Remembering the Bear

March 17th, 2018

We’re about 10 years from the bailout of Bear Stearns. Some clever people actually made money on the deal. It took from the August 2007 conference call to March of the next year for the drama to play out. Things went rather slowly from bad to worse until the Lehman disaster in September 2008, which ended up giving us QE and all sorts of things like 0% interest rates. In our opinion the world is pretty lucky that technology advances and China’s loading up on debt mitigated the problems, at least for a while.


March 16th, 2018

Perhaps because we listen to the radio for an hour a day on our jog, we have quite a musical soundtrack playing most of the rest of the day, playing a combination of current music, golden oldies, some oddities, the Dead, classical music, etc. Hey, Bach probably had a heck of a soundtrack too. Anyway, this one from Kubrick is notable, and there’s even an appearance of the 2001 soundtrack. OTOH, if you want to read about the madness, please do.

Dodd Frank redux

March 15th, 2018

We analyzed this disgrace a long time ago. Here’s a good update. BTW, in case you happen to be in a good mood, here’s something that can cure that. Idiots abound.

Another brick in the wall

March 15th, 2018

So they don’t need no education but they do need thought control. Thus, Example A.

Ear wax can spoil your hearing

March 15th, 2018

Gosh it was just the other day that we once again mentioned Amy Wax. Timely. Her mandatory class has just become no longer so. As John McLaughlin used to say, Bye Bye. The world created by the immense suffering and victory of the WWII generation is now pretty much the moral equivalent of the Confederacy in our universities. Wow.

Micro this and macro that

March 14th, 2018

Damn fools. Hey, what so you expect when common sense has been outlawed to the extent that half of a law professor’s colleagues want her fired for expressing what 95% of everyone believed in the age of Ozzie and Harriet, Father Knows Best, Danny Thomas and so forth. Hey, BTW, did any of these fools do anything that was 0.00001% of what Danny Thomas did?

Some interesting numbers today

March 13th, 2018

Former GS banker:

a young Beijing-based entrepreneur I met recently estimates that at least 20% of Chinese – over 250 million people – are now making $40,000 per year. Besides the United States, no other country in the world has that many people generating that much individual wealth. Now, think about this. If China can sustain 5.5-7% annual economic growth for the next 15 years, the number of Chinese earning $40,000 per year could more than double.

Also, VF did a HuffPo a while back. Geez….


March 12th, 2018


The International Monetary Fund (IMF), the most prestigious international financial institution in the world, has rated China’s ranking to number one economic superpower in the world — surpassing those of the United States based upon the purchasing power parity of GDP indicator (gross domestic product). IMF has asserted that China produced 17% of the world gross domestic product

Sigh: we dealt with this a dozen years ago or more. (BTW, we watched an episode of SVU the other day, and we were going to say that if NYC spends millions on stupid trials like this, the city is doomed; then we reconsidered: if a guy can become a zillionaire by selling stuff like this for many decades, he’s the greatest since PT Barnum.)

More dizzying numbers

March 11th, 2018


Real estate investment in 2017 was close to Rmb11tn, up 7 per cent compared to 6.9 per cent in 2016, according to the National Bureau of Statistics. The average house price by the end of 2017, according to Wind, was Rmb13,967 per square metre, 7.15 per cent up year-on-year but far below the 2016’s growth rate of 19 per cent. Housing sales grew by 13.7 per cent year-on-year, much slower than 2016’s 34.8 per cent. Such statistics suggest not a downward spiral but a managed slowdown.

According to the IMF, China’s debt-to-GDP ratio—borrowing by governments, non-financial companies, and households from both banks and bond markets— rose to about 254 per cent in 2016, with the government debt ratio at 44 per cent, the household ratio at 44 per cent and non-financial companies’ ratio at 165 per cent. However, if the national savings ratio of about 46 per cent (with corporates at 17 per cent, the government at 6 per cent and households at 23 per cent) is taken into account, the overall debt serviceability is acceptable although not healthily sustainable.

As for the financial system’s increasing leverage — brought about in particular through the issuance of off-balance-sheet wealth management products or inter-bank transactions — a resolution to this gigantic mess needs to be achieved over the long-run.

According to the Bank for International Settlements (BIS), the size of the outstanding shadow savings instruments in 2016 stood around 77 per cent of GDP or Rmb57.3tn (which is broken down into wealth management products at Rmb23.1tn, trust products at Rmb20.2tn, entrusted loans at Rmb13.2tn and P2P loans at Rmb0.8tn). No matter which aspect of the shadow finance problem is tackled first by regulators, there is an official consensus that this problem will take time to resolve.

Nevertheless, when compared to the overall size of China’s financial system, an inherent resilience becomes clear. Total financial assets of Rmb307tn (broken down into Rmb59tn in equity, Rmb75tn in bonds and Rmb173tn in deposits, according to Wind) provide an ample buffer as regulators tighten curbs around these lightly-regulated products.

