

If memory serves correctly, both Alibaba and JD.com are both offering young chinese “fintech” wealth management products, which are essentially bank deposits in money market funds…

Personally, I will be giving Alibaba a miss for the moment…


#7

Here is something I found mentioning the inherent risks in investing in Yuebao…

A recent report by Fitch Ratings compared the performance of Yue Bao with JP Morgans Government Bonds Fund.

Iit found that Yuebao was incredibly risky compared to JP Morgan’s Fund on almost every level…

• Credi Quality

• Concetration

• Liquidity

• Regulatory Risk

Yue Bao has an unbelievable 325 million investors. If they decide that things are getting spicy, they are going to move like a herd…

Buyer beware!


#8

Interesting article in alibaba’s strategy…