Tomorrow’s news today, etc

September 18th, 2017

Youngstown Steel‘s Black Monday 40 years ago. Very sad, as the piece notes. Back at that time Youngstown was not one of our accounts, but we loaned money to many coal and steel companies in that area for the company that had just changed its name to Citibank. Great job, going down in the Y&O coal mines, standing above J&L’s BOF’s in their steel mills, supervising a $66MM RC/TL for Wheeling Pittsburgh Steel, etc. Ah well, time flies.

(The next year, we got a nice letter from the Citibank CEO saying he had approved our request to fund and furnish a stock price machine for the library of the business school we started attending; the school turned down the offer. We wonder if that would happen today if the equivalent of the fantastic and groundbreaking CEO Walt Wriston made such a request. Turn down Google or Facebook or Amazon guys?)

BTW, we still have many files and memos associated with these duties in Citibank’s Extractive and Process Industries Department 1974-1978, and many of them make good reading today, so we’ll probably, over time, share some of these old ways of doing business, even if we’re the only party entertained

Good grief, more numbers

September 17th, 2017


Yuan positions accumulated from foreign exchange purchases fell 821 million yuan (US$125.36 million) in August – the 22nd monthly decline in a row, according to data published by the People’s Bank of China. A drop in the figure means China has reported a net capital outflow – the bigger the drop, the larger the outflows. But the decline in August was much smaller than the 4.6 billion yuan fall in July and the 34 billion yuan decrease in June – showing that the cash exodus is starting to wane.

In the same month last year, yuan positions plunged by nearly 200 billion yuan. That compares to the 700 billion yuan decline at the height of China’s capital outflows in December 2015. The trajectory of changes in yuan positions is in line with other indicators measuring capital flows. The country’s foreign exchange reserves have gone up for seven consecutive months to August, when they were firmly above US$3 trillion. Meanwhile, the yuan has gained about 6 per cent against the dollar so far this year.

BTW, what the heck is a goat taco?

A little reading, etc

September 16th, 2017

Very good piece at AT on problems with data in the scam of global warming. There was a very interesting discussion between Ralph Nader (whose radio show is often nutty) and Franklin Foer but there is currently no link to the conversation. The issue is the data that Google, Facebook and Amazon, among others, have on everyone, and the problems, yes problems and more problems, with that. Finally there was a radio program we caught for a minute on our jog featuring a professor recounting all the horrible things about the US. The most notable thing was while the fellow recounted the terrible things, constantly playing in the background was the this music. Perfect!

So strange, so strange

September 14th, 2017

We simply have no understanding of what NK thinks it’s doing. We have no analysis, since a guy who kills his brother in a public place is not predictable in a rational world, except for big trouble ahead. Meanwhile absurd nuttiness of a somewhat related kind escalates on US campuses.

Our view, FWIW, is that China is using its non-action on NK to pressure, not the US, but Japan and South Korea, to bend towards its will in the South China Sea, and other things, before it reins in its lunatic protectorate. As for antifa, it is a gift of infinite value to existing Trumpkins, who will expand their numbers the crazier these lunatics get. We’ll link to the Carlson discussion tonight with an unkempt loony antifa professor (!!!) when it becomes available. We share the opinion of Dennis Prager and other oldsters that the media/leftists have lost their minds. They are vastly outnumbered by ordinary Americans and when the stuff hits the fan, they’re in for many bad surprises.

Pretty much done

September 13th, 2017

Here’s a piece on ESPN. That’s where we are today. We don’t want to participate in the name calling that’s going on today, though we’re obviously on the side of the oldsters and have been for quite a while. The oldsters are doing a very good job, BTW, and we know the media has gotten much worse than a decade ago. But we’ve stopped learning; once you know something, what’s the point in repeating it every day? That’s part of why we’ve turned to China so often; at least we learn new things — but that’s even kind of boring now. We’ll see where things go and thank you for reading this from time to time.

