Labor Day Envy!

Labor Day in the US and I'm envious.  Actually, given how easy US markets have been (relative to Asia, specifically China), I think I deserve to be a bit jealous.  After all, it's those of us here in Asia that have been having a bit of a mare while the US seems to be chugging along.

Accordingly, Ben Bernanke set everyone up for a restful Labor Day with his benign address at the FOMC meeting in Jackson Hole.  While not being specific, he made the case for further easing to help the US economy.  Interesting that everyone's so quick to believe Ben.  Meanwhile China's governments (both at local and national levels) have earmarked over RMB20T in economic stimulus and the market can't catch a bid.  Pretty discouraging as RMB20T is a massive sum - in fact, it's roughly 40% of China's GDP.   Tough times for those who subscribe to the theory of 'just throwing money at the problem'.  For now, China's acting more like the oft-cited complaint 'mo money, mo problems'.      

    

Did you see Ann?

Political affiliations aside, didn't Ann Romney look great at the Republican National Convention?  I really have to hand it to her, she has aged remarkably well.  However, the 'love' she lamented so wistfully of in her address, doesn't look to have made it out to the Far East.  Or more specifically to China as the Chinese markets hit a new 42 month low.  And, the U.S. press is particularly critical of the current Chinese economic climate.  Just logging into CNBC right now (Pathetic but I'm detoxing and BORED) and look at the Top 4 headlines:


China — Not Wall Street — Caused 2008 Crisis: Study
China’s ‘Zombie Firms’ a Growing Risk: Andy Xie
China Agbank Profit Misses as Margins Shrink
China's Biggest Steelmaker: 'Most Difficult' Period Ahead

Anyway, given how important China is to the world economy, I hope it does get some love.  Hey, Ann donned Red last night, and while it is the patriotic choice, it is also China's national color.   

Confessions of a Delinquent Blogger

Sorry I've been MIA (Missing in Action).  Those who know me well would suspect I've been out on holiday. Sadly, that's not the case.  Frankly I've been working a ton and it's all been a bit depressing.  Yes, US markets had been smooth sailing for the most part, but, we're really struggling to follow here in HK/China.  In fact, the Chinese A-share market is now at 2009 year lows.  Extremely discouraging as the Chinese government has already promised billions of dollars of stimulus commitments to help the economy.  Nothing's working!

Bring me to my next point (and bear with me please).  Did you know Bo Xi Lai's wife, Mrs Gu (so much less confusing if she was Mrs. Bo), was convicted of murder?  Recall, Bo Xi Lai is one of the highest ranking members of the Chinese Communist leadership who had that staggering fall from grace.  Bo and his wife have been accused of wide spread corruption, including stealing hundred of millions of dollars, and his wife has just been convicted of murdering a British business associate.  Hugely scandalous/ high-profile case that you'd imagine would go on for months in a Western court.  Oddly enough, Mrs. Gu's murder trial lasted 48 hours and barely publicized.  In fact there is even rampant speculation that it wasn't even Mrs. Gu on trial but it was a body double.  You can't make this stuff up!!

To sum it up, seems the Chinese government is struggling with a pretty rampant credibility problem right now.  Imagine if this were happening in your home country, it would be pretty tough to trust your politicians?  Anyway, I hope China gets it's act together soon as it's been a brutal year.

Stormy Weather...

Ugggh...barely slept last night after some seriously scary thunder.  Have to be honest, I still get frightened by really heavy thunder storms.  Especially the super loud ones when the sky is jolting with lightning flashes.

Now it's another Typhoon Warning.   Speaking of storms, China continues to be a tricky place.  While it's no secret that the world's fastest growing economy has been slowing, how bad is it?  Debate continues but many are arguing if the Chinese government doesn't start stimulating in a meaningful way SOON, it could be pretty disruptive.  Kind of like the weather last night.  Stay safe!  

Olympic 2012 Wrap-Up

Sadly the Olympics have come and gone.  Actually while I'm disappointed it's over, I'm kind of relieved I don't have to hear any more of Bolt's annoying boasting.  Yes, he's an amazing athlete!  But a little grace and modesty (even if it's fake) would go a long way.  We're certainly not seeing Michael Phelps brag shamelessly.  On that note, what a great year to be an American!!  Kudos to our Olympians (particularly women) on an outrageous performance.  Likewise, a serious Congratulations to our cousins across the pond - Great Britain!  Frankly, having seen the 2008 Olympics, I  had worried it might be impossible for anyone to come close to the show staged in Beijing.  But, the Brits pulled it off.  They staged an original, tasteful, memorable event and won a ton of Gold medals along the way.

