2009-06-30

Hugh Hendry on Madoff, 人民币 & More


What if we've already had the inflation?
Most interesting comment comes just before the 8 minute mark (the topic begins around the 7:20 mark):
"In my crazy head, in this day and age when everyone is anticipating inflation, not just inflation—hyperinflation—I'm saying to you...what if we saw it? What if we saw it between 2002 and 2007, and it wasn't the quantitative easing of the Federal Reserve, it was the mercantilistic trading policies of the surplus countries, which kind of suppressed the value, kept their exchange rates cheap and therefore created these foreign exchange reserves, these sovereign wealth funds are really just quantitative easing programs, and if we look at that 5 year period, gold broke a 27-year trend and actually went up. It went from $250 to $1000.

The dollar lost 40% of its value—40! That is one of the biggest collapses in the dollar ever. 40%. Oil went from 10 bucks to 150. (as you said) But maybe we've had all the inflation. And today, prices are falling. Retail prices are falling. And yet, everyone wants to talk about hyperinflation. I'm just curious at these...shifting players, and how they don't seem to be aligned, expectations versus reality are a little bit skewed."

Bank Loans Still Pouring into Mainland Stocks

China Bank Lending Funneled Into Stocks, News Says
Chinese new bank loans worth about an estimated 1.16 trillion yuan ($170 billion) were invested in the stock market in the first five months of this year, China Business News reported, citing a government economist.

That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council.

Wei’s assistant said the economist is traveling and can’t be reached. She declined to give her name. Calls to the press offices of the China Banking Regulatory Commission and the China Securities Regulatory Commission weren’t answered.

China’s Shanghai Composite Index has rallied 61 percent this year, the world’s third-best performer, after plunging a record 65 percent in 2008. The nation’s property sales jumped 45.3 percent to 1 trillion yuan in the first five months, the statistics bureau said June 11, compared with a 19.5 percent decline for all of 2008.
Then check out Michael Pettis' Chinese loan table:

New loans

2008

2009

January

804

1,600

February

243

1,100

March

286

1,900

April

464

591

May

319

665

June

332

1,200

Half year

2,448

7,056

July

382

August

272

September

378

October

182

November

478

December

772

Total

4,912




Pettis, in a long post worth reading in its entirety, goes on to say:
It seems that few things are more dangerous than the belief that governments can eliminate or sharply reduce the risk of financial crisis. The idea that a country’s financial system can act as crazily as it likes as long as the government is willing to protect it from its folly runs not only into the problem of undermining government credibility as bad debts surge, but the very belief almost guarantees that the financial system will act in a crazy way.
Judging from the commentary I come across, many investors believe China's fundamentals are strong enough to plow through the bad loans via high growth (assuming they aren't ignoring the loans entirely). Several Chinese economists are worried about inflation, however, and the loan growth shows their worries are justified. As we've seen in the U.S., however, asset inflation can be "sterilized" by way of asset deflation. Risk is increasing as loan growth remains high and the equity markets rally, but how that risk manifests itself (other than bad loans) determines the investment strategy. At this point, I'm not convinced of inflation or deflation, though I lean towards inflation because of the government's desire for growth.

2009-06-29

分析金矿股票图表

我以前看看美国,香港和大陆的差别。
现在我想分析金矿股票图表。 在二月的时候,金矿票预测股市的股市底部.在这时候,市场大师Prechter说了别卖空. 他用艾略特波理论, 但是金矿票也说有问题。金矿票重要因为在S&P下降的时候,金矿票涨价。跟随标准普尔是个变化.


现在呢? 看起来有问题.黄金价格平的,可是金矿股票下降了.

我还是想今年跟去年有相似之处:

不知其月有什么新闻,可是我怕金融公司盈余报告. 2008年7月是Fannie Mae和Freddie Mac的危机.

大陆金矿票跟随上海股市:


最后给你看看Chris Vermeulen的GLD(黄金ETF)技术分析:


这里还有几个图表.

Buy and Hold? It Depends.

This morning I read Five Reasons Why Buy-and-Hold is Dead and Buy and Hold Dead? Um...No
I think they are both right. "Why Buy-and-Hold is Dead" is a dead-on analysis of changing market structure, investor access and psychology. A quick check of Smita Sadana's checklist:
1. Easier access to brokers, cheaper commissions, and the rise of ETFs.
2. Easier access to information and susceptibility to peer pressure.
3. The world's accelerating rate of change has created the perception of increased risk in buy-and-hold strategy.
4. Once beaten, twice shy: buy-and-hold versus “buy-and-forget.”
5. Loss of faith in the markets.
Read the whole article. My take on 1 and 2 is that structural changes have weakened "buy and hold". When you had to go through the act of calling your broker or going in for a visit, this slowed the investment process. Now, you can make a decision in seconds. Socially speaking, what is more trendy, sitting down and reading a book or "Tweeting"?

3 and 5 get to the psychological change. "Buy and hold" is dead because investors burned by losses will fear getting burned again. They will sell their winners and losers more quickly in future.

4 is more of a general critique on "buy and forget", where investors buy a stock and hold it forever. GE's plunge from over $60 in 2000 to under $10 this year comes to mind.

The immediate thought when I read that "buy and hold" is dead is that "buy and hold" is now an increasingly good strategy. It was a bad strategy near the market peaks because how are you going to reap profit when you're buying at the top? And one of the reasons there is a top is because everyone is buying and holding. There is great demand for stocks, but not a lot of supply (although there was new supply via IPOs).

Todd Sullivan gives a great example of when to "buy and hold". It almost all depends on price:
I'm going to take a look at the longest holding I ever had...Altria (sold last December).

I bought it in late 1999 in the midst of the "Master Settlement" and Chapter 11fears for them. The buying thesis was simple:

1- Addicts will buy their products
2- They can't go Chapter 11 because those suing them (States) need the money they provide
3- Because of that, their long term health was assured.

The purchase price for Alria was $21.65 a share and when I sold it was $16.75. In addition to that I received $21 a share in the Kraft (KFT) spin-off (sold immediately), $48 a share in Phillip Morris International (PM) shares (still held and today worth $42).

Oh, and over the 9 years I held it I received $23.25 a share in dividends.
First off, notice he did not "buy and forget". He exited in December. The key factor is the price—he purchased at a time when people thought Altria would declare bankruptcy. He goes on to say:
Has the market done a round trip the past decade? Yes. Are there plenty of companies whom over that time have gone up/down and then back to start? Yes. BUT, if you buy it low enough and pay attention to its business environment/prospects to determine your selling time, you can avoid many of the losses.
And most importantly, as Ms. Sadana rightly points out, "buy and hold" has lost popularity. You want to be selling to "buy and hold" buyers at the peak, and buying from "buy and hold is dead" sellers at the bottom.

Disclosure: I also sold MO last year, and still hold PM and KFT. I first purchased MO in the mid-1990s. I still hold Coca-Cola (KO), first purchased in 1994. And yes, I was stupid not to sell at $80 in the late 1990s. Live and learn!

China's State Owned Banks

Ambrose Evans-Pritchard brings us: China's banks are an accident waiting to happen to every one of us
"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."

Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".

The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".

Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.
He goes on to quote Andy Xie's comments on the debt fueled "recovery". China is still in a strong position, however, because it can use its foreign currency reserves to bail out its banks. How the U.S. fares once its largest creditor stops lending is another question.

2009-06-28

Deflationary Spiral?

I've seen mentions of the deflationary spiral cropping up. Phil of Phil's Stock World mentions it in this post, Just Stop the Madness Already (h/t: Zero Hedge). I recommend reading the whole thing, but I want to focus on one part.
I keep telling people but the market does not listen to me: Commodity hyperinflation is causing DEFLATION in the price of everything else, especially when neccessities like fuel are allowed to run out of control. This is sucking money out of the rest of the economy and causes a deflationary cycle that ends up snapping back and bursting the commodity bubble anyway. IT JUST HAPPENED LAST YEAR - WHY DOES NO ONE THINK IT WILL HAPPEN AGAIN?
First off, I've made the same point about high commodity prices. I believe inflation fears are having a deflationary impact because inflation fears are deflationary, or at least disinflationary. People associate high interest rates with high inflation, but high interest rates are the reaction and the cure to high inflation. Once high rates arrive and everyone prices inflation into their calculations, the end of the inflation is in sight—assuming the central bank doesn't choose economic suicide by fiat currency. "The Market" (the millions of individual investors, business, and governments) are already applying the cure before the disease shows any symptoms.

Back to the spiral. The deflationary spiral, in a nutshell, is that falling asset prices causes financial institutions to lose money and they must raise capital to shore up their balance sheets. Credit contracts and then more business and individuals are forced to sell, and then the process repeats and repeats until we hit bottom.

Your thinking on this spiral is where the rubber meets the road in the debate between "liquidationists" and Keynesians and Monetarists. The "liquidationist" argument, i.e. the classical and Austrian argument, is to let the deflation happen at once (do nothing to arrest it). There will be no deflationary spiral because prices fall to such a degree that they have nowhere to go but up. In psychological terms, I believe an overshooting to the downside is itself a part of the recovery process because it teaches the public that prices will only move higher. If you failed to buy at the bottom, you will never see it again. This is a powerful force for recovery because fear is blown out of the market, what remains is something like post-traumatic stress, where some people swear off investing. The criticism of this policy fits with this last part, that a massive deflaiton would create social disorder or cause catastrophic economic collapse—substantively the same argument used by Paulson to ram through the bailouts last fall.

The Keynesians and Monetarists want to halt the deflationary slide. They pursue policies to support home prices, bond prices and stock prices, prevent bankruptcies, bank failures, and foreclosures. This works if it succeeds in stopping the deflation and is the reason for the desperate attempt by Bernanke to create some positive inflation. It has great appeal because it prevents the sort of disaster witnessed in the one-fell swoop of a panic. The criticism is two fold. First, if it fails, it costs a lot of money and time and accomplishes nothing. More importantly, I believe, is the psychological impact. A failure of this policy creates the deflationary spiral because each attempt to arrest the decline is followed by another deflationary event. The public becomes accustomed to falling prices and mentally accepts this situation.Once people expect a cycle of lower prices, we can enter the deflationary spiral and the bottom will arrive much, much later, and possibly at a much lower bottom.