More: we forgot to mention the audaciously self-congratulatory TV fundraiser where celebrities worth billions of dollars raised $44MM. Gross beyond mockery.

Yes, but…

September 12th, 2017


Less than a year ago, economists feared the country might be a drain on global growth. But China’s GDP expanded by 6.9 per cent in the first half of this year, accelerating from 6.7 per cent in 2016. China’s industrial profits in the first seven months rose 21.2 per cent from a year earlier, while profits at state-owned industrial enterprises surged 44.2 per cent in the same period, according to figures from the National Bureau of Statistics. Wen Bin, chief economist at China Minsheng Banking Corp, said that while there was clear evidence of a “cyclical expansion” – given the rebound in the producer price index and expansion of manufacturing activity since 2016 – the manner of growth was old-fashioned, relying on real estate and infrastructure construction, and government orders to cut capacity.

Yes, but what about climate change? Fun weirdness alert: In the big restaurant in the Guangzhou Pullman hotel they played music, and this guy was singing Lorde “you can call me queen bee.” Everything has melted down everywhere.

Battle of the generations

September 11th, 2017

The Airplane got it right, as it turns out. One generation did get old. And it’s being grossly discriminated against by rich younger tech fools. Whether this can be turned around before something really terrible happens is an open question.


September 10th, 2017

CNN reports on Cuba and Irma. Commie Cuba is such a rich country that we’re sure nothing bad happened. We had no idea until today that Dock of the Bay reached number one posthumously. Wow.

BTW, on our American Airlines flight the other day back from Hong Kong, we had an experience even stranger than watching the uncensored, stupid DiCaprio Wolf movie on another flight. Unbelievably, the flight had, among film choices, the complete, unexpurgated and nasty hilarious version of Blazing Saddles. Without apology, the film insults everyone in it, all ethnic groups, and pretty much everyone watching the movie. What a joy! We think it, in that form, should become a requirement to watch before becoming a freshman in college. Enrollment would drop to near zero. Of course if Mel Brooks tried to make that movie today, he’d probably be arrested — but that’s our point after all. The snowflakes need such electroshock therapy or America has gone bye bye.

JJZ 109

September 9th, 2017

Put him on the trail of this guy. Hint: the bad guy’s in the green VW bug. Problem solved!

Interesting financial news

September 8th, 2017


Bridgewater Associates LP is poised to amass a huge investment fund in China, giving its founder, Ray Dalio, the kind of clout that has largely eluded Western financial firms in the world’s second-largest economy. Mr. Dalio turned Bridgewater into one of the most successful investment firms ever, making investors $49 billion since its launch in 1975, according to LCH Investments NV. Based in Westport, Conn., Bridgewater handles $160 billion and has about 1,500 employees. Bridgewater registered its name in Chinese as QiaoShui, a literal translation of the words “bridge” and “water.” It deposited millions of dollars in required capital and won approval for its largest fund to invest in China’s $9 trillion primary bond market. To trade in local Chinese markets, Bridgewater is designing a new operation that focuses on Chinese securities. It is being created in the mold of Bridgewater’s low-fee All Weather portfolio, which follows a “risk parity” strategy and uses computer-driven bets. Mr. Dalio has much of his own net worth invested in the same strategy. All Weather automatically buys and sells investments to maintain a balanced long-term strategy amid the market’s day-to-day ups and downs. Mr. Dalio has told people at Bridgewater that a mechanical investment approach that steers clear of active market speculation could be the most palatable to Chinese and international investors. Some current and former employees say the practice of “radical transparency,” which requires most meetings to be recorded and employees to identify the weaknesses of other employees, reminds them of “struggle sessions” from the Cultural Revolution era, when Chinese citizens were encouraged to publicly criticize and punish one another. At Bridgewater headquarters, Mr. Dalio created a team he named “the politburo,” a modified version of the ruling Chinese Communist Party’s domineering governing body of the same name.

Capital flows both ways: “By 2020, China’s overseas assets are forecast to triple, to $20 trillion, from $6.4 trillion today.” Dalio does TM. Who can imagine that?