Incidentally, the 2012 Olympics serves as an apt analogy to current market dynamics.  China's 'dream economy' continues to battle growing (or lack thereof) pains.  Meanwhile the US markets look to be muddling through (despite the negative campaign rhetoric).   In fact, I'd argue there are some genuine signs of a housing recovery emerging in the US.  And, need I mention the thriving London housing market?  Admittedly most of it due to an exodus of of wealthy denizens from the Middle East, Russia and Euro-zone countries.

Let's wrap it up here.  It's a Monday night and I'm finally Olympic-free so I need to catch up on my sleep!          

              

Olympics

Is anyone else super excited for the Olympics?  I love the Olympics!  Recall last Olympics took place during a time of financial Armageddon (literally).  And despite the turmoil (I was a former Lehmanite!), watching Michael Phelps dominate or marveling at the freakishly tiny Chinese gymnasts made it all seem ok.

I'm hoping the London Olympics provides us the same break.  Interesting side note here.  I distinctly recall the closing ceremony of the Beijing Olympics and the conversation shared by my fellow spectators.  Everyone agreed London 2012 wouldn't be able to follow the amazing show staged in 2008.  That said, with all the scrutiny and worry around China's economy right now, maybe London will be just fine!      

Tough Times call for Tacos 'N Tequila

Hard week.  Europe is now being haunted by problems in Spain and tax Day in America!!  Ugh!!  As much as I believe in the US recovery, I'm a bit of a grumpy American today.  

So let's move onto China.  Crazy things are happening.  Let's start with the precipitous fall of Bo Xi Lai (once deemed to be a very very promising member of the Chinese politico).  Latest chatter (which is all it is for now) is that his wife is being investigated for the murder of English businessman Neil Heywood.  Story gets more convoluted in that not only was she a close family friend (godmother to their children), she is alleged to have had an affair with him.

DRAMA - they could make a movie out of this!  Now much less dramatic but more important is the change in the China foreign exchange regime.  China has now amended the band that their currency can fluctuate.  You see, the RMB is a very tightly controlled currency so not subject to the same laws of supply and demand.  That's why US politicians get so mad at China and believe their unfairly cheap currency is making US manufacturers uncompetitive.  Now this new widened trading range (first time in 2007) is exciting people that China could be opening up.     

Gotta wrap it up here as I'll be busy wrapping up tacos tonight as the featured TaCorean (to quote my brother) at Heirloom.  Amidst some pretty choppy markets, their Tacos 'n Tequila night is always a nice break!

I miss election years...

Sick of watching American politics?!?!  Well things can be worse.  In China it's a transition year.  Note that's very different from an election year.  Happens once a decade and it's truly a lame duck year.  While US politicians are busy at working trying to win your favor and get re-elected, Chinese politicians are in wait and hold.  Partially explains why the Chinese Government has been so quiet as of late.  Meanwhile just last night Fed Chairman Bernanke commits to further helping the economy if necessary. 


Yes indeed the strong silent type can make for fun early dates.  However the prolonged silent treatment also runs the risk of exasperation.  That's kind of what we're seeing in markets.  China's making it too hard.  That explains why US markets are +30% over the last 18 months while China hasn't done anything!  Plus, you get the extra holiday on election day.  How I miss election years...

China...uuuugh!

China’s acting like a liability.  Not only a slowing economy, it is a power transition year.  Only happens once every decade, so a pretty big deal and recently we’re seeing political hiccups.   As if China doesn't already have enough issues. Sucks that suddenly everyone's a political expert, spewing about the recently ousted Bo Xi Lai.  ONLY POSITIVE spin to the current economic/political confusion is that the government may introduce measures to help the economy and ease the transition.  

Great article here on the challenges and opportunities China faces.  Again I’m an optimist and I side with the author Martin Wolf’s thesis that China’s serious about getting it right.  In the meantime, I don't expect an easy time.  Glad that I can focus my energy on the things that are working well in the US.  I'm still really excited about US banks and luxury consumption stocks.  And of course US real estate... Dream apartment for this week.    

Brushing up on our Chinese...

