Tiger Woman on Wall Stree
Read Tiger Woman on Wall Stree Online
Authors: Junheng Li
Tags: #Biography & Autobiography, #Nonfiction, #Retail
Copyright © 2014 by Junheng Li. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher.
ISBN: 978-0-07-181844-5
MHID: 0-07-181844-8
The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-181842-1, MHID: 0-07-181842-1.
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This book is dedicated to my father, who gave me a strong mind;
to my mother, who taught me perseverance;
and to my grandmother, who exemplified resilience.
It is also dedicated to Middlebury College,
for teaching me that life is an art, not a science.
8 * Learning, Burning, and Crashing
9 * The Red Party: Instant Alpha
10 * The New Chinese Reality Check
12 * The Human Cost of the Economic Miracle
14 * The Power of Investigative Research
15 * What Keeps Me Awake at Night
16 * From Shanghai to New York and Back Again
Note to Investors: Do Your Homework
The opinions, analyses, and comments in this book are my own personal views based on my experience and research from public sources that I believe to be accurate and reliable.
For the companies I analyze, my team and I spend a tremendous amount of time collecting intelligence on their businesses by, among other things, online data mining and tracking and on-site customer surveys and reviews. To analyze the raw data collected, my team and I employ proprietary technologies and methodologies, which I believe give me a unique insight into the performance and prospects of the companies I review.
I hope that what I have written will provide my readers greater insight into and a better understanding of investing, especially in China, but readers should not take what I write as investment advice—they should do their own independent research or consult with their own investment advisors before making any investment or trading decisions in the United States, China, or anywhere else.
I have based this book on my recollections of my life and my work. Some names and identifying characteristics of companies and individuals have been changed. All conversations are based upon my best recollections and should not be taken as verbatim transcriptions.
W
HEN
I
WALK INTO ANY BUSINESS GATHERING
, I
AM AWARE
that all eyes are on me. I don’t say this to be vain. As a Chinese woman living and working in the financial capital of the world, I know that my presence provokes conversation. People want to know my opinion on China’s economic surge. They are curious about my journey from Shanghai to New York. They often ask if I was raised by a tiger mother and where I stand on the tiger parent controversy. They are endlessly curious about China and the Chinese ways of business and life and what I think of them.
I was born and raised in Shanghai, the commercial and financial center of mainland China. My childhood and adolescence mirrored the rise of capitalist China in the 1980s and 1990s. My parents, like everyone else in their generation, were survivors of the Cultural Revolution, the starkest period in modern Chinese history. That movement left a burn on the nation’s psyche, the impact of which is still felt today and will be felt by many generations to come.
I had what Western critics would call a brutal upbringing, raised with strict discipline and harsh consequences. My father’s tiger-on-steroids parenting style neither broke nor made me, but I do carry the memories into my adult life.
Somewhere between the Hollywood movies my father and I watched together and the Voice of America radio broadcasts we listened to together, I latched onto the American concepts of individualism, freedom, and diversity. My thirst for an American life drove me to pursue an American education. I accepted an offer for a four-year scholarship to Middlebury College in Vermont in 1996. At Middlebury I encountered a universal code of ethics for the first time in my life, and it has proved to be an important principle in my career in finance—especially where Chinese investments are involved.
My experience at Middlebury was also the first time I was exposed to the concept of an idea-based rather than a knowledge-based education. I was challenged to think and not just memorize—to recognize the
how
, not just the
what
. Study took place in collaboration, not isolation. I began to recognize on a deeper level something I never could in China: American values are not based on clichés of freedom and individuality, but rather on the importance of independent thinking, the courage to question the norm, and the belief in universal ethics.
At Middlebury, I became an avid student of the market economy. My endless curiosity about and passion for economics were both philosophical and personal. My study of economics has helped to cultivate a critical mind and a precise logic to understand how the world works—not just regarding monetary exchange, but also the role of government and citizenry in an increasingly global world.
* * *
In 2000, I graduated summa cum laude in economics, and I accepted one of the job offers I got: to work as an investment
banking analyst at Credit Suisse First Boston in its New York office. A year later, I was recruited to join Franklin Templeton Fiduciary to help launch an international small- to mid-cap fund focusing on developed markets in Asia. In 2002, I enrolled at Columbia Business School to get my MBA.
Soon after Columbia, I joined Aurarian Capital Management, a long- and short-equity hedge fund known for its investigative research into under-covered and under-researched companies. I focused on the technology, medical device, and renewable energy industries globally, and I worked my heart out to become an expert on a myriad of complex and controversial investment subjects.
At Aurarian, I learned over and over again that an investment can be profitable if and only if the marketplace misunderstands and misprices part or all of the company’s businesses. A stock analyst’s job is to explore and develop variant views from the marketplace. If there are no variant views, the stock is considered fully priced and therefore is not interesting for investors seeking alpha, an above-the-market return.
While working on U.S. stocks first, I started to witness waves of Chinese companies raising capital in the United States. As I followed a group of listings closely, I noticed a lack of skepticism toward Chinese companies on and off Wall Street—in corporate America, among the general public, and among the mass media around the world. As the unchecked enthusiasm for Chinese stocks gained momentum, I saw a bubble forming and inflating.
The process of the bubble forming, and later bursting, is a result of classic push-and-pull dynamics: if there is a buyer, there is a seller. Greedy and lazy investors play off immature companies that have questionable ethics and practices, whose stocks are pushed out to the market by private equity investors, packaged by bankers, and cross-checked by auditors, accountants, attorneys, and other institutional managers. Most of these players are American-born.
* * *
The world’s general lack of cynicism about China got me excited. I launched JL Warren, an independent research firm, in 2009 to plug the gap between the corporate and commercial reality in China and curious investors in America, leveraging my combination of a Chinese background and Wall Street experience.
The idea of an independent research firm came from years of observation that traditional sell-side research is inadequate for serious investors who invest heavily in China. Despite the theoretical presence of a Chinese wall, sell-side research continues to serve the banks’ underwriting and advisory businesses. The desire to preserve existing relationships and develop new ones in the investment banking area creates an inevitable bias in a bank’s research products that institutional investors can hardly rely on for investment purposes. Analysts are constrained from candidly expressing their views.
The need for unbiased research is even greater in the field of China-focused research as China’s importance in the global economy has surged.