Investor
says Chinese stocks will win gold
Every pro football season, lighthearted business-page
articles appear about the Super Bowl Indicator -- the
theory that stock prices will rise in the year a team
from the old National Football League wins the Super Bowl
and fall if an American Football Conference team wins.
The Super Bowl Indicator has been correct 30 of the past
40 years.
Aaron Boesky, however, claims to have found an even better
sports-related stock market indicator based on the Summer
Olympic Games.
Boesky, a 31-year-old Michigan State University graduate
who runs two investment funds that specialize in Chinese
stocks -- and yes, he's related to Ivan Boesky, the infamous
New York financier of the go-go 1980s who went to prison
for insider trading -- studied the performance of stock
exchanges prior to all summer Olympics since the boycotted
Moscow games of 1980.
During the 18 months preceding the past six Olympics,
stock indexes in the host country rose smartly every time
-- 26% in 1984 (Los Angeles), 185% in 1988 (Seoul, South
Korea), 33% in 1992 (Barcelona, Spain), 45% in 1996 (Atlanta),
19% in 2000 (Sydney, Australia) and 32% in 2004 (Athens,
Greece).
Boesky, of course, points this out to infer that good
fortune will almost certainly befall investors in Chinese
stocks between now and the 2008 Olympics in Beijing. His
listener may take this inference with a dollop of skepticism,
but Boesky doesn't seem to.
"This Olympics is not in some backwater," Boesky
told me Monday during a chat at his grandfather Edward
Rosenberg's real estate office in Farmington Hills. "This
will be the biggest Olympics of our lifetime. ... It will
have double or triple the psychological impact of other
Olympics."
That's because China is emerging as a global economic
superpower. From an investment perspective, the Olympics
coincide with the opening of China's stock exchanges in
Shanghai and Shenzhen to foreign investors, which began
on a small scale in 2005 under the Qualified Foreign Institutional
Investor program. Boesky, who was raised in Huntington
Woods, studied Mandarin at Oakland University while working
at his grandfather's real estate firm after graduating
in 1997 from MSU's Eli Broad College of Business. He was
itching to do something on a grander scale and got hooked
on China by reading about it.
"I'd get up every morning and Google 'China' on
the computer, print out every news article that came up
and read them all by the end of the day."
He finally went to China in 2003, thinking he'd make
his mark in real estate development. "But everything
looked risky, too risky for a young man to risk everything
he's got," Boesky told me.
Then he met Chris Tang Wing-mui, a PriceWaterhouseCoopers
auditor whose uncle, a Chinese government official, told
him about plans to open the Chinese stock exchanges to
foreign investors. Boesky and Tang, along with Lewis Wan,
Tang's former boss at PWC, and Stuart Leckie, a former
chairman of Fidelity Investments Asia-Pacific, raised
$3 million to form Marco Polo Investments. Now they have
$40 million under management in two funds.
It's not an investment for the faint of heart. Marco
Polo's investors have done well, earning about 54% so
far this year for about 15 high net-worth clients of Pappas
Financial, said Keli A.K. Alo, the investment director
for private clients at Pappas, a broker-dealer in Farmington
Hills. But the Shanghai market as a whole has been relatively
flat in recent years, while stock exchanges in India and
South Korea have posted huge gains.
Asian markets have a history of breathtaking gains during
bull runs. Maybe the run-up to the 2008 Olympics will
trigger such a bull run in the Shanghai and Shenzhen markets.
Maybe not.
Wondering what Aaron's infamous cousin Ivan Boesky, who
was also a Detroit native, might predict?
Don't hold your breath waiting for an answer. As part
of his 1986 plea agreement, he was barred from giving
stock tips or otherwise working in the securities business
for life -- in addition to being fined $100 million and
serving two years in federal prison. Ivan Boesky, 69,
now lives in California.
Aaron Boesky never met his famous cousin until after
he graduated from MSU, closed his first real estate deal
and decided to call the family's financial genius for
an affirmation of sorts. "I was 21 or 22," Aaron
recalled. "I called him and said this is your cousin
Aaron, Bobby's son. He was very nice."
"Aside from his infamy," Aaron Boesky said,
"his legacy is very good." Ivan Boesky pioneered
the type of arbitrage trading that is common in hedge
funds today.
But -- and I promised Aaron Boesky I'd write this --
Aaron states that Ivan Boesky is not an investor or involved
in Marco Polo Investments in any way, shape or form.
They probably just talk sports and catch up on family
chatter when they get together.
