A Trail of Two Cities

With a large portion of the world's population focused on the Olympic events in the political entity called China, I have remembered a bit of research I performed, comparing two companies named SAIC and their respective headquarters, one near San Diego, California, USA, (a little jewel called La Jolla) and one in Shanghai [上海市], China.

When one looks to invest in companies, what is the interest? Personal? Economic? Strategic? When I examined the two SAICs, Science Applications International Corporation and Shanghai Automotive Industry Corporation, I wanted to see what these Pacific Coast bodies did to promote a stronger, more prosperous, conscientious society.

Stock price history...well, you can get that just about anywhere. In any case, if you look, you'll see the two companies have quite a different stock history over the past two years. The one in America has maintained a rather steady price, giving one the impression this is a company that can survive a recession well but won't create instant millionaires in times of economic booms -- very easily a company I'd consider should these recessionary times carry on. The one based near the Yangtze River Delta has demonstrated that good economic times mean a good ride on a Chinese automotive manufacturer -- now that the fun two-year ride has coasted to the bottom of a hill, one can wonder, "Should I jump back on and follow the trail back to the thrill hill of higher stock prices as the economy kicks into gear in the near future?"

Can you predict the future? I shy away from predictions, myself. Instead, I close my eyes (putting on imaginary blinders, if you will), hold out my two hands, with a record of the recent past in one hand (going back only to the late 1950s because the major world wars and their causes/aftermath are irregular, misleading economic indicators in my assessment) and a semi-scientific projection of the next 50 years in the other hand. If the two feel balanced, then I can comfortably agree with the saying, "Those who study history know that the price of eggs in China does have something to do with it." [Whatever "it" is is up to interpretation, as any student of American presidential testimony about two-letter words can attest.]

Therefore, my reenactment of blind justice in determining the fate of my investment in stocks can only tell me what the future price of stocks will hold. In other words, if I was a bear, I'd sell some worthless stock, buy SAI and hold it for a year or so to shelter myself from the turbulent market of the coming months. If I was bullish, I'd buy 600104.SS and hold it for two years, when the economy will have boomed a bit again.

But I have my wits about me. I have the future of my extended family to consider. These companies, although both involved in the design and manufacture of goods and services, have more going on than just bolts, screws and sheet metal.

On a personal note, last year I interviewed for a job with Microsoft to run their Microsoft Home Server test lab in Shanghai (thank you, thank you -- okay, that's enough applause; oh, that was the toilet flushing, my dear, not applause? Sorry, my mistake). As I made my way through the various interviews, violence in China was rising. Bad snow storms were blocking millions of Chinese from taking a holiday and hostilities toward foreigners rose up in Shanghai. I had worked with many expats who spent half the year working in Shanghai and they agreed that Shanghai's status as one of the world's largest cities, if not the largest, did mean that crowded conditions forced one to spend time in the parts of the city where you worked. But hey, don't most of us spend the majority of our waking hours near our workplace? My Shanghai worker friends also noted that hostility could be an issue, if you made too big of a deal about your foreigner status. Then again, have you ever attended a rugby or football game wearing the opponent's jersey? As a character in Monty Python and the Holy Grail noted, "Now we see the violence inherent in the system." Mob mentality has not changed -- you can get the same reading of large groups of people in Gustave Le Bon's 1896 treatise, "The Crowd." Also, many years ago I interviewed for a job with the U.S.-based SAIC and have visited its headquarters. I tell you all this so you understand my interest in comparing the two SAICs.

Bottom line: what can I tell you to help you decide which stock is worth making your life better in the long run? Look at the smog in Beijing during the Olympian broadcasts for the next couple of weeks. Shanghai Automotive, a member of the Fortune Global 500, helped create that smog putting a lot of cars and trucks on the road while giving gainful employment to bright, enthusiastic workers. Meanwhile, Science Applications, a Fortune 500 company, serves the interest of a lot of government agencies while giving gainful employment to bright, enthusiastic workers. Which do you think is better (or worse)? There is no right answer. Admittedly, it's a tough decision. As some wikipedia author stated, this is an antilogy. Now you can see why I prefer to make my decisions in the dark. My nieces and nephews will have to decide if the world is a better place as they divide up my stacks of money amongst themselves. I'm guessing they won't really care where the money came from, even if I leave these crumbs of blog entries that mark the trail. But for those of you who I bump into on this trail, you may like to know where I found the bags of gold slung over the back of my mule. Good luck prospecting!