Bonus: someone we’ve never heard of had something to say about the weather. Seriously, we’ve never seen nor heard of this person.

Intelligent species?

September 7th, 2017


there should be at least a hundred billion intelligent species…across the universe.

Sure wish there was one on earth (e.g., this and that).

Today’s tidbits

September 6th, 2017


Only 8 percent of American undergraduates choose engineering as a major, compared to more than 30 percent in China (which now graduates four times as many engineers as the United States).

Spengler is way too pessimistic. We’re all going to be blown up by Fat Boy before his predictions come true.

And China has some very odd things going on from time to time. In order to buy a train ticket from Guangzhou to Hong Kong, you had to haul yourself and your luggage up a two storey flight of stairs in 90 degree heat and 90 percent humidity yesterday. Then wait in a long line. Then try to pay for a ticket but they don’t take credit cards. Then haul all your stuff back down, only to find that there are no banks or currency exchanges within four blocks of a train station no less. This is engineering genius? The Oyster Bar at Grand Central is heaven by comparison. And they don’t list the airlines on the terminals at Hong Kong’s airport.

New Silk Road Update

September 5th, 2017


Earlier this year the first direct freight train from China to the UK arrived at a depot in Barking, east London, carrying containers loaded with consumer goods. Named East Wind, it took 16 days to travel 7,500 miles across eight countries, halving the time it would have taken by sea. A few months later the train made its first return journey, delivering Scotch whisky, pharmaceuticals and baby products to the gargantuan wholesale markets of Yiwu, on China’s east coast. Last year 1,702 freight trains from China arrived in Europe, double the total in 2015, and more services are being added.

The train is named after some famous words of Mao Zedong. “Either the east wind prevails over the west wind or the west wind prevails over the east wind,” Mao declared in 1957. Sixty years on, China’s current leaders are doing their best to ensure the east wind prevails. The trains trundling their way across Eurasia are part of their attempt to build a new Silk Road, inspired by the ancient caravan routes that once crisscrossed the remote desert and steppe of central Asia. They are motivated today by the quest for economic power and national glory. By building and financing highways, railways and ports, China’s leaders literally want all roads to lead to Beijing. Key pieces of the new Silk Road, such as the overland freight routes from China to Europe, are already in place.

Direct investment along the road was $30bn in 2015-16, according to Beijing’s records, while Chinese firms signed construction contracts worth $189bn and earned $145bn in 60-odd countries. But there are doubts over its security and commercial feasibility. Pakistan has reportedly deployed 14,500 security personnel to ensure the safety of some 7,000 Chinese nationals working on the economic corridor. The danger was evident in May, when two Chinese language teachers were kidnapped and killed by armed men in Quetta, a remote but important section of the corridor. Freight trains from China to Europe may not prove profitable, however much time they save. Countries with a history of enmity with China, such as Vietnam and India, fear the strategic implications of China’s expanding tentacles. New Delhi has condemned China’s port-building in the Indian Ocean, especially in Sri Lanka and Pakistan, as a platform for military expansionism – a “string of pearls” around the neck of Mother India. This summer’s military standoff with China along the contested border in the Himalayas has only added to India’s concerns.

China has already moved to fix things in that dispute.

Ha Ha news

September 4th, 2017

CNN runs like a (please suggest adjective) travelogue in at least parts of China. There was a show about Miami being a red Ferrari or something. Our favorite was a serious sounding piece asking a commentator if Iran could become as big a tourist destination as Turkey, with Iran emulating Turkey’s mighty efforts. (The sponsors of all these pieces seem to be airlines.) You might say that NK was a real story, but CNN has been there and done that.

OTOH, there’s real stuff happening, you just won’t know it from CNN; e.g., China’s ODI regs make a lot of sense.

Some reading suggestions

September 3rd, 2017

Steyn is particularly good today. Trivia: 40,000 bolivars is two and a half bucks. Interesting piece on antifa in Berkeley. We’re headed to where it’s raining. Have a nice day!