2009-06-26

BaWang 霸王 IPO

Shampoo maker cleans up
Seven brokerages polled by The Standard received margin financing orders of about HK$6.34 billion for BaWang as of yesterday.

The firm is seeking up to HK$1.67 billion in its initial public offering. At least HK$166.6 million is expected to come from local retail investors.

"The retail subscription for BaWang was much hotter than expected, backed by rosy share prices of newly listed companies," said Kingston Lin King- ham of Prudential Brokerage.

The strong response came after shares of China Metal Recycling (0773) surged as much as 29.5 percent yesterday on its trading debut.

It closed at HK$6.32, up 22 percent from its offer price of HK$5.18.

Hing Lee (HK) (0396), which also went public yesterday, soared 39.2 percent to close at HK$1.42 - the best debut performance so far this year.

BaWang's share price is expected to climb at least 20 percent on its first trading day on July 3, said Bright Smart Securities general manager Nelson Chan Kai-fung. Its share price will be set at HK$1.95 to HK$2.38.

BaWang's IPO may be oversubscribed up to 80 times because of strong market sentiment, sources said.

Another candidate, 361 Degrees International, closed its retail book yesterday and its retail tranche was more than nine times oversubscribed with brokers getting margin orders of HK$2.2 billion.

The sportswear brand aims to raise HK$2.18 billion by floating 500 million new shares at HK$3.15 to HK$4.35 each on June 30.
Don't you know there's a bull market going on?

Savings Just Getting Started

The personal savings rate increased to 7% in May. I believe it will rise much further because the U.S. must replace the depleted savings of the past 16 years. I found personal savings rates at the Bureau of Economic Analysis. There are two savings rates compiled, one from National Income and Product Accounts (NIPAs)and one from Flow of Funds Accounts (FFAs). They differ slightly, but the trends are the same. The savings rate was relatively steady between 1952 and 1992, but then quickly began to drop. I treated 1952-1992 as the "natural" savings rate, and 1993-2008 as the "bubble" rate. The average savings rate from 1952 to 1992 was 8.7%, and 2.7% from 1993 to 2008. Assuming the 40-year savings rate was the natural rate, I created the chart below to show the annual difference from the natural rate. Notice that the savings rate increased during the 1970s and 1980s recessions, just as it is increasing now. The question I have is whether Americans must "make up" the lost savings of the past 16 years. If so, the savings rate could be headed to 60-year highs. This is worrisome for any business dependent on the American consumer.
Here's an article using Eliot Wave analysis of the savings rate. It uses a different data set, but reaches the same conclusion.
The Bull Market in Savings as Cash has Been King for 10 Years
It's somewhat amazing that cash is not capturing anyone's fancy because a tremendous society-wide thirst for cash is spreading fast. "In a deflation," the Elliott Wave Financial Forecast has stated, "Rule No. 1 is to unload everything that isn't nailed down. Rule No. 2 is to sell whatever everything remaining is nailed to." The banking system is surely deflating, because, echoing Elliott Wave Financial Forecast's wording again, "Desperate American Banks Are Selling Everything That Isn't Nailed Down." SunTrust is selling its stock in Coca-Cola, an asset the bank held for 90 years. Merrill Lynch sold its founding stake in Bloomberg as well as various other subsidiaries.

Meanwhile, "Americans are selling prized possessions online and at flea markets at alarming rates." Pawnshops and auction sites are booming. At Craigslist.org, the number of for-sale listings soared 70% in eight months. This fits with our review of Craigslist's prospects when it was getting started in 2005: "This is just the set-up phase. Once the global garage sale really gets rolling, truly astounding volumes of dirt-cheap goods will be available on-line and elsewhere." The global garage sale is on. The chart of the U.S. savings rate shows that the bull market in cash has come to life.

2009-06-25

Don't Drink the Water!

Zhou Qiren 周其仁, Beijing University professor, brings us "Money Supply Taste Test: Water or Honey?"
We will call the first theory "currency is like water." The general idea is that currency has no use other than to act as an intermediary in commodity transactions. Therefore, excess currency in the economy and market will not increase the amount of goods in the market, but certainly will increase overall price levels.

Imagine a cash-laden helicopter flying over a small country and dropping enough currency on its citizenry to double everyone's cash stash. What follows? Will everyone in the country be able to afford twice as many goods? Or will prices double? If you choose the second option, congratulations; Milton Friedman, the great master of monetarism, would be proud. But why would a cash drop from a helicopter double everyone's money? Because money behaves like water: As soon as it enters the real world, it flows evenly into the open, offering equal access to all.

Another theory we will call "money is like honey." This theory holds that new money, after it's put into the economy and markets, sticks like honey. While flowing, it can accumulate in one area before gradually evening out. This means an oversupply of currency “roams” between different types of assets and goods, changing the relative prices of various assets and goods. This was the theory espoused by economist Friedrich August von Hayek, who emphasized that inflation has a "fluid equilibrium" quality.

Changes in relative prices create investment opportunities for some people. However, even if the market experiences "me-too-ism" and fanatical speculation, a single "hot spot" is hard to maintain. This is because honey continues to flow. The bumps eventually become smooth.

Each theory is interesting. What's important, though, is that from these theories we can infer an unambiguous thesis to test, with observable results.

货币似蜜,最后还是水

The professor comes to the conclusion that its honey first, water later, which is what was observed in the 1970s and during every financial bubble financed with money printing. Right now, it appears that oil, commodities and equities are first to absorb the "monetary emissions" or "货币喷射". In the long-run, inflation seems inevitable, but Japan shows the long-run can be a long time. Given that the entire world is printing money, however, the process may commence a bit earlier.

Deflation

2009-06-24

China Cuts Export Taxes

In a move likely designed to preempt a E.U.U.S. complaint at the WTO, China reduced the export taxes on several agricultural products:
China will revoke a provisional export tax on 31 products including wheat, rice, soybeans, sulfuric acid and steel wire effective July 1, according to a notice issued by the Customs Tariff Commission (CTC) of the State Council.

Most of the products have been taxed at rates of 3 to 10 percent, with a 25 percent rate levied on steel grit, a raw material used in abrasives, according to the CTC Web site.

The commission will also abolish a special export tax of 50 to 75 percent levied on 27 types of fertilizer, as well as raw materials including yellow phosphorous, phosphorous ore and binary compound fertilizers that are used to make them.

The products will be taxed at the provisional rate of 10 to 35 percent.
This should be bullish for Chinese agricultural firms.

知识在社会中的利用

F.A.海耶克有名的文章: 知识在社会中的利用

当我们试图建立一个合理的经济秩序时想要解决什么问题呢?根据某些常见的假设,答案十分简单。即,假如我们具有一切有关的信息;假如我们能从一个已知的偏好体系出发;假如我们掌握现有方式的全部知识,所剩下的就纯粹是一个逻辑问题了。换言之,什么是现有方式的最好利用这一向题的答案,已隐含在上述假设中了。
  解决这个最优化问题所必须满足的条件已全部列出,它们能用数学形式得到最好的说明。最简单他说,这就是:任何两个商品或两个要素间的边际替换率在所有不同的用途中必须相同。
  然而,这根本不是社会所面临的经济问题。而且我们为解决这个逻辑问题所发展起来的经济运算,也并末为它提供答案,尽管这种经济运算是朝解决社会经济问题方向所迈出的重要一步。其原因是,经济运算所依赖的“数据”从未为了整个社会而“赋予”一个能由其得出结论的单一头脑,而且也绝不可能象这样来赋予。
  合理的经济秩序问题之所以有这么一个独特的性质,是因为我们所必须利用的关于各种具体情况的知识,从末以集中的或完整的形式存在,而只是以不全面而且时常矛盾的形式为各自独立的个人所掌握。
  这样,如果“赋予”在此指赋予一个能有意识地解决这些“数据”所构成的问题的单一头脑,社会的经济问题就不只是如何分配所“赋予”的资源,而是如何确保充分利用每个社会成员所知道的资源,因为其相对重要性只有这些个人才知道。简而言之,它是一个如何利用并非整体地赋予任何人的知识的问题。   
  上述基本问题的这一特点,恐怕非但没有为经济理论中的许多新方法——尤其是许多利用数学的新方法——所澄清,它反而被搞混了。虽然我在本文中主要想阐述合理的经济体制问题,但在阐述时我将多次涉及它与某些方法论问题的密切联系。我想说明的许多论点,其余是各不相同的推理途径不期而遇地汇集所得出的结论,但就我现在对这些问题的理解,这决不是偶然的。
  我认为,目前许多关于经济理论和经济政策的争论,都源于对社会问题的本质的误解,而这种误解又源于我们把处埋自然现象时养成的思维习惯,错误地转用于社会现象。


在普通语言中,我们把关于分配现有资源的相互关联的决策的综合称作“计划”。在此意义上,所有的经济活动都是计划,在任何许多人共处的社会中,这种计划不管由谁制订,都必须在一定程度上依据起初是计划者以外的其他人所知,然后又以某种方式传递给计划者的那种知识。人们赖以制订计划的知识传递给他们的各种途径,对任何解释经济过程的理论来说,都是至关重要的问题,而利用起先分散在全体人民中的知识的最好途径,至少是经济政策——或设计一个高效的经济体制——的主要问题之一。
  这个问题的答案与此处所提出的另一个问题——谁来制订计划——的答案密切相关,而这正是所有关于“经济计划”的争论所围绕的中心。”存有争议的并不是要不要计划,而是应该怎样制订计划:是由一个权威机构为整个经济体系集中地制订?还是由许多个人分散地制订?在当前的争论中所使用的特定意义上的计划一词,毫无例外地指中央计划,即根据一个统一的计划管理整个经济体系。而竞争则指由许多单独的个人所制订的分散的计划。居于这两者之间的是代表有组织的工业的计划,这种计划许多人谈及但一旦看到便很少有人喜欢,它就是垄断。
  在这三种制度中哪一种效率更高,主要取决于我们可望在哪一种制度下能够更为充分地利用现有的知识,而知识的充分利用又取决于我们怎样做才更有可能取得成功;是将所有应被利用的但原来分散在许多不同的个人间的知识交由一个单一的中央权威机构来处理呢,还是把每个人所需要的附加的知识都灌输给他们,以便他们的计划能与别人的计划相吻合?


