This is part of a growing trend of Chinese compani

first_img This is part of a growing trend of Chinese companies taking over US companies. The Washington Post reports that Chinese firms have bought $46 billion worth of US companies since 2000. For now, SmithField Foods is the largest US company taken over by the Chinese. Smithfield is the world’s largest pork producer. Shuanghui International bought it for $7 billion in 2013. Tsinghua Unigroup Ltd. is a microchip company owned by the Chinese government. It just made an offer to buy Idaho-based Micron Technology (MU) for $23 billion. From The Wall Street Journal: The bid reflects a widening push by the Chinese government to build more domestic sources of semiconductors, which are crucial to consumer products like smartphones as well as equipment used for defense purposes. China is particularly weak in memory chips, having developed none of the key technology needed for the data-storing components. “They have decided that they really have to buy somebody because they can’t deliver the intellectual property themselves,” said Handel Jones, who is president of the Silicon Valley consultancy International Business Strategies and has written books on China’s high-tech policy. Micron is a huge company. It’s the world’s fourth-largest semiconductor maker by sales. If the deal goes through, it would be China’s largest acquisition of a US company in history. But CNBC reports that the US government might shut down the deal for security reasons… “I think it’s highly unlikely the Justice Department would allow this,” said Timothy Arcuri, an analyst at Cowen. “DRAM [the type of memory chip that Micron makes] is in a lot of security-related applications. It’s in defense-related stuff. It’s in enterprise server applications that are storing very sensitive information. Also, [Micron is] the last remaining domestic DRAM producer.” Even if regulators OK the deal, China will probably have to increase its bid. Its $23 billion offer equals about $21/share. That’s about 20% higher than Micron’s stock price before the announcement. But it’s way below where Micron stock was just a few months ago, as this chart shows… – World’s Most Valuable Tech Companies for 21-Cents? One of the easiest ways in the world to get rich is to be an “insider” and own stock BEFORE a company goes public. Now you can, without stock options. Recently, we’ve found a way to play some of Silicon Valley’s top private tech companies for on average 21 cents each. Click here to see how you could do with them. The Real Reason Obama Wants a Digital Dollar If Obama can convince America to adopt a digital dollar he might just get away with the most… (Read More)center_img Recommended Links — •  More from China… This morning, China reported that its economy grew 7% in the second quarter. It was a pleasant surprise. Analysts expected just 6.8% growth. For comparison, the US economy grew just 2.4% in 2014. Regular readers know we’ve been following the Chinese stock market’s wild ride. After surging 152% in one year, Chinese stocks crashed 28% in just four weeks. It might seem odd that Chinese stocks are crashing when China’s economy is growing strong. Ray Dalio has a good explanation. Dalio runs Bridgewater Associates, the world’s largest hedge fund. He’s one of the best investors of all time. Here’s Dalio: A lot of people think that the direction of a stock market is indicative of the direction of an economy. That is because a) the prices of stocks normally reflect the conditions of the companies, and the mix of stocks reflects the economy; and b) changes in stock prices have a wealth effect that affects economic activity… …that is much less true for China than for other countries. That’s because 1) the liberalization of the financial system and all that is going on is not connected to the growth rate and normal economic linkages, and 2) the complexion of stocks is not representative of the economy. As a result, China can have a bull market or a bear market at the same time it has the opposite behavior in its economy. So don’t bet on those linkages. Dalio’s point is important. China’s economy and its stock market are two totally different things. China’s economy has more than doubled since 2008. But the Shanghai stock index has declined 28% in the same time period. The takeaway? If you’re investing in Chinese stocks, ignore the Chinese economy. •  Iran Just Struck a Deal… Last week, we told you Iran was negotiating with six countries to reform its nuclear program. The two sides reached a deal on Tuesday. According to The Guardian, Iran agreed to “dismantle most of its nuclear infrastructure.” It will also reduce its nuclear fuel stockpile by 96%. Iran is trying to prove to the US and its allies that it won’t build a nuclear bomb. Congress now has 60 days to approve the deal. If it goes through, the US and its allies will end sanctions against Iran. That would let Iran sell oil to the West again. The European Union has banned its members from buying oil from Iran since 2012. As we’ve explained, Iran could ramp up to produce 1.1 million more barrels of oil per day when the sanctions end. The increase in supply could put pressure on oil prices. The price of oil barely moved when news of the deal broke. But it’s down 8% in the last month, and down 46% since June 2014. •  The Iran deal isn’t just about oil… It should also open up Iran to US investors. Right now, sanctions don’t allow US citizens to invest in Iran. Iran has its own stock market. According to CNBC, the Tehran Stock Exchange includes 300 public companies worth over $160 billion dollars. Nick Giambruno, editor of Crisis Speculator, has been preparing for this. He believes the opening of Iran’s market to Americans is an opportunity “on a scale the world hasn’t seen since the opening of China.” And Nick is one of few analysts who have actually been to Iran. Here’s Nick: Hands down, Iran is the most fascinating country I’ve ever been to. I’ve been to almost every country in the Middle East. Iran stands out for a number of reasons. Unlike most other states in the Middle East, Persia is not an artificial construct. By race, religion, and social history, it is a nation. And European bureaucrats didn’t dream up Iran by drawing zig-zags on a map. The map reflects the geographic reality of a country with natural, fortress-like, mountain borders. For an American, getting there isn’t easy. But that’s part of the allure. You can’t simply hop on a flight to Tehran from New York, like you would to Vancouver or London. You can’t enter the country unless the Iranian government has granted you permission in advance. And they take their careful time… You can read about Nick’s trip to Iran for free by clicking here.last_img

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