How about non-performing assets, the old Achilles heel? According to CEIC, non-performing loans (NPL) account for 1.74 per cent of a total Rmb1.7tn in lending. Some China watchers may doubt the truthfulness of the NPL ratio itself. However, the financial institutions’ profit accumulation and ongoing reinforcement of their capital base can without doubt prevent old troubles from turning into new mistakes.

The author is on the executive committee of this, so grain of salt please. Having said that, China isn’t California.

So do you want to feel good or bad?

March 10th, 2018

For bad, we recommend most every story brought to you by CNN and the freak-out clones. Send in the clones; they’re already here as the song said. We’re not even going to link because there’s no point after all. The Swamp is far worse than we ever imagined, but that’s our fault. After all, $7 trillion a year is a lot to skim from, and to expect otherwise from toads who couldn’t get a real private sector job with P&L accountability is foolish.

But to conclude on a positive note from long ago, check out Steve Lawrence and Sammy Davis Jr in this video from 1979. It turns out that 4 decades is a long, long time. (Final tiny point: college grads today would not be able to identify all the historical references in this 50 year old song by the Stones — how pathetic is that?)

What’s wrong with this story?

March 9th, 2018


Smaller cities in China are luring graduates with generous cash incentives, tax breaks and cheap flats to take jobs outside Beijing and Shanghai. China’s second tier cities, including Nanjing in the east, have long been shunned by university graduates but the government is trying to reverse this trend and spur economic growth outside the capital. More than a dozen Chinese cities, mainly regional hubs, are offering lower income tax rates, help with housing and other public benefits to entice postgraduates. For highly qualified and talented postgraduates, who could be considered as leaders in their fields, the city of Zhengzhou is handing out cash payments of as much as £570,000 each. Shi Dadong, the city government’s spokesman, defended the offer and insisted that it represented an investment in the future. “It’s like raising a child. You invest everything for him to go to school, and he will be able to buy a car in the future. If you don’t invest in him, you will never see the car.” A postgraduate who settles in the city will get a monthly payment of £170 for three years, and someone with a master’s degree receives £113 a month.

Also: “A district urban management authority in Wuhan, Hubei province, issued job adverts on Friday for two public toilet managers, stating that successful applicants must have at least a bachelor’s degree.” Gee, do these fellows get the 570K too?

Today’s GDP numbers from China, eurozone and US

March 8th, 2018


China’s gross domestic product is forecast to reach about $13.2 trillion in 2018, beating the $12.8 trillion combined total of the 19 countries that use the euro. China should grow at a pace of at least 6% for the rest of this decade and keep up a 5-5.5% rate throughout the 2020s, Mann projected. He said it’s hard to argue that growth in the euro area would be much above 2% for the next couple of decades.

China faces numerous challenges. It will have to manage ballooning debt, financial markets need to open to global investors, and the government will have to adjust to a rapidly aging population. The UN projects that a quarter of its residents will be over 60 by 2030.

US GDP is about $20 trillion, according to people who do not know how to write a press release. BTW, we haven’t thought much about the aging of China’s population, but we’ll now keep that in mind.

Every day a new low

March 7th, 2018

New CBS show:

after a white cop in Chicago mistakenly shoots and kills a black doctor, the show follows three different families that all have connections to the case as the story is told from each perspective. Wyle will play Daniel Calder, described as a dedicated high school teacher mourning the loss of his innocent African-American husband who was shot and killed by a white police officer. Daniel is now a single parent to his adopted daughter, Jira.

Twenty years ago, the horrible nature of the 435 episodes of Ozzie and Harriet was revealed. Now look where we are. Progress?

Charm, charm, and charm

March 7th, 2018

Charm, charm, and actual charm. Maybe all is not lost, though we never imagined the current level of chaos ten years ago.

Our charming culture

March 5th, 2018

We watched a few minutes of the Academy Awards yesterday. Not unpleasant, though they passed over the 2 WWII movies in the best picture category. Correct or no, we can’t say; we didn’t see them. But that’s part of the point. The winner in that major category had little to do with real life — underwater fish and deaf person: what’s up with that? Go look at the best picture list from 1930 to 1954. Any deaf fish? And BTW, how about that racist war criminal? Charming.

Miscellany: Kimball, Reid and critique, outer space. Help, Mr. Data! And oh yes Mr. Schumer, join the party.

Then and now

March 4th, 2018

Now they’re starving in Venezuela. A year after the country nationalized the oil industry, we crossed into Venezuela from Colombia in a mountainous area, while on a trip with a coal company client. We saw slices of meat hanging outside on nails; must have been some sort of primitive butcher shop. By far the oddest thing we saw were kids with rickets. Damn fools haven’t learned a thing in 40 years.