  在这一点上,不同种类的知识,其他位显然是不同的。所以一回答我们问题的关键就在于不同种类知识的相对重要性:是那些更可能为特定个人所支配的知识重要呢?还是那些我们认为更会被经适当挑选的专家所组成的权威机构所掌握的知识重要?
  如果当前人们广泛地认为后者更为重要,那只是因为一种叫科学知识的知识在公众的想像中占据了至高无上的地位,以致我们几乎忘了这种知识并非绝无仅有。也许可以承认,就科学知识而言,一群经适当挑选的专家也许最能掌握现在全部最好的知识。尽管这样做只不过是把困难转嫁到了挑选专家这一问题。我想指出的是,即使假定这个问题能很容易地解决,它也只是这个范围更广的问题中的一小部分。
  今天,谁要是认为科学知识不是全部知识的概括,简直就是异端邪说。但是稍加思索就会知道,当然还存在许多非常重要但未组织起来的知识,即有关特定时间和地点的知识,它们在一般意义上甚至不可能称为科学的知识,但正是在这方面,每个人实际上都对所有其他人来说具有某种优势,因为每个人都掌握可以利用的独一无二的信息,而基于这种信息的决策只有由每个个人作出,或由他积极参与作出,这种信息才能被利用。
  我们只要想一下,我们无论从事任何职业,在完成了理论上的培训后还必须学那么多的东西,学习各种特别工作占了我们工作生涯的多么大的一部份,在各行各业中,对人们的了解,对当地环境的了解、对特殊情况的了解是多么宝贵的财富。知道并使用末充分利用的机器或懂得能被更好地利用的某人的技能,或了解供应中断时能提取的储备,对社会来讲与了解更好的可选择的技术同样有用。
  一个靠不定期货艇的空程或半空程运货谋生的人,或者其全部知识几乎就在于知道一种即时机会的地产掮客,或从不同地方商品价格的差价获利的套利人,他们都是以不为他人所知的对一瞬即逝的情况的专门了解,在社会中起重大作用的。
  奇怪的是,这种知识今天一般遭到蔑视,掌握这种知识的人如果胜过掌握更好的理论或技术知识的人,他几乎会被认为是行为不端。以更了解通讯或运输设施而获益,有时几乎被认为不诚实,虽然在这方面利用最好的机会与利用最新科学发现对社会同样重要。这种偏见在很大程度上造成了人们重生产轻商业的态度。即使那些自视为完全摆脱过去的赤裸裸的唯物质谬论的经济学家,在导致获得这种实用知识的行为问题上,也屡犯同样的错误,这显然是因为在他们的事物体系中,所有这类知识都是“给定”的。
  普遍的看法是,所有这类知识应该理所当然地很容易为每个人掌握,而这种知识难以获得的事实,往往是指责现存经济秩序不合理的基础。这种观点忽视了我们所必须解决的问题正是如何能使这种知识尽可能容易地获得这样一个事实。


  如果当前贬低特定时间和地点的知识的重要性是一种时尚,那只是因为变化本身的重要性更被贬低了。事实上,在使生产计划必须作重大修改的变化的重要性和频率方面,“计划者”所作的假设与其对手所作的假设相差无几。当然,如果详尽的生产计划能提前好长一段时间制订并被彻底贯彻,以致不再需要作重大的经济决策,则支配一切经济活动的全面计划的制订任务就会轻松得多。
  也许,值得强调一下,经济问题总是由变化所引起的,而且只有变化才能引起经济问题。如果事情一成不变,或至少完全按预期的那样发展,则不会产生新的需要决策的问题,也不需要制订新计划。要是认为变化或至少日常的调整在现代已经变得不重要,其实就等于认为经济问题已变得不重要。由于这个原因,相信变化的重要性在日益缩小的人,一般也认为经济考虑的重要性已让位于已益增长的技术知识的重要性。
  如果有了现代生产的精细结构,是否就真的像建立新工厂或引进新工序那样只是间或才需要经济决策呢?果真一旦工厂建成,其余方面就依据工厂特点而几乎全是机械的了,而不需作什么变动以适应不断变化的情况了吗?
  人们普遍相信,上述问题的答案是肯定的,这种看法据我查证, 并非产生于经营者的实现经验。 在任何竞争的行业中——单单这种行业就能作为标准——保持成本不上升的任务需要坚持不懈的努力,仅仅这个任务就要消耗掉很大一部分精力。一个不称职的管理者浪费掉作为获利基础的成本差额,真是太容易了,而且从事经营管理的人们都知道,即使技术设施相同,但生产成本可能各不相同。
  经济学家对这一点似乎并非如此了解。生产者和工程师们常常强烈地渴望能不被货币成本的考虑扰乱进程,这雄辩地证明,这些因素已进入了他们的日常工作。
  经济学家们越来越容易忘记组成整个经济体系的经常不断的小变化,其原因之一也许是他们越来越耽于统计总数,这种统计总数比具体细节的运动表现出更大的稳定性。
  然而, 这种统计总数的相对稳定性并不能像统计学家时常想做的那样以“大数定律”即随机变化的相互补偿来解释。我们必须处理的因素,其数量并非大得足以便这些偶然力量产生稳定性。货物和服务的不间断流动得以维持, 是由于持续不断的精心调节,由于每天要根据前一天所不知的情况作出新的安排,由于一旦A不能交付就马上由B代替。
  即使是高度机械化的大工厂,其之所以能保持持续运转,也主要是因为它们能依靠外界环境满足各种始料不及的需要:如盖屋项的瓦,文具及表格纸,各种工厂不能自备的和根据工厂运营计划所需的能够很快在市场上买到的设备。
  或许我还应该简单地提及,上述那种知识,由于其性质是无法进入统计数字的,因此也就无法以统计数字的形式传递给任何中央权威机构。这种中央权威机构所必须利用的统计数字,应该是严格地通过分析事物的细小差别,通过将不同地点、品质和其他特点等项目作为同一类资源综合,以可能对具体决策产生重大影响的方法得出。由此我们可以知道,根据统计资料制订的中央计划,由其本质决定,是无法直接考虑这些具体时间和地点的情况的, 因而中央计划者必须找出一种方法。 让“在现场者”来作这种基于具体情况的决策。


  如果我们可以同意社会经济问题主要是适应具体时间和地点情况的变化问题,那么我们似乎就由此推断出,最终的决策必须要由那些熟悉这些具体情况并直接了解有关变化以及立即可以弄到的应付这些变化的资源的人来作出。
  我们不能指望通过让此人首先把所有这些知识都传递给某一中央机构,然后该中央机构综合了全部知识再发出命令这样一种途径来解决这个问题,而只能以非集权化的方法来解决它,因为只有后者才能保证及时利用有关特定时间合地点之具体情况的知识, 但是,“在现场者”又不能光依据他有限然而又直接的对周围环境的了解来作出决策。所以,仍然存在如何向他传递他所需要的信息以便其决策符合更大范围经济体系的整个变化模式这样一个问题。
  一个管理者需要多少知识才能成功地做出决策?哪些事件是他不能直接了解,而又与他的决策有关?他到底需要了解其中的多少呢?
  世界上所发生的任何一件事几乎都可能对一个管理者应作的决策产生影响,但他却并不需要了解这些事件本身,也不需要了解这些事件的全部影响。他完全不必要知道为什么在特定时间内某种尺寸的螺钉需要量更大;为什么纸袋子比帆布袋更易搞到;为什么熟练工人或某些机床暂时难以弄到,因为这些事与他全无关系。
  对他有意义的只是,弄到这些东西与弄到其它他也关心的东西相比的难易程度,或者他所生产或使用的替代品是否更为急需。所以,这总是一个与他有关的特定事物的相对重要性问题,他对改变这些事物的相对重要性的原因不会感兴趣,除非它对他周围的具体事物有影响。
  正是在这方面,我前面所称的“经济运算”(即纯粹的选择逻辑)至少能通过类推来帮助我们认识价格体系如何能够解决(事实上正在解决)这个问题。即使是掌握了某一下“规模的自给自足经济体系之全部数据的单个管理者,仍不能彻底弄清楚每次在资源的分配必须作某些小的调整时可能会受影响的目的与方法间的全部关系。纯粹的选择逻辑的伟大贡献,的确在于它清楚地表明,即使是这样一种单个的头脑,也只有通过作出并不断使用等值比率(或“值”或“边际替换率”)的方法,才能解决这种问题。
  即他要给每一种稀有资源标上数字指标,这种指标不可能从这种特定的物品所拥有的任何特征中得出,但它却可以反映,或者在它身上某中了它在整个方法目的结构中的重要性,在任何小变化中,这个管理者必须考虑这些集中了所有有关信息的数量指标(或“值”,通过逐个调整数量,他就能恰当地重新作出安排,而不必从头解决整个问题,也不必同时检查其所有的分支部分。
  从根本上说,在一个关于相关事实的知识掌握在分散的许多人手中的体系中,价格能协调不同个人的单独行为,就象主观价值观念帮助个人协调其计划的各部分那样。下面,我们有必要来看一个简单而常见的例子,以弄清楚价格体系的作用。
  假设在世界某地有了一种利用某种原料——例如锡——的新途径,或者有一处锡的供应源已枯竭,至于其中哪一种原因造成锡的紧缺,于我们关系不大——这一点非常重要。锡的用户需要知道的只是,他们以前一直使用的锡中的一部分,现在在另外一个地方利用起来更能盈利,因此他们必须节约用锡。
  对于其中大部分用户来说,甚至不必知道这个更需要锡的地方或用途。只要其中有些人直接了解到这种新需求,并把资源转用到这种新需要上,只要了解到由此产生的新缺口的人转而寻求其他来源来填朴这个缺口,则其影响就会迅速扩及整个经济体系;而且,这不仅仅影响到所有锡的使用,它还影响到锡的替代品的使用,以及替代品的替代品的使用,还要影响所有锡制品的供应,其替代品,替代品的替代品的供应等等,而那些有助于提供替代品的绝大部分人,一点也不知道这些变化的最初原因。所有这些构成了一个市场,并非因为任一市场成员都须对市场整体全部了解,而是因为他们每个有限的视野合在一起足以覆盖整个市场。
  所以,通过许多中介,有关的信息就能传递到全体成员。一个掌握所有信息的单一管理者本来可以通过下面这个事实得出解决办法,即任何商品都只有一个价格,或更确切地说,各地的价格是相互关联的,其差别取决于运输费用等等。但是事实上,没有一个人能掌握全部信息,因为它们全分散在所有有关的人手里。


