This is tom nash and in this video. I'm going to explain to you you exactly what's going on right now with chinese companies specifically alibaba with renewed listing fears. Now first of all i have to explain something to you there's really an oligopoly in the whole accounting. Scene there's only four companies that i actually.

Control i would guess. 999 of the public companies accounting auditing practice kpmg ey pwc and deloitte and there's others. But mainly if you're a public company listed on the us stock exchange. Most likely you're using one of these four.

And it's kind of a given now there used to be five. One more called arthur anderson that company went down with enron that's a whole different story might be a video in itself comment below. If you want to hear about that how it used to be the big five actually arthur anderson used to be the biggest. But now we're back to the big four now.

I actually specifically work for one of these big four companies for a long time. So know how things work and just to explain something to you i didn't actually audit financials. I actually worked for another department that did transactional services due diligence tax planning stuff like that. But i know how these things work and the way they work is very very simple the accountants that audit your financials are operating based on representations so basically when you are giving your data to the auditors.

The auditors do not go and re verify every single number bank statement and whatnot and the underlying numbers. You're providing. They're basically saying if the numbers you gave me are correct the way you. Present these based on gaap or us.

Gaap or ifrs whatever that may be is accurate unless. The accountants or the auditors. In this case have a suspicion they're not going to look into the underlying numbers to check. If there's actually any fraud and a lot of fraud cases got exposed and a lot of accountants and auditors never really caught them usually the ones who catch them is somebody else because this isn't really what auditors do now mainly mainly mainly here's the big problem with auditors.

There's this kind of weird relationship between auditors and companies on the one hand the company is a client on the other hand. The fiduciary duty of an auditor is not to its client. But rather to the truth. So it's a weird hybrid relationship.

Where somebody's paying you money. But essentially you're saying. Hey. I don't owe nothing to you.

It's a very problematic relationship. Let's put it this way. But the reason. I'm saying to you this whole spiel rant whatever the hell you want to call.

It is because there's only five words in the english language that actually terrified the out of chinese companies the public company accounting oversight board now these they look in into the underlying numbers they verify they're the sheriff. They're the ones who look into this and make sure. There's no fufuing going on no monkey business. No they'll come in and they'll check and if you actually are listed on the us stock exchange and you're reporting on us.

Gaap you are being supervised by the pcaob what have you done for me hey no intro. But all that is true unless you're a chinese company because chinese companies refuse systematically to get audited and to get regulated by the pcaob why i don't know. But here's the crazy part up until just a few years. Ago the us.

Regulators pretty much said okay now finally the sec came out and said hey guys you have three years to comply with this if you're not gonna show us your books. And you're not gonna let us review and regulate what the hell you're putting in there we're just not gonna let you stay on our us. Stock exchanges you can go home and you got three years now this is basically what's driving alibaba down. Because the sec came out and basically said hey we're adding alibaba to the list of companies that are basically candidates for the listing.

Now here's the thing and i want to be very clear about this. Ask yourself this question. Imagine you have two options option. Number one let somebody verify.

There's no accounting fraud in your company. Option. Number. Two do not allow that disagree and get the listed why would you agree to get the listed.

If there's no accounting fraud in your documentation. And reporting. I mean the principle alone isn't worth that right think about the amount of damage the amount of carnage these companies will go through if they actually get delisted. But if they have nothing to hide or nothing to fear.

Why would they agree to get shellac like that for me this doesn't add up. However it seems that there's others who tend to disagree. So i pulled up this seeking. Alpha article for you alibaba.

The listing theories are back time. To turn bullish. Again from jail research. So this is from seeking alpha let's read.

The article. So summary alibaba was struck by the listing fears again on july 29th. As the ussc. Added.

China's leading e commerce. Players to its the listing list as a result. Baba slumped. However check this this mother lover says.

We urge investors not to overreact to such fears. Alibaba is seeking a primary listing in hong kong. That would enable it to access capital and liquidity from chinese investors. So basically what this guy is saying.

Hey so this company is about to get the listed because they're not willing to show their financials to somebody who will actually look into them but don't worry they're gonna list somewhere else where there's no such regulation. Which is hong kong. Which is pretty much dominated and owned by china at this point. So imagine that how in what world forget how in what world does this make sense to you to say.

Well you know i feel good about this company you know it's it's not allowing anybody to review that there's no accounting fraud. There. But i feel good because they can find elsewhere where it's not going to be enforced is this bizarre world what's going on i mean come on now look at this we also believe that the recent statements by. Politburo which suggests that the china could miss its 55.

Gdp growth target could have unsettled some investors now mind you that you know it's a known thing in the industry. The gdp numbers out of china are primarily based on their property market. Which is pretty much a ponzi scheme. There's no two ways about it the greater full theory makes it look like like it's a complete like operation.