My very cute three year old nephew Colby went to visit his paternal grandparents.   His Taiwanese grandmother was understandably pretty concerned and unimpressed with his Mandarin (or lack thereof).    When pressed to say something (ANYTHING) in Mandarin, he finally blurted out 'Ni Fang Pi'.  Google this yourself but not nice!  I found it hilarious.  Nobody else did.  Thankfully I don't speak Mandarin as I would definitely get the blame for this. 


Anyway, I do wish I spoke Mandarin, as all eyes are on China right now.  A lot of things going on as it's a transition year with a new leader preparing to take over.  Not to mention ongoing concerns of a potential housing bubble collapse and some stress in the banking system.   Thankfully the National People's Congress has assembled this week to discuss it all.  However, the first thing they do is cut the GDP growth forecast from 8% to 7.5%.  This is a big deal as China has targeted 8% growth since 2005.  


Not a great start to the week and markets are trading weaker off the back of it.  China's now the world's second largest economy and clearly a big driver of global growth.  So expect China to get a lot of air-time this week.  Makes for a good time for us to all to do a little China homework.  Kind of like Colby.      


  

Caution the rise of the Mama's Boys!

My weekend was uneventful but the peeps in China should be pretty happy.  PBOC has told Chinese banks to start lending more.  Also things in Greece still unclear but you may want to break out the Baklava (supposedly) we should see an agreement by Monday.  

Now onto more sobering news, Mama’s Boys (GROSS!) are on the rise.  See, the number of  25-34 year old Euro-zone boys living with their Parentals is pretty huge.  However, the problem isn’t evenly distributed and a lot worse in some places.  In that vein, I have attached this nifty chart to see where the sissy problem is the worst.   No surprise GREECE (with almost 60% of boys bunking with mommy/daddy) takes top spot as the  ‘mama’s boy’ capital and also boasts the highest CDS.   Never heard of CDS (Credit Default Swap)?  It’s easy – basically a fancy term for insurance to protect against a country going bust.  So stop glazing over when you hear finance boys chatting CDS!  If you’re the type to who thinks Mommy-obsession is a No-No, better mind the CDS!  The relationship(correlation) between CDS and Mama’s boys at 75% is dangerously high.     

CHINA- Why all the drama??

Are you fully invested in the market right now?  I’m not. (uugh!!)  Thankfully/Regretfully we’re not alone -  Stock trading around the world fell to the lowest level since at least 2006 even as global equities have been climbing higher. Barton Biggs (another super smart guy) saying this means we have further to go.  HELLZ YEA!!

Ok ladies be prepared – there will be loads of press on China inflation now (so basically pork on mainland is getting PRICEY!).  Jan inflation at 4.5% and market wanted 4%.  Now reason this sucks is because China’s economic growth is also normalizing and they need to inject some adrenaline into the economy.  Now if inflation is going up (and poor peeps are already stressing about food costs) it's hard to inject this ‘adrenaline.’  Because as much as the China government dudes want their hot wives (as well as sketchy mistresses) to buy more Louis Vuitton, they don't want to see poor peasants going nuts Tiananmen style. Unlike a lot of what our pro-democracy history teachers taught us (mine used to wear an Amerian flag pin on the lapel of his SEARS ROEBUCK SUIT) – they weren’t protesting for democracy – it was a peasant revolt on soaring food costs.      

Some people in the press are now going to say China’s going to COLLAPSE.  Now these people are as silly as the people who said the US is going to collapse like Japan (US demographics totally different to Japan - thank TEEN PREGNANCY and the CATHOLIC CHURCH) and culturally we’re way different (look at images of Katrina vs 2011 Tsunami).  Now back to China – unlike the US where the government is like SANTA CLAUS and encouraging you to spend your cash, China can't really do that.  It’s over 1 BILLION people (imagine how big that is – that's 3x the size of the US) and when people think things are getting expensive – they will hoard.  Kind of like what I saw in the Sak’s Jan shoe rampage which was pretty ridiculous and shut the whole store down.

Now do I think china is going to collapse? No.  First of all, the US is back – China really struggled when fat Americans stopped being able to afford  cheap ‘Made in China’ Walmart T-shirts and DVD players.  Thankfully we’re back and binging to buy more Tebow gear at our local Walmarts.  Also, what is China doing right now? They are quietly loosening – staying flexible on lending and injecting money into the economy. Unlike the US Fed, which like Santa Claus is asking us to SPEND, China is doing it quietly.  It’s going to take a long time to see how this plays out.  Be patient and just like that annoying boyfriend that’s always so mysterious – China’s making us work at it and read between the lines.