  如果我们想了解价格的真正作用,就必须把价格体系看作一种交流信息的机制。当然,价格越僵硬这种作用就发挥得越不理想。(不过,即使在牌价相当僵硬时,价格变化的力量仍在很大程度上通过合同的其它条款起作用。)价格体系的最重要的特点是,其运转所需的知识很经济,就是说,参与这个体系的个人只需要掌握很少信息便能采取正确的行动。
  最关键的信息只是以最简短的形式,通过某种符号来传递的,而且只传递给有关的人。把价格体系描绘成一种记录变化的工具或一种通讯系统不仅仅是一种隐喻,这种通讯系统能使单个生产者象工程师观察一些仪表的指针那样,仅观察一些指标的运动便可调整其活动从而适应变化,然而,只有反映在价格运动上的变化才能为他们所了解。
  当然,  这种调整在经济学家的均衡分析中也许从来不是“完全”的。但是,我担心我们那种以几乎每个人的知识都几乎是完全的假设来处理问题的推理习惯,使我们看不清价格机制的真正作用,并使我们以错误的标准来判断其效力。令人惊奇的是,在上述一种原料短缺的情况下,没有命令发出,也没有多少人知道其原由,就使许许多多的人——他们的身份花几个月时间也无法调查清梵——更节约地利用这种原料或其产品。
  也就是,他们的方向正确。即使并非每个人都能在一个瞬息万变的世界中相处得如此融洽,以致他们的利润率总是保持相等或同样的“正常“水平,这仍不失为一个奇迹。
  我故意使用“奇迹”一词,以消除读者把价格机制看作理所当然的自得心理。我相信,如果这种机制是人类精心设计的结果,如果人们在价格变化的引导下懂得他们的决策之意义远远超出其直接目的的范围,则这种机制早已会被誉为人类智慧的一个最伟大的功绩了。但不幸的是,它既不是人类设计的产物,受其引导的人们通常也不知道自己为何会如此行事。
  不过,那些嚷嚷要“自觉指引”,以及不相信任何末经设计而自发形成(甚至我们不理解)的事物能解决我们无法有意识地解决的问题的人应该记住:问题恰恰是如何把我们利用资源的范围扩展到任何单一头脑所控制的范围以外,因而这也是一个如何摆脱有意识的控制以及如何促使个人不用别人吩咐就能令人满意地行事的问题。
  我们在此遇到的问题决不是经济学所特有的,它与几乎所有的社会现象,与语言以及大多数文化遗产都有关系,它真正构成了一切社会科学的中心理论问题。正象艾尔弗雷德怀特黑德在另一场合所说的,“所有的习字帖和大人物演说时反复引用的说法——我们应该养成思考我们在做什么的习惯,是一个大错特错的陈词滥调。
  事实恰恰相反,文明是功过增加那些些我们不加考虑就能实施的行为的数目而进步的。”这在社会领域极为重要,我们不断地利用我们不理解的公式、符号和规则,并通过这种利用,使我们能够得到那些我们个人所未掌握的知识之帮助。
  我们已经通过建立起在其各自领域证明为成功的习惯与惯例,并反过来使之成为我们已建起的文明的基石的方法,发展起了这样的实践和制度。
  价格体系正是一种人类偶然发现的,未经理解而学会利用的体系(虽然人类远非已经学会充分地利用它)。通过价格体系的作用,不但劳动分工成为可能,而且也有可能在平均分配知识的基础之上协调地利用资源。喜欢嘲弄这类主张的人,通常歪曲其论点,暗示这种论点断言,这个最适于现代文明的体系是通过某个奇迹自发形成的。
  事实正好相反,人类能够发展起劳动分工这一现代文明的基础,是因为人类碰巧发现了一种使其成为可能的方法。如果人类没有发现这种方法,他们可能仍会发展起另一种完全不同类型的文明,象“白蚁国”,或其它完全无法想象的类型。我们所能说的一切是,至今还未有人成功地设计出一种替代体系,在这种替代体系中,现存价格体系的某些特点仍能继续保留;因为即使是最激烈地攻击这个体系的人,对这些特点也甚为钟爱,尤其欣赏它达到能使个人选择其职业,并因而能自由地利用其知识和技能的程度。


  当前,关于在一个错综复杂的社会中,价格体系是否必不可少的争论已不再是完全在两个不同政治观点的阵营间的争论,这从许多方面说都是一件大好事。二十五年前,当冯米塞斯首先提出没有价格体系我们就无法维持一个建立在象我们这样广泛的劳动分工基础上的社会这一论点时,遭到了一阵阵嘲弄。
  今天,仍有些人不愿接受这种论点,但其主要原因已不再是政治上的了。这就创造了一种更有助于合理讨论的气氛。当我们看到托洛斯基的论述“没有市场关系,经济核算就是不可想象的”时;当奥斯卡兰格教授允诺在未来的中央计划局大理石厅为冯米塞斯教授建一尊雕像时,当阿巴勒纳教授重新发现亚当斯密并强调价格体系的主要作用包括促使个人在寻求自身利益的同时做符合普遍利益的事时,分歧就确实不能再归于政治偏见了。现在的不同意见,看来主要是由于纯粹理智上的,尤其是方法论上的分歧。
  最近,约瑟夫熊彼特在其《资本主义,社会主义和民主》一书中,清楚地叙述了一个方法论上的分歧。能彼特是根据一种实在主义的分枝研究经济现象的经济学家中的杰出人物,在他看来,经济现象是已知商品量的客观相互直接影响,而几乎不受人类意志的干涉。
  只有根据这个背景,我才能解释下列令我惊奇的论点。 熊彼特教授认为,在缺少生产要素的市场时,仍然可能根据理论家的这一基本主张,即“消费者估价(‘需要’)消费物这个事实本身、也是对生产这些消费物的生产方式的估价”,来进行合理计算。
  确切他说,这个说法是不对的,消费者所做的根本不是那回事。熊彼特所说的“这个事实本身”大概是指对生产要素的估价隐含在对消费物的估价中,或前者是后者的必然结果,但这也不正确。隐含是一种逻辑关系,而它只有在所有建议同时为同一人所知时,才能被富有意义地确定。
  但是,生产要素的价值显然并不单单取决于消费物的估价,它也取决于各种生产要素的供应情况。只有所有这些事实同时为一个人所了解,才会必然地从这些事实中得出答案。但正是由于这些事实不会同时为一个人所了解,实际问题就产生了,而解决这个实际问题必须利用分散在许多人中间知识。
  所以, 即使我们能证明, 所有的事实如果为一个人所了解(我们假设所有的事实都为观察力敏锐的经济学家所了解),会由他独自决定解决方法,问题也丝毫未得到解决。相反,我们必须表明,如何通过只掌握部分知识的个人的相互作用来解决这个问题。如果以为所有的知识都应由一个人所获得——同样假设这些知识都归我们这样的经济学家,那就是以为不存在问题而无视现实世界中重要而意义重大的一切事物。
  像熊彼特这样一个经济学家的立场,会由此而跌入由“数据”一词的含糊意义给冒失鬼造成的陷阱,这很难解释成一个简单的失误。这说明,这样一种方法有根本性的错误,这种方法习惯性地忽视我们所必须应付的一个重要现象类的知识不可能是完全的,因此需要一种不断交流和获得知识的途径。
  任何实际上以人们的知识与客观事实是一致的这一假设为出发点的法,诸如许多有联立方程式的数理经济学的方法,都完全忘掉了我们所要解释的主要任务。我决不否认, 在我们的体系中,均衡分析可起有益的作用,但立刻使我们的一些主要思想家误以为它所叙述的情形与解决实际问题直接有关。所以我们应该记住,均衡分析与社会过程根本无关,而仅能作为研究主要问题前的有益的准备。

2009-06-22

Mish Makes the Case for Deflation

and refutes an argument for inflation. Check out "The Big Inflationist Scare"
However, Gary's hypothesis "the Federal Reserve can re-ignite monetary inflation at any time by charging banks a fee to keep excess reserves with the FED", is just that, a hypothesis, and I believe a very poor one at that.

Bernanke's idea to pay interest on reserves will slowly recapitalize banks over time. This is why he desperately wanted to do so. To suggest he is about to charge interest on deposits is silly.

The key fact now is there are not enough credit worthy customers for banks to want to lend, or for that matter willing borrowers looking to expand debt. Thus, if banks had to pay interest on reserves, rather than causing mass inflation, the Fed would cause mass panic.

Indeed, the likely result would be banks scrambling for dollars to repay the Fed as opposed to a mad dash to lend dollars.

Clearly the Fed understands this. Thus, it's not the Fed who is screaming about the banks' unwillingness to lend; it's Congress. Moreover, banks won't lend because most of them know the score as well, regardless of what lies they tell the public about being well capitalized. This is why "reserves" are accumulating in the first place.

Of course those "excess reserves" are a mirage; they don't really exist. Banks need those reserves because of the massive wave of credit card defaults and foreclosures yet to hit the books. Every uptick in unemployment exacerbates credit card losses, foreclosures, losses on home equity loans, etc, something that Gary North ignores.

So charging interest on reserves would not bring about inflation, it would cause a systemic deflationary crash if Bernanke was foolish enough to attempt it.
Read the whole thing. I agree with Mish on every point, especially the facts: rising savings rates, tighter regulation, and more credit losses.

