Excess Capacity in China

A.G. Edwards is warning that excess capacity in China is becoming a serious issue.

Determining the proper level of production is a difficult task in a capitalist economy driven by profits, it is an almost impossible task in a communist / socialist system where decision making is driven by politics instead of economic reality.

"So far, it looks as though these problems of excess capacity are limited to just a few sectors of the Chinese economy. However, if slower activity in those sectors puts a chill on their suppliers and workers, it could develop into a broader hard landing for the Chinese economy. In that case, China's excess capacity problem could have negative impacts even beyond China. For example, excess capacity could tempt Chinese producers to unload their goods at fire-sale prices on the world market. That could have the positive impact of reducing global inflationary pressures, but it could also sharpen current trade disputes and encourage further protectionist moves in the U.S., Europe and beyond."

Timothy Burger
timothyb(at)timothyburger.com

KU APM Portfolio Over $1 Million

Last week the KU Applied Portfolio Management Portfolio, managed by a class of KU finance students, hit the $1 million mark. The portfolio briefly crossed the $1 million mark this summer, before slipping below the mark in August.

The portfolio was founded with a $250,000 donation from KU alum Kent McCarthy in 1993, since then the portfolio has performed well, including a 12.9% return during 2005.

Timothy Burger
timothyb(at)timothyburger.com

KU Buffett Presentation in the Wall Street Journal

In case you missed it, the Wall Street Journal had an article about KU's presentation to Warren Buffett this Saturday. You can read the article here.

Timothy Burger
timothyb(at)timothyburger.com

KU Presents to Buffett, and the CFA Level 1 Exam

KU Students Present to Warren Buffett

Friday afternoon a group of about 100 KU Business students had the opportunity to join Warren Buffett for a question and answer session in Omaha. The 90-minute Q&A went very well, with Buffett in fine form, including some interesting discussion of Ben Graham's life and development as an investor that I had never heard before.

Two groups of students from Mark Hirschey's Security Analysis class then presented two investment ideas for Buffett. The ideas were the result of a semester of research and competition from the 45 students in Hirschey's class.

In the end, the students presented two investment ideas, Schwan's Food and Pella Windows. While the students produced lengthy reports explaining the investment thesis behind each company, they chose to present them in creative and compelling humorous skits. Buffett loved the skits and at the end told the students that their presentations will be the standard by which he measures future presentations and that:

"I will definitely follow through on these ideas,"” Buffett said after the meeting... "I will follow up (and read the reports), and I will follow that up with a personal phone call to both companies — especially (Schwan)."

CFA in Chicago

I also joined five other KU Finance students, and about 900 of our closest friends in taking the first level of the CFA exam on Saturday.

As I expected, the test was long (six hours) and tough (only 34% of all test takers pass the test). You know a test is really a tough test when out of 900 normally cocky finance students and practitioners, you don't hear anyone talking about how easy it was or how they feel like they really nailed it.

Goood luck to everyone who took the test on Saturday, we have six weeks until we get results.

Timothy Burger
timothyb(at)timothyburger.com