SINL

by Bill Baker, J.D.
Editor and Publisher, SINL

The big picture

The equity markets have been moving down on news that does not support a sustainable recovery of the world economy. On March 9, 2009, the Hang Seng index closed at 11,345 and on November 16, 2009, the Hang Seng closed at 22,944. On February 8, 2010, the Hang Seng closed at 19,550.89.

Right now, there is more bad news than good news and more reason to believe that equity markets will continue to fall. That being said, remember that markets climb a wall of worry. So, there is also the strong possibility that, in the near future, the constant drum beat of bad news will begin to fade into the background, there will not be a further serious decline in the equity markets (absent a shocking event) and equities could even start to move higher.

JRJC (China Finance Online); a Chinese financial information / service company.

Some JRJC positives include (but are not limited to):

A). The company has about $4.94 / share in cash. We all know that cash is king, so when a company trading at $7.16 has about $4.94 in cash per share that's a real plus.

B). The stock is optionable. I rarely consider buying any stock that is not optionable because I like to have the ability to hedge downside risk as much as possible. Especially in today's markets, you need to have a way to hedge downside risk if you want to own sotck.

C). There is always a demand for financial information and services. As information delivery technologies become more sophisticated, the companies best able to bring their services to these new technologies will experience the greatest growth.

D). China Finance Online is well diversified in the financial information and services sector.

Some of JRJC negatives include (but are not limited to):

A). JRJC competes in a very competitive sector where change is a constant while new technologies and competitiors are always popping up.

B). Monetizing a financial information and service business is extremely difficult.

A few questions:

a). One of the biggest questions about the future growth of this company is whether or not China's explosive economic growth will translate into explosive growth in the number of Chinese investors needing and using the service offered by China Finance Online?

b). Is China Finance Online a buyout candidate? If so, who would want to buy this company and what price would they be offering?

c). Is there any potential for interaction with the Chinese government that could positively or negatively affect the price of China Finance Online? What are the probabilities of these possible interactions?