One point I made recently is that if the Fed wanted to inflate, it first needs deflation anyway. I do not believe it is possible to inflate when everyone is watching. Who will be the sucker to lend money at 4% when "everyone" knows the Fed will create 6 or 7% inflation? You have to have everyone looking for deflation or complacent with low inflation. When everyone is looking for inflation, you get bond vigilantes and people piling into oil futures. When commodity prices soar and interest rates head higher, Fed printing will cause rates and commodities to skyrocket in pure bubble fashion. On the other hand, if the Fed does nothing, it acts as a deflationary force on the economy. Zero Hedge excerpted a David Rosenberg report on June 9, to wit:
U.S. retail gasoline prices are now up a full buck from the lows, to $2.62 a gallon (up 41 days in a row) — the equivalent of a $130 billion drag on discretionary spending at an annual rate. Tack on the 60bps bounce in mortgage rates too, which has triggered a near-60% collapse in mortgage refinancings. Then tack onto that the 0.2% decline in average weekly earnings in May — down now in two of the last three months — and a consumer relapse could well be in the offing and end up snuffing out this ballyhooed inventory-led recovery that has underpinned equities and undermined Treasuries over the last 3-4 months.
Higher oil prices and higher energy prices, the supposed signs of hyperinflation, threaten to derail the recovery. Ben Bernanke probably thinks he lives in bizarro world. He's fretting about deflation, but won't publicly say anything lest he frighten the public. On the other hand, he's painted as helicopter Ben. Millions of people are making his job much harder by threatening high inflation at the drop of a hat and their actions will exacerbate any deflationary flare up. The actions of the inflationists themselves indicate deflation!

361 Degrees IPO

JLM Pacific Epoch has the news:
The Hong Kong Exchange said the company plans to issue 500 million shares and public trading will commence on June 30. Of the HK$1.74 billion, 361 Degrees plans to use 39% on advertising and sponsorship, 32% for its Fujian factories and the remainder for research and development and operating capital.

The company has 5,900 retail outlets across 31 provinces in China, and plans to expand to 6900 by next June with 25 flagship stores. In addition, 361 Degrees plans to enter the children- clothing business in 2010 and expects to become profitable within one or two years, said the report.
My 361 Degrees sneakers have survived 5 years of wear and tear. Here's the company's homepage: 361 Degrees.

Chinese traditional medicine shampoo manufacturer, BaWang, is also set to IPO. From FinanceAsia:
Bawang's IPO consists of 700 million primary shares, or 25% of the company, which are offered at a price between HK$1.95 and HK$2.38 apiece. This gives a total deal size of between HK$1.37 billion and HK$1.67 billion. A standard 15% greenshoe applies, which, if exercised, will inject another 105 million shares into the IPO, increasing the maximum size of the deal to $247 million.

The price range values the company, on a pre-shoe basis, at between 14.3 and 17.5 times its estimated 2009 earnings, according to joint bookrunner numbers. On a post-shoe basis, the valuation increases to between 14.8 and 18.1 times 2009 earnings, based on joint bookrunner numbers.

This makes Bawang somewhat cheaper than its comparables. Since there are no other shampoo manufacturers listed in Hong Kong, investors are looking at companies that make similar products, or other asset light distributors of branded products. In the first category, the most obvious candidate is Hengan International, China's leading personal hygiene company, which is trading at around 22 times 2009 estimated earnings. In the second category, there is sportswear company Li Ning, which is trading at around 20 times 2009 estimated earnings.

Bawang is positioned in a market dominated by foreign brands. Proctor and Gamble (P&G) has a 39% share of China's shampoo sales, much more than Bawang's 7.6%. Within the niche herbal shampoo sector though, Bawang comes out top with a 36% market share.

"The shampoo market will continue to grow steadily... even under a relatively unfavourable economic downturn, as a result of its necessity nature," said Michelle Huang, a Shanghai-based senior analyst at consultancy Euromonitor International.

Huang said that continued growth in shampoo usage is driven by a range of factors. One such factor is product innovation: Bawang's competitors, even the leading players, are developing herbal products. This year, for example, P&G started a line of herbal products under its Rejoice brand. Another major factor is the male market segment, since men have contributed more to the recent increase in shampoo usage than women.
361 Degrees will trade under the symbol 1361, BaWang (霸王) under the symbol 1338.

I like the consumer angle of these stocks, but I'd like to see prices fall from the IPO before I buy. These two will get a once over as I prepare my shopping list.

China: Economic Catastrophe Unfolding

Here's the ultimate bearish take on the Chinese economy.

2009-06-21

Germany Demands Gold from U.S.?

Shocking if true:
Even more telling, I think, is when he reported, "The Germans have demanded all of their gold held in custodial accounts inside the United States to be returned to German soil."

He admits, "The story is not public, but details have come to me from a private source close to the action." But if I know Germans, and I don't, they are not going to sit around waiting for America to steal their gold, if indeed there is any left after the criminally incompetent Federal Reserve and Treasury encumbered thousands of tonnes of gold by leasing it out, which was immediately sold into the market by those borrowing the gold, massively depressing the price of gold (which was the whole purpose of the exercise) so that bubbling inflation in prices from the floods of money and credit coming from the Federal Reserve to finance massive, long-term deficit-spending by the federal government was effectively disguised by making gold ridiculously cheap, which made guys like me, whose familiarity with the Austrian school of economics allows us to see through this despicable scam, and we begin to accost strangers on the street in a heroic attempt to save them, and we say to them, "Buy gold now, you moron, because it will never be this cheap again! And if you don't buy gold even after being told, point-blank and right to your face, to buy gold as your only rational response to massive government incompetence and corruption that will destroy the dollar, then you are as stupid as you look! Hahaha! You're a moron! Hahaha!"

Interestingly, he adds, "The Germans have also given counsel for Dubai to demand all of their gold held in custodial accounts inside London to be returned to Dubai, where a new gold trading center will spring up. In my view, THIS IS THE BIGGEST NEWS FOR GOLD THIS ENTIRE YEAR."

Careful readers looking for "news behind the news for news you can use" will no doubt notice his use of all-capital letters with which to indicate particular emphasis, perhaps along this very line, which must be important as hell, for whatever reason, because the year is not quite half over and we already have the best news? Wow!

Then I learned that I did not even suspect that "the hidden arch-enemy for the US-UK on all matters pertaining to gold bullion is Germany." He admits that this "is not a well-known concept", letting me save a little face, although Germany is "also advising the Chinese on currency and gold matters. Can one detect some coordination?"
If true, it is big, big news. The Germans learned their lesson from the 1920s and they haven't forgotten it.

Protectionism is a growth industry

China's "Buy China" provision is the latest high watermark for protectionism.

Beijing defends 'buy China' order
"This document is aimed at maintaining a fair market environment for competition, which is also in line with China's law on government procurement," foreign ministry spokesman Qin Gang told reporters.

"Therefore, there is no such thing as discrimination against foreign enterprises or products."

Earlier this month, the National Development and Reform Commission, China's economic planning agency, ordered local governments to buy Chinese goods when carrying out projects linked to the nation's massive economic stimulus package.

"For government procurement, apart from cases where products and services are not available domestically or cannot be acquired on reasonable commercial terms, domestic products should be purchased," the document said.

The call for preferential treatment for Chinese firms follows claims by local businesses that a large part of Beijing's stimulus money has gone into foreign pockets, state media said.


It wasn't all China though, the U.S. ruled on Chinese tires:
China ministry "regrets" U.S. tire trade finding
The International Trade Commission found that a surge of low-cost tires from China had disrupted U.S. markets, following a complaint by the United Steelworkers union which hopes to cap Chinese tire imports at their 2005 level.

"China has repeatedly expressed its opposition to foreign governments' using safeguard clauses to launch investigations of Chinese products," Commerce Ministry spokesman Yao Jian said in a statement posted on the ministry's website on Friday.

"The decision does not conform to objective facts, and also violates relevant World Trade Organization rules in addition to U.S. law."

Lawyers representing Chinese tire producers argue that U.S. companies largely abandoned the low-range tire market before Chinese manufacturers moved in. They also noted that no U.S. tire producers had joined the steelworkers' complaint.

What can deliver deflation?

In the previous post on Andy Xie's "Fear the Dark Side of China's Lending Surge", I wrote that the central banks need deflation to knock inflation speculators out of the commodity market. The easiest way to achieve a quick drop in commodity prices would be a dollar rally. And one may be on the way, as Kathy Lien points out in U.S. DOLLAR: WHAT CAN BREAK THE RANGE? :
Although the summer doldrums should reduce volatility in the currency market, the apex of the triangle formations in EUR/USD, GBP/USD and USD/JPY point to a large expansion in volatility (ie. a possible breakout move) as early as next week.

What Can Trigger a Breakout?

Sometimes nothing more than the lack of liquidity could cause a breakout in the currency market. No major surprises are expected in U.S. economic data next week with only housing market reports, durable goods, the final release of first quarter GDP and the Federal Reserve interest rate decision on the calendar. If the Fed expanded their asset purchases or becomes more optimistic, it could trigger a break in the EUR/USD, but we expect the central bank to keep the tone of the FOMC statement basically unchanged. The only real possibility is a mention of exit strategies, but so far currency traders have shrugged off similar talk by the ECB and BoE. Instead, what could trigger a breakout are exogenous events such as growing tensions with North Korea, downgrades or higher taxes. The late afternoon sell-off in the dollar on Friday was driven by speculation that rating agency Moody’s could downgrade California’s debt rating. California’s fiscal finances are a mess, prompting Governor Schwarzenegger to even consider a flat tax.

Forex Traders Adjusting Positions

A few weeks ago, we talked about the exaggeration of dollar short positions in the futures market but these positions have recently been trimmed.
Best of all would be for a U.S. dollar rally to accompany a stock market rally, with bullish investors claiming that lower oil prices will boost the economy.

2009-06-20

谢国忠 Andy Xie: Fear the Dark Side of China's Lending Surge

Here's a long and important section of Andy Xie's latest:
The current surge in commodity prices, for example, is being fueled by China's demand for speculative inventory. Damage to the domestic economy is already significant. If lending doesn't cool soon, this speculative force will transfer even more Chinese cash overseas and trigger long-term stagflation.

Commodity prices have skyrocketed since March. The Reuters-Jefferies CRB Index has risen by about one-third. Several important commodities such as oil and copper have doubled in value from this year's lows. As I have argued before, demand from financial buyers is driving commodity prices. The weak global economy can't support high commodity prices. Instead, low interest rates and inflation fears are driving money into commodity buying.

