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Baidu, Inc. Message Board

  • hmmm26 hmmm26 Oct 7, 2011 10:54 AM Flag

    Chinese Currency Bill and How We Might Profit

    Would passage of the Chinese Currency Bill cause BIDU to go up or down? The data from yesterday seems inconclusive to me.

    Yesterday morning the only news item was politico's one sentence article quoting Sen. McConnell that the bill wouldn't pass. Since Bidu rallied at the bell my initial assumption was that the market was regarding defeat of the bill as a 'good' thing for Bidu (long position). However, McConnell's fillibuster was defeated around noon and on that news Bidu seemed to rally even higher, so my current best guess is that passage, not defeat, of the bill is being viewed as a 'good' thing for Bidu.

    Here's my guess as to the market's reasoning, which I admit might not be correct: since the declared intent of the bill is to force China to strengthen the value of the yuan vs. the dollar, let's take a hypothetical 10% increase, then every company that collects its revenues in yuan, including bidu, would instantly get (in this hypothetical) a 10% jump in all earnings/revenue numbers, AS REPORTED IN DOLLARS. Basically, Bidu would capture an increase in its revenues/earnings due to a favorable currency rate fluctuation without having to actually bring in more yuan.

    Obviously, there's profit potential here if we can figure out whether the market likes or hates the currency bill, as it will get several opportunities to react to news of the bill as it proceeds through the legislative process. If we can figure out what the market's reaction to good/bad news will be, then maybe we can get in early and ride some one day momentum plays up or down. I'm generally a buy and hold, long term investor, so day trading's not my strength, but cash is cash.

    The bill was postponed in the Senate last night, so among the possible announcements/actions pertaining to the bill's chance of success for Bidu and all other yuan revenue, US listed stocks are: scheduling of Senate vote/outcome of same, assuming passage in Senate (very likely), the attitude of Boehner in the House, then the House committee schedule of vote/outcome of same, scheduling of vote for full House/outcome of same, President's comments at any point, Presidential intent to sign or veto, and surely some others that I haven't thought of yet.

    This isn't just an exercise in vanity or cheerleading; I believe there may be real profit potential here. In previous, analogous situations I've made decent profits trading potentially affected companies vs. pending federal legislation (which is always deliciously complicated with many steps and esoteric parliamentary rules). Anyway, thanks for your time and thanks in advance for your comments. Good luck and great profits to you all.

160.88-0.52(-0.32%)Jul 22 4:00 PMEDT