There's apartments in ghost cities. That basically gets sold for more and more profit. And this bubble is basically driving this whole gdp numbers up so the whole chinese gdp numbers from the get go don't make no sense that's assuming even if they are reporting. It correctly.

Which is a questionable assumption to make about chinese reporting. So basically they're saying yeah um. You know this could have unsettled some investors. My guy.

I mean. That's a deal breaker for any normal investor in my opinion. But hey what do i know i'm just a layman layman tom of course this is not financial advice just a lame in my opinion might be an accurate might be wrong might be rambling of amendments as always don't click nothing. There's much nothing don't buy nothing let's keep going so notwithstanding.

We believe it sets up baba. Very well heading to its upcoming q1 card. On august 4th. How does this in what world.

Everything you just said about this company sets it up well in any kind of objective parameter. I just don't understand therefore we revise the rating from hall to buy so basically these are about to get delisted and gdp is slowing down china assuming it's even correct and they're saying well it makes us more bullish. This is just insane. This is crazy.

I don't know if you want to read this whole thing. Oh. My goodness in our june downgrade. We caution investors that we noted significant selling pressure at this critical resistance zone 125.

Just to kind of clarify this we're at like 89 right now. So yeah. The resistance has fallen and urged them to avoid adding at those levels despite the sharp recovery from its main lows. We're concerned that the market could use the bullet sentiment yeah.

It's more of a trading stuff. I don't understand trading bro. I i i invest i don't trade so my go up might go down short term you might make a lot of money trading the stock or shorting it or trading it whatever i don't do this i don't say nothing about it. It's not my cup of tea not my wheelhouse at all so basically they're talking more about the gdp being overblown that you i don't think the gdp thing with china being overblown.

That's a major issue. But it's a whole different discussion. Um. Yeah okay so this is interesting um city's latest commentary was favorable of the move by alibaba to seek a primary listing in hong kong.

We viewed the move as a positive given the continued overhang of on adrs from the threat of the listing well they're it's so freaking crazy that they this entire paragraph is just basically regurgitated uh as as being spewed by the chinese government with almost no mention of the fact that the listing is not coming because of uh people hating china or adrs is because these chinese companies will not allow the pcaob to actually review their financials like any other company. The us actually has to do so not a lot of shocks. There investors could be concerned with the downbeat q1 earnings. Whatever is baba stock.

A buy seller hold. Yeah. That's a that's the bottom line. Here.

So basically. They're saying. So yeah crazy crazy crazy crazy look okay they're saying it should not go below 73. Who knows at this point.

I don't know and it's actually none of my business. I don't care about short term trading. But let's talk about alibaba here for a second let's real talk. Okay real talk.

Why do people who own alibaba. Enjoy inflicting themselves with wounds and self pain and horror. You're literally investing in a stock. That is constantly hanging on the edge of the freaking cliff trying to hold on why would you do it to yourself.

Well there's so many other options. I mean come on not to mention the fact we talked about in a separate video the demographic crisis. We talk about the real estate market we talk about all this what if china actually goes to war with. Taiwan what's going to happen with us.

Sanctions you saw what happened to russia i mean there's so many risks here. It's basically a communist totalitarian regime. Centralistic government that is sponsoring ip theft from western companies for years and years and years. And even charlie munger.

Who was super bullish on it i think sold half a stock if i believe correctly. It's not a bad company alibaba in itself. But it's in china. Which means.

It has to deal with all this which means for me. It's uninvestable. I mean. This is a country that literally imprisoned jam jack ma.

Went at 10 cent. Destroyed. Dd global for reasons. I mean we don't even understand half the they do sometimes it's just crazy.

It's a whim of some weird politician and you got to take it it's worse than crypto people that give me for saying. I don't like physical wallets and i like to keep my crypto on the place where i can recover my password so not your you know not your key not your bitcoin. My guy if you invest in china first of all investing in the vie not in china. But that's a whole different story.

Let's say invest in china. It's not your stock. It's a chinese government they can do it whatever they want so for me. This is a weird article.

I don't understand the point of this. I would just you know reiterate my own opinion check for yourself. The logic. Right if somebody's coming up to it saying.

Hey just give me show me your license. A couple's over right the car like show me your license. Just show me your license. That's it and you can go or if you don't show me your license.

Then it means. I don't have you like as in my column of people who i checked today and they have a license that means that if i can't see it i can't verify it you have to go to jail tonight and potentially to court and get into serious trouble so just show me the freaking thing for a second and drive off. I don't want to do this. And then the guy says no i'm not going to show.

It's my constitutional right not to show you okay. That's the kind of thing that we have here so it's either china is super like morally um uncompromisable that they will not allow westerners to look at their financials or option number two which is there's a lot of shenanigans in those financials. They don't want the western world to see whatever it is comment below let me know see you next video.