Exchange-traded funds (ETFs) alone account for half of the activity on the oil futures market. ETFs allow retail investors to act like hedge funds. This product has serious implications for monetary policymaking. One consequence is that inflation fears could lead to inflation through massive deployment of money into inflation-hedging assets such as commodities.

Financial demand alone can't support commodity prices. Financial investors can't take physical delivery and must sell maturing futures contracts. This force can lead to a steep price curve over time.

Early this year, the six-month futures price for oil was US$ 20 higher than the spot price. Investors faced huge losses unless spot prices rose. A wide gap between spot and futures prices increased inventory demand as arbitrageurs sought to profit from the difference between warehousing costs and the gap between spot and futures prices. That demand flattened the price curve and limited losses for financial investors. Without inventory demand, financial speculation doesn't work.

For some commodities, warehousing costs are low, limiting net losses for financial buyers. Some commodities can be used just like stocks, bonds and other financial products. Precious metals, for example, are like that. Copper, although 5,000 times less valuable than gold, still has low warehousing costs relative to its value. Some commodities such as lumber and iron ore are bulky, costly to warehouse, and should be less susceptible to financial speculation. Chinese players, however, are changing that formula by leveraging China's size. They've made everything open to speculation.
The worldwide rally of commodities and equities is a speculation led bubble based on future growth expectations that have no basis in reality. Economic data continue to point to a very weak U.S. economy, check out a recent post by Mish on truck and rail traffic. The Baltic Index is up because the Chinese demand requires shipment of commodities, but rail traffic in the U.S. doesn't show resource demand.

Andy Xie's comments on ETFs and the implications for monetary policy are important. Never before have commodity markets been so accessible to retail investors, yet the commodity markets themselves remain relatively small compared to stock and bond markets. There's a lot of room for growth, should investors decide they want out of equities and into commodities. This also means investors can exit the U.S. dollar and financial assets at a moment's notice.

In the early 1980s, Ed Yardeni dubbed the inflation hawks in the bond market "bond vigilantes". Today, there are still bond vigilantes, but now retail investors can join the game via derivative ETFs such as ProShares Ultra Short 20+ Year Treasury (TBT), or various commodity ETFs such as SPDR Gold Shares (GLD), PowerShares DB Agriculture (DBA) or PowerShares DB Oil (DBO).

Financial markets don't do what everyone is expecting though—"the market" is the master of misdirection. If investors anticipate high inflation, they will pour into commodity funds and drive up interest rates. The government may try to restrict commodity speculation, and that could be a part of upcoming financial reforms. Otherwise, the Federal Reserve and other central banks will be forced to raise interest rates and drain liquidity from the system, and that will touch off another round of deflation.

The speculators are in the driver's seat because they suspect (many would say they "know") that the government finds another deflationary event unacceptable. They are playing chicken with the central bank because they believe central banks will swerve their inflationary Fiat in the face of the deflationary Mack truck. The behavior of speculators guarantees very high inflation if the central banks do not curtail credit. In order to have the "healthy" inflation the central banks want, they must restrict access to commodity markets and/or chase the speculators out. A well-timed liquidity drain or surprise rate hike would put the central bankers in the driver's seat of the Mack truck and leave the speculators packed in the Fiat.

I do not believe the central banks can create the inflation they desire while the world is watching. There is a natural law underpinning the world that cannot be defied for long. In the absence of central bank inflation, speculators are setting up the next round of deflation as high resource costs drain the pockets of consumers and business alike. The central banks cannot print money unless people are willing to hold it, i.e .unless there is a healthy demand. Recently, demand for cash was so strong that the velocity of money plummeted. In a high velocity environment, with very low demand for money, central bank printing is suicidal. The central bankers need to keep demand high, and they will do by keeping the spectre of deflation alive. Without it, they can only fail.

2009-06-18

Yuan and Oil—The Bubble Connection?

Zero Hedge uploaded a Hugh Hendry letter to shareholders. Some of it coincided with some of my musings in the previous post, such as comparing 2008 and 2009. What I found really interesting was the comparison of the rise in the yuan to the rise in oil. If you scroll down to page three of the report, there's a chart of the yuan and oil that I've extracted below. What you notice is that the rise in the yuan/USD stops at exactly the same moment as the rise in oil. Hendry speculates that Chinese speculators were borrowing in dollars at low rates and buying oil. Once the yuan stopped weakening, the trade lost its impetus and oil dropped.

The whole letter is great. I highly recommend taking the time to read it.

Eclectica Fund

Time for a shopping list?

I put long-bonds into most of my Marketocracy portfolios today, building an initial position. I think they will drop from here, especially with the $104 billion Treasury auction next week—even though the sales are at 2, 5 and 7 years. My belief is that the "green shoots" will stay green and the 200-day moving average will keep the market afloat through the summer, but in the fall, the average will flat-line. From here, the market can afford to drop more than 5 percent below its current level and still stay above its 200-day late into summer (assuming it traded at an average of the current level). A correction between now and then could provide more room by knocking the average lower. I'm not too reliant on the technicals because they can shift; I anticipate the catalyst will be weak economic data. If by September and October we're still seeing anemic data, investors will start losing confidence in the optimistic scenario. The "green shoots" are a theory that need confirmation in the data, without it the theory crumbles. Up through May, I believe we saw a market rebound. Since then, there's been some optimistic buying, and I don't think this has been exhausted. Finally, if you plot 2008 versus 2009, it's eerily similar. We sank early in the year 2008, culminating with the Bear Stearns death in mid-March. This year, the market fell until March 6. Last year, shares rallied into June, with oil and commodities leading the charge. This year, oil is up 100% and the market is in full rally-mode. Last year, Fannie and Freddie caused a mini-panic in mid-July, two weeks after oil had topped and commodities began to decline. If we follow the script, there should be a mini-event sometime around the middle of July, give or take a couple of weeks, then a recovery and another panic in the fall.

I tagged this post as musings because that's all it is. I'm not trading on this, just trying to get a handle on events.

2009-06-17

China Small Cap Bubble?

Bloomberg has the story:
“We’re seeing a bubble in small-cap stocks,” said Zhong, who helps oversee $220 million in Hong Kong. Zhong predicts the CSI 500 Index, a benchmark for China’s 2.1 trillion-yuan ($307 billion) market for small-cap equities, will slide as much as 30 percent “in the near future” because he expects companies will report first-half results that disappoint investors. The index gained 1.6 percent to 3,403.96 at the close today.

The jump in mainland-traded equities with a median value of 3.8 billion yuan pushed the price-to-earnings ratio for Shenzhen Topraysolar Co. to 110, data compiled by Bloomberg show. Xuzhou V V Food & Beverage Co. fetches 160 times profit, almost double its PE ratio of 87 at the top of the last bull market. Beijing Vantone Real Estate Co. shares rose 171 percent since Nov. 9, even as analysts cut their earnings estimates by 35 percent.
My own observation shows that many Hong Kong small cap Chinese companies have also moved higher, though nowhere near as much as in China.

2009-06-15

分析中国ETF

这个文章介绍ETF:什么是ETF?
指数型基金投资策略的核心思想是相信市场的有效性,从而通过复制与市场指数结构相同的投资组合,排除非系统性风险的干扰而获得与所跟踪指数相近,相当于市场平均水平的收益。

ETF基金(Exchange Traded Fund)即“交易型开放式指数证券投资基金”,是一种上市交易的指数型基金。与其他类型的开放式指数型基金相比,ETF是一种混合型的特殊基金,它克服了封闭式基金和开放式基金的缺点。具体而言,它具有组合透明度高、管理费用低、交易便利、资金效率高、交易成本低、参与资金门槛低等优点。

ETF与指数型基金

与一般的指数型基金相比,其区别具体表现为:

1、一般的开放式指数型基金只能在一级市场上申购和赎回,交易仅仅涉及现金与基金份额; ETF基金在一、二级市场的交易涉及现金、股票和基金份额等。其申购赎回必须以一篮子股票(或有少量现金)换取基金份额或者以基金份额换回一篮子股票(或有少量现金)。由于存在这种特殊的实物申购赎回机制,投资者可以在ETF二级市场的交易价格与基金单位净值之间存在差价时进行套利交易。

2、从申购规模来看,一般的指数型基金申赎最小单位较小,通过所有代销机构进行,ETF有规模较大的最小申赎单位,通过参与券商进行申赎。

3、从费率来看,ETF由于采取实物申赎,费率低。一般的指数型基金现金申赎增加基金经理的操作,费率高于ETF。

4、一般的开放式基金每季度或半年公布组合,每日公布上一日净值。ETF基金每日公布组合,日间实时公布拟合净值。

ETF与LOF

ETF基金与LOF基金(Listed Open-Ended Fund)同为上市交易指数型基金即可以在一级市场上申购赎回基金份额,又可以在二级市场交易;主要的区别在于:

1、LOF基金仅仅涉及现金与基金份额的交易;而ETF基金在一、二级市场的交易涉及现金、股票和基金份额等内容,投资者既可以在二级市场赚取交易差价,也可以用一篮子股票换取基金份额(或有少量现金)或者以基金份额换回一篮子股票(或有少量现金)进行套利。

2、从基金类型来看,ETF为指数型基金;LOF既可以是指数型基金又可以是主动配置型基金。

3、从套利机制来看,ETF实时套利,全日折溢价率低;LOF不可以实时套利,日间折溢价率高。

4、从流动性来看,ETF基金由于其套利机制,其流动性相当于成份股流动性加总;LOF基金取决于基金的规模,和买卖双方投资者的数量以及交易活跃性。

5、LOF基金每季度或半年公布组合,每日公布上一日净值;ETF基金每日公布组合,日间实时公布拟合净值。

ETF与封闭式基金

同为上市交易型基金,ETF与封闭式基金的不同表现在:

1、从基金类型来看ETF基金为指数型基金,封闭式基金可以为指数型基金也可以是主动型基金。

2、ETF基金在一、二级市场交易,并可以实物申赎,封闭式基金只能在二级市场按照市场价格进行交易。

3、ETF基金可以实时套利,全日折溢价率低;封闭式基金不可以套利,折溢价率较高。

4、从流动性来看,ETF基金由于其套利机制,其流动性相当于成份股流动性加总;封闭式基金取决于基金的规模和买卖双方的交易活跃性,由于折价,流动性较差。

5、封闭式基金每季度或半年公布组合,每日公布上一日净值;ETF基金每日公布组合,日间实时公布拟合净值。


现在中国股市有五个ETF:
易方达深证100ETF: 159901
华夏上证50ETF::510050
华安上证180ETF: 510180
友邦华泰上证红利ETF:510880
华夏中小板ETF:159902

我想地最后两个有意思, 可是需要多多分析。
友邦华泰上证红利ETF
  持股代码  持股名称   占净资产比例(%)
1。 600028   中国石化   8.91
2。 601006   大秦铁路   8.39
3。 600019   宝钢股份   7.28
4。 600005   武钢股份   5.58
5。 600011   华能国际   5.21
6。 600015   华夏银行   5.18
7。 600104  上海汽车   3.13
8。 600642  申能股份   2.92
9。 600177   雅戈尔    2.75
10。 600196  复星医药   2.51

委 比 ++60.67%
换手率 0.53%
振 幅 1.12%


华夏中小板ETF
  持股代码  持股名称  占净资产比例(%)
1。 002024  苏宁电器  16.30
2。 002202  金风科技  6.16
3。 002142  宁波银行  4.82
4。 002007  华兰生物   2.94
5。 002022  科华生物   2.70

别的我没找到,可是这个让我们知道苏宁电器是非常多的这个ETF。

委 比 ++89.71%
换手率 0.10%
振 幅 0.62%

2009-06-13

Chinese real estate is bubbly

From ChinaStakes:
Weak foreign trade shows China's macro-economy has not experienced any rebound from the bottom. CPI dropped 1.4%, year on year, in May, while PPI dropped 7.2%. This is the fourth straight month for decline in both figures, indicating looming deflation.

But go figure--China's real estate market is booming along with its stock market. The March rebound in the real estate market has developed into a luxurious banquet for the property industry.

The latest National Bureau of Statistics figures show that between January and May China's commercial housing sales reached 24,644 square meters, a leap of 25.5%, year on year, with residential housing sales growing 26.7%.

The real estate market boom is led mainly by a liquidity surplus due to a huge increase in credit. The Obama administration is printing money to beat the band, over $2 trillion. China's currency placement is also very high. At the end of April, M2 growth reached 25.95%, the highest level in the past 10 years.


Using inflation to lift prices will only lead to another deflation once the bubble bursts.

2009-06-10

Latest News From China

China's new bankruptcy law, which makes it more difficult to declare bankruptcy, has caused companies to choose "hidden bankruptcy".
Throughout 2008, only 3,500 enterprises formally filed for bankruptcy in China. Hiding behind this tiny number however is the approximately 800,000 businesses that exited the market by either cancelling their registration or having their business license revoked.

The rise in the number of these hidden bankruptcies has emerged since a new bankruptcy code came into force in China on June 1, 2007.

In order to solve problems that have emerged since the introduction of the new legislation, the Supreme People's Court has accelerated it's timetable to release judicial interpretations of the law.
Professor Li Shuguang diagnoses the problem:
"Among those 800,000 enterprises, some managed to responsibly resolve issues related to creditors' rights and to settle their debt, but many enterprises simply cancelled their license or registration in order to avoid debt obligations. This kind of withdrawal can be deemed as malicious bankruptcy or even credit fraud."

Li noted that there were far more bankruptcy cases when the former corporate bankruptcy law, introduced in 1986, was in effect. At that time bankruptcy was mainly instructed by government policy.

According to Li, these new methods of withdrawal provide no guarantee for creditors' interests and also bring about a higher risk of credit default in the market as a whole and amounted to a huge waste of quality assets.

Not only were these enterprises not making use of the market exit mechanism provided by the Law on Enterprise Bankruptcy, but in doing so, they also failed to take advantage of the the market economy's ability to efficiently allocate resources.

He believed that government intervention was the major cause of the huge drop in bankruptcy cases, saying "the Government has intervened too much in the market."

Prof. Li said, the reason a lot of enterprises that should make use of bankruptcy procedures don't, is because so many government officials fail to recognize that bankruptcy is a common method utilized by market economies. Bankruptcy procedures are used by market economies as a way to allocate resources.
My take: we already knew the bankruptcy law was too strict and many factory owners just walk away. Reform will cause a surge in bankruptcies, but it would be a positive step since the companies are closing anyway, and as Professor Li says, it leads to misallocations of capital.

Minsheng Bank (600016.SS) wants to offer H-shares:
民生银行H股发行再上路
民生银行相关人士表示,此次H股发行股数不超过发行后总股本的15%,并授予全球簿记管理人不超过上述发行的H股股数15%的超额配售权。

按照2008年末民生银行188.23亿股的总股本计算,H股发行将不超过33.2亿股,再加上不超过15%的超额配售权,此次发售H股最多不超过38.18亿股。

“具体价格与规模届时将视市场情况而定。”上述人士表示。

截至2008年底,民生银行的资本净额707.67亿元,其中核心资本513.07亿元;资本充足率为9.22%,核心资本充足率为6.6%。

民生银行董事会办公室人员告诉记者:“何时启动再融资、以何种方式再融资一直是其董事会和管理层考虑的议题。通过发行H股,能够适时补充资本,提高资本充足率;能通过进入国际资本市场,为推动民生银行的管理国际化战略创造有利条件;同时拓宽融资渠道,发行H股也能帮助民生银行提高海外影响力和品牌知名度,有力推进民生银行的国际化战略,从而更好地促进民生国际业务的拓展和开发。”

“民生银行这些年扩展速度比较快,股份制商行中属于业务增长速度较快的银行,为了支撑业务发展,为补充资本金还是需要开辟融资新渠道,H 股策划时间比较长,亚洲经济率先复苏,香港股市目前比较活跃,对银行来讲更符合经济利益。此次海外扩展和展开国际业务有直接帮助。”中央财经大学中国银行业研究中心主任郭田勇认为。

今年3月下旬,民生银行发行了50亿元的混合资本债券,但是核心资本充足率偏低。致使银行业务发展受到制约,给信贷规模带来不小压力。
Bloomberg also reports:
Beijing-based Minsheng plans to sell as much as 15 percent of its enlarged share capital on the Hong Kong stock exchange for the first time, it said June 5. The lender may increase the offering by 15 percent if there’s enough demand.

Minsheng’s capital shortage threatens to crimp profit growth amid a government-backed lending boom aimed at boosting expansion in the world’s third-largest economy. The bank, founded by 59 private investors including pig-feed tycoon Liu Yonghao, aims to increase profit by 35 percent this year after growth slowed to 25 percent in 2008, the slowest pace since its 2000 listing in Shanghai.

“Investors started to revalue Chinese banks after concluding that the profit decline trend has been stemmed, if not reversed,” said Liu Xiaochang, a Nanjing-based analyst at Huatai Securities Co. “Minsheng is the first to take advantage of this opportunity.”

The lender’s capital adequacy ratio narrowed to 9.22 percent at the end of December, lower than the 10 percent minimum required by the country’s regulator and the 13.4 percent average of the nation’s 14 publicly traded banks.

My take: Mingsheng is doing the same as Citigroup, Bank of America, Goldman Sachs and others. Get your money while the gettin' is good.

Chinese local governments need more capital:
The NAO conducted a survey in 18 provinces lately and in a report released on May 18, it revealed that some local governments had lagged in channeling the required funding timely, with the poorest performing province managed to release only 48% of the funding earmarked.

The Economic Observer learned that majority of the local funding came from policy-driven bank loans, while local bonds - by late April, 111.8 billion yuan worth of bonds issued - and contributions from local treasuries formed a minor part of the financing. Meanwhile, participation from private capital was negligible.

For locally initiated investment projects, even if bank loans were secured, the local governments concerned would need to raise the required registered capital, which constituted some 20% to 40% of the projects' cost.

Sources from the banking industry and local authorities told the EO that red tape and shrinking local revenues - resulted partly from tax cuts to stimulate the economy and reduced collections from less profitable companies - had added pressure to timely financing from local governments.

A state-owned bank researcher estimated that the grand total of local financing required - including that for projects mapped out under the stimulus package and other supplementary costs - could run into 5.2 trillion yuan, nearly double that of all the local treasuries' revenues combined - 2.8 trillion yuan - last year.

...To relieve financing pressure at local level in meeting the required registered capital for investment projects, the EO learned that Chinese Finance Ministry was planning to expand local government bonds issuance in the first half of 2009.

My take: good for the local bond markets. Also, China's still getting far more stimulus into the economy than the U.S., even if there's a funding bottleneck. It may turn out to be a blessing if local governments focus only on the most productive projects.

5月通货紧缩: 猪肉价降32%

6月10日上午国家统计局发布的数据显示,5 月份居民消费价格指数(CPI)同比增幅从 4 月份的-1.5%略升至-1.4% ,工业品出厂价格指数(PPI)同比增幅从 4 月份的-6.6%降至-7.2%。

通货紧缩压力明显减弱
一、食品类价格同比下降0.6%。其中,肉禽及其制品价格下降15.5%(其中猪肉价格下降32.0%),鲜菜价格上涨22.2%,粮食价格上涨5.0%,油脂价格下降23.1%,水产品价格上涨0.9%,鲜果价格上涨13.6%,鲜蛋价格上涨3.4%,调味品价格上涨3.8%。
  二、烟酒及用品类价格同比上涨1.4%。其中,烟草价格上涨0.2%,酒类价格上涨3.3%。
  三、衣着类价格同比下降2.3%。其中,服装价格下降2.5%。
  四、家庭设备用品及维修服务价格同比上涨0.5%。其中,耐用消费品价格下降1.8%,家庭服务及加工维修服务价格上涨5.5%。
  五、医疗保健及个人用品类价格同比上涨0.9%。其中,西药价格上涨1.0%,中药材及中成药价格上涨1.9%,医疗保健服务价格上涨1.0%。
  六、交通和通信类价格同比下降2.3%。其中,交通工具价格下降2.2%,车用燃料及零配件价格下降6.7%,车辆使用及维修价格上涨1.4%,城市间交通费价格上涨1.0%,市区公共交通费价格上涨0.6%;通信工具价格下降18.8%。
  七、娱乐教育文化用品及服务类价格同比下降0.8%。其中,学杂托幼费价格上涨1.6%,文娱费价格上涨1.5%,旅游价格下降2.6%,文娱用耐用消费及服务价格下降10.1%。
  八、居住类价格同比下降4.8%。其中,水、电及燃料价格下降3.6%,建房及装修材料价格上涨0.1%,租房价格上涨1.3%。

5月食品类价格同比下降0.6% 猪肉价降32%

2009-06-09

谢国忠:看好黄金涨到2000美元

大回调之后再买
《大众证券报》:在金融危机爆发后,你一直看好黄金。目前,市场上有一种乐观的看法,认为未来黄金能涨到2000美元/盎司,你是否同意这种观点?