March 3rd, 2018

Everything is wrong about this piece. Bizarre that it seems to be written by a Nobel laureate. More coo-coo birds here.

Charming, and then some

March 2nd, 2018


China leaned heavily on major internet companies when Guo Wengui, a Chinese tycoon in self-imposed exile, went on Facebook and YouTube to accuse a number of Chinese officials of corruption. Chinese officials last year complained to Google, which owns YouTube, and Facebook, according to people familiar with the events who requested anonymity because they were not authorized to discuss the issue publicly. Facebook suspended Mr. Guo’s account. In a statement, the company said the account published the personal information of others without their consent, which violated the platform’s policies.

Yeah, right. Mr. Objectivity. More on the New Media’s war on and suppression of traditional-common-sense here. Yikes.

What’s happening in India?

March 1st, 2018


Poonam calls her young and restless subjects the “Dreamers” and claims that they are the “most desperate generation of Indians since Independence.” Whereas the children who came of age after India’s independence in 1947 were content with the freedom they wrested from the British Raj, the Dreamers expect their government to actually deliver on the freedoms enshrined in the constitution, such as eliminating status hierarchies in society, minimizing the unequal concentration of wealth, providing gainful employment, and guaranteeing social protection. Empowerment must come between elections, not simply during them.

Unfortunately, Poonam argues, Indian democracy shows few signs of attaining such lofty ideals. Today, the bulk of India’s youth bulge falls into at least one of three categories she calls the three “Es”: uneducated, unemployed, or unemployable. The problem with India’s education system is not schooling but learning. At the primary level, India is approaching universal enrollment. Yet over half of all students enrolled in the sixth grade cannot read a story suitable for second graders. One-tenth cannot even recognize the numbers one through nine.

These failures exist at every rung of the ladder. A recent assessment of Indians between the ages of 14 and 18 conducted by the nongovernmental organization Pratham produced a slew of depressing statistics: 40 percent cannot tell the time looking at an analog clock, 36 percent do not know the capital of India, and 62 percent cannot compute a ten percent discount on a given price. Higher education has become a lucrative business in India, leading to a surge in university enrollments. Between 2000 and 2015, according to the political scientist Devesh Kapur, India established almost six new colleges every single day. Barring a few isolated examples, however, these institutes are a classic case of quantity over quality.

The second crisis relates to the lack of jobs. The Indian economy needs to create roughly one million jobs each month just to keep up with the natural growth in the labor force. The government’s own estimates suggest that India is creating between 350,000 and 400,000 a month. Those who are not lucky enough to find employment in the formal sector join the growing hordes trying to make ends meet in the informal sector. A big part of the problem is that unlike its East Asian neighbors, India adopted a “precocious” economic model that leapfrogged manufacturing altogether and went straight into services.

The trouble with this model is that not every Indian can become a software engineer; establishing a robust manufacturing base is the only tried-and-true strategy for mass employment generation. Unfortunately for India, it is not only failing to industrialize, it is prematurely deindustrializing. Frustrated job seekers have increasingly turned to the public sector. Unfortunately for them, the number of government posts has been consistently shrinking for the last two decades. This explains the absurd sight of more than 2.3 million Indians rushing to apply for 350 government positions to serve as lowly office helpers, as happened in 2015. The most perverse twist is that despite India’s abundance of labor, industry struggles mightily to recruit qualified workers. A 2016 report studied 150,000 engineering students across the country, only to find that 80 percent of them are unemployable

Let’s see. China is running out of water, South Africa has decided to become the new Rhodesia, NK this and that, and on and on and on. What else could go wrong?

Twilight Zone: fantastic Life Expectancy and GDP growths = 0 or worse

February 28th, 2018

Another example of this 2005 iPod ruining piece, but with a difference. Here’s a chart on income growth over the last century in the US. Here’s a chart on life expectancy — 50%+ increases in both in a tiny amount of time — You think this would make the younger people endlessly joyous, totally appreciative, and 1000% eager to ask how they can help make more of this. Wrong. Instead, hysteria grows apace in the millennial universe. Professors who say commonsensical things are told they ought to be fired. The young men sound insane, fantasizing about how they’re oppressing everyone, when they haven’t done a damned thing in their lives yet.

Elliot: “Why, for all of us, out of all that we have heard, seen, felt, in a lifetime, do certain images recur, charged with emotion, rather than others? The song of one bird, the leap of one fish, at a particular place and time, the scent of one flower, an old woman on a German mountain path, six ruffians seen through an open window playing cards at night at a small French railway junction where there was a water-mill: such memories may have symbolic value, but of what we cannot tell, for they come to represent the depths of feeling into which we cannot peer.”

Hard to see this ending well, unless new coalitions get beyond nonsense.