  谢国忠:长远来看,在二三年内黄金涨到2000美元/盎司是有可能的,我还是比较看好黄金、石油的,因为有通胀、央行货币发放太多的因素。这是
一个趋势,但是不会一路涨到底,在这个过程中会有反复,所以,短线来说,涨得太多了就不能再追了。看好一个品种,都是在一个大回调以后再去买,风险比较
低。涨得比较快就说明有热钱在流入,有流入就会有流出,就容易导致短线亏损。

金矿:
山东黄金(600547.SS)
中金黄金(600489.SS)
紫金矿业(601899.SS, 2899.HK)
荣华实业(600311.SS)
灵宝黄金(3330.HK)
招金矿业(1818.HK)
瑞金矿业(0246.HK)
澳华黄金 (1862.HK)
紫金矿业H股2899比A股601899升值了百分五十多,2899跟招金矿业1818差不多。
这里有美国的金矿。

看到香港和美国金矿差不多,但是上边看大陆落后. 可是看看一年的:

如果黄金价格比通货膨胀升值多或者价格下降比通货紧缩少: 我是金矿牛. 最近金矿股票升值了,但是黄金没升值. 如果股市下降和黄金不升值,金矿股票会下降.

透露一个消息: 我买了NSU和GLD.

If the animal spirits are driving commodities...

Commodity prices are up, but that doesn't necessarily stem from real demand. As Andy Xie and others have said, speculation and inflation expectations are driving commodity prices. Then it is easy to understand how this headline can exist: China CPI Likely Falls In May.
Ha Jiming, chief economist at China International Capital Corp., forecast May's consumer price index to fall 1.2 to 1.4 percent year-on-year led by a drop in pork and vegetable prices over the month.

Industrial Bank's head economist, Lu Zhengwei, predicted May's CPI to fall 1.3 percent year-on-year, and noted that some distortion likely resulted because of high May 2008 figures.

A reversal in the markets is due, but not yet.

谢国忠|Andy Xie: Tight Spot for Fed, Blind Spot for Investors

Regardless of what investors or speculators say to justify their punting, the real driving force is the return of animal spirit. After living in fear for more than a year, they just couldn't sit around any longer. So they decided to inch back. The resulting market appreciation emboldened more people. All sorts of theories began to surface to justify the market trend. Now that the rising trend has been around for three months globally and seven months in China, even the most timid have been unable to resist. They're jumping in, in droves.

When the least informed and most credulous get into the market, the market is usually peaking. A rising economy and growing income produces more funds to fuel the market. But the global economy is now stuck with years of slow growth. Strong economic growth won't follow the current stock market surge. This is a bear market rally. People who jump in now will lose big.

Over the past three weeks, the dollar dove while oil and treasury yields surged. These price movements exhibited typical symptoms of inflation fear, which is complicating policymaking around the world. The United States, in particular, could be bottled in. The federal government's fiscal stimulus and liquidity pumping by the Federal Reserve are twin instruments for propping up the bursting U.S. economy. The fiscal deficit could top US$ 2 trillion (15 percent of GDP) in 2009. That would increase by one-third the total stock of federal government debt outstanding. Such a massive amount of federal debt paper needs a buoyant Treasury to absorb. If the Treasury market is a bear market, absorption becomes a huge problem.
Animal spirits are back, just what the Keynesians in charge wanted. However, those animal spirits have wiped out the gains from stimulus spending as higher resources prices and higher interest rates act as a tax on the economy.
The dollar's weakness can limit Fed policy options. It heightens inflation risks; a weak dollar imports inflation and, more importantly, increases inflation expectations, which can be self-fulfilling in today's environment. The Fed has released and committed US$ 12 trillion (83 percent of GDP) for bailing out the financial system. This massive overhang in money supply could cause hyperinflation if not withdrawn in time. So far, the market is still giving the Fed the benefit of the doubt, believing it will indeed withdraw the money. Dollar weakness reflects the market's wavering confidence in the Fed. If the wavering continues, it could lead to a dollar collapse and make inflation self-fulfilling.

The Fed may have to change its stance, even using token gestures, to assure the market it won't release too much money. For example, signaling rate hikes would soothe the market. But the economy is still in terrible shape; unemployment may surpass 10 percent this year. Any suggestion of hiking interest rates would dampen growth expectations. The Fed is caught between a rock and a hard place.
The Federal Reserve has a Hobson's Choice on the economy, the question is how do they get there. Will it be deflation or inflation?
While inflation expectations are causing some in the investor community to act, the rest are betting on strong economic recovery. Massive amounts of money have flowed into emerging markets, making it look like a runaway train. Many bystanders can't take it any longer and are jumping in. Markets, after trending up for three months, are gapping up. Unfortunately for the last-minute bulls, current market movements suggest peaking. If you buy now, you have a 90 percent chance of losing money when you try to get out.

Contrary to all the market noise, there are no signs of a significant economic recovery. So-called green shoots in the global economy are mostly due to inventory cycles. Stimuli might juice up growth a bit in the second half 2009. Nothing, however, suggests a lasting recovery. Markets are trading on imagination.

Amen. He goes on to talk about real estate, specifically in China:
China's property market holds even less value in the long run. Chinese properties are sitting on land leased for 70 years for residential properties and 50 years for commercial properties. Their residual values are zero at the end. The hope for perpetual appreciation is a joke. If you accept zero value at the end of 70 years, the property value should only be the use value during those 70 years. The use value is fully reflected in rental yield. The current rental yield is half the mortgage interest rate. How could properties not be overvalued? The bulls want buyers to ignore rental yield and focus on appreciation. But appreciation in the long run isn't possible. Depreciation is, as the end value is zero.
Check out the rest of his article at Caijing.

2009-06-08

Shanda makes an offer for Hurray!

Shanda to Take Over Hurray
Shanda Interactive Entertainment Inc. announced plans to launch a tender offer for 51% of fellow Chinese online-entertainment concern Hurray Holding Co. with the support of Hurray's board.

Shanda is offering $4 per American depositary share, a 25% premium to Friday's closing price. The shares bottomed out at 93 cents three months ago, but have surged since late April amid potential takeover efforts.

2009-06-07

Protectionism Rising

Canadian municipal leaders threatened to retaliate against the "Buy America" movement in the United States on Saturday, warning trade restrictions will hurt both countries' economies.

The Federation of Canadian Municipalities endorsed a controversial proposal to support communities that refuse to buy products from countries that put trade restrictions on products and services from Canada.

The measure is a response to a provision in the U.S. economic stimulus package passed by Congress in February that says public works projects should use iron, steel and other goods made in the United States.

The United States is Canada's largest trading partner, and Canadians have complained the restrictions will bar their companies from billions of dollars in business that they have previously had access to.

"This U.S. protectionist policy is hurting Canadian firms, costing Canadian jobs and damaging Canadian efforts to grow our economy in the midst of a worldwide recession," said Sherbrooke, Quebec, Mayor Jean Perrault, also president of the federation that represents cities and towns across Canada.
Canadians angered over "Buy American" rule

China May Not Approve Hummer Purchase

A Sichuan company's bid to buy up a famous brand name may hit the little snag of reality, as Chinese officials don't see the wisdom in buying the gas guzzling brand when the country is pushing for industry consolidation and electrification.
However, any such deal would require Chinese Commerce Ministry approval at the provincial level at least.

Reports in the Shanghai Securities News and other state-run newspapers Friday said Sichuan Tengzhong had not yet obtained such an approval. They also raised questions over whether the deal will be allowed to go through, with one report likening Tengzhong's plan to acquire Hummer to a "snake trying to swallow an elephant."

California Budget Solution

Mish posted a link to an interactive feature on the California budget that allows you to come up with your own solution. Here's my solution:

$8 billion in new taxes on gas, cigarettes and alcohol, plus new taxes from allowing offshore drilling. In combination with $25 billion in cuts, it generates a $10 billion surplus, enough to pay down some debt and eventually reduce taxes on savings and investment.

2009-06-06

Yuan Overvalued?

There are a minority of economist and analysts who believe the yuan in overvalued. Even the Chinese wonder about it:
There is some concern that the pilot program could cause massive yuan outflows and an increase in China's foreign exchange reserves, but that negative may be offset by the broader use of the yuan by foreigners, who would be attracted by a currency expected to appreciate over the long term.
That's from an article on the yuan settlement program, which is currently working with the State Administration of Taxation to finish up the policies. Foreign demand may offset the outflow, but the current policy already allows a lot of yuan buying, while not allowing Chinese to sell. The question is whether there is enough new demand to offset the pent up selling.
踌躇退税问题 人民币结算试点只差“临门一推”
知情人士告诉《财经》记者,实行跨境贸易人民币结算试点后,试点地区的一些进出口业务,将不再经过收汇、核销等原本由外管局控制的环节,这使得税务部门对这些业务的监管风险加大,需要在退税办理的具体操作方式和文件要求上做出相应的调整。这是目前细则迟迟无法出台的主要原因。

  国务院5月27日召开常务会议,研究部署进一步稳定外需的政策措施,其中就指出“抓紧实施货物贸易人民币结算试点”。基本与此同期,央行与税务总局召集会议讨论了跨境贸易人民币结算试点中的退税问题,消息人士表示,只待此问题解决,试点工作即可实施。