Down day

September 2nd, 2017


China’s economy is a juggernaut, we often hear. It can keep growing forever. After all, it has 1.3 billion people, with a near-bottomless need for goods and services. But in fact, China’s growth miracle is looking a bit bubble-ish these days.

Yes, China’s economy is growing. Last year, China’s GDP grew 6.7%, down from 6.9% in 2015, 7.3% in 2014, and 7.8% in 2013. See the downward trajectory there? Current GDP growth, even if you accept the Chinese government’s self-admittedly phony economic data, is half the growth rate just before the global financial crisis hit.

The problem is, it needs rapid growth to pay off its enormous investments fueled by massive amounts of government credit.

“The real risk that China poses to the U.S. and global economies is that its rapid economic growth since the 2008-2009 global economic recession has been powered by a credit bubble of epic proportions,” wrote Desmond Lachman, an American Enterprise Institute fellow who previously served as a deputy director of the IMF, earlier this year.

What does “epic” mean? By one account, China has expanded credit by nearly 100% of the nation’s GDP since the end of the credit crisis. Since 2007, China has added $24 trillion in debt at all levels, which is more than the U.S. government’s total debt of just under $20 trillion.

It’s fueled an investment boom and excess capacity. The Washington Post in 2015 reported that China used more cement in just two years — 2011 to 2013 — than the U.S. used in all of the 20th century. Let that sink in for a moment. Meanwhile, China now produces five times as much steel as all of Europe each month.

But where are the customers? China built cities without people, malls without customers, and roads without cars, in anticipation that all of those would soon be filled. But many remain empty. China’s population is aging fast, and its growth is grinding to a halt. Still, many of China’s heavily-indebted businesses continue to borrow from government lenders, who have no incentive to stop the game.

One of these days, China is going to need to create a restructuring industry, as we’ve been saying for some time. Just when, nobody knows. And speaking of restructuring…

More generally upbeat numbers

August 31st, 2017


The manufacturing purchasing managers index increased to 51.7 in August, compared with the 51.3 forecast in a Bloomberg survey of economists, and the 51.4 reading in July. The non-manufacturing PMI slipped to 53.4 compared with 54.5 in July. Numbers higher than 50 indicate improving conditions; readings below 50 signal a worsening outlook. “China’s economy is operating at a very high level, and will remain stable until at least the fourth quarter,” said Zhou Hao, an economist at Commerzbank AG in Singapore and the only analyst who accurately forecast the August manufacturing reading in a Bloomberg survey. “China’s surprisingly robust growth performance so far this year has triggered talk about the beginning of a ’new cycle’ of sustained moderate growth, underpinned by efforts to close down redundant capacity in heavy industry,” Bloomberg Chief Asia Economist Tom Orlik wrote in a note.

We’ll see. In general it’s happier to focus on a country with an upbeat spirit rather than one where the young people whine and cry all the time.

Changing times

August 30th, 2017

The old days:

These basic cultural precepts reigned from the late 1940s to the mid-1960s. That culture laid out the script we all were supposed to follow: Get married before you have children and strive to stay married for their sake. Get the education you need for gainful employment, work hard, and avoid idleness. Go the extra mile for your employer or client. Be a patriot, ready to serve the country. Be neighborly, civic-minded, and charitable. Avoid coarse language in public. Be respectful of authority. Eschew substance abuse and crime.

Unexceptional, you say. Well, you would be wrong.

India projected 8% CAGR to 2025

August 29th, 2017


What really caused a sudden end to the Doka La standoff between India and China is as yet unclear. Until recently, the situation wasn’t getting any better with the war of words escalating on both sides, reminders of the 1962 war and highly provocative, sometimes misleading reportage in the media.

But everything changed on Monday when both sides issued statements on an end to the impasse and withdrawal of troops. What worked between the two parties for such a quick resolution will, perhaps, remain a State secret. The decision also served as a face-saver for political leaderships on both sides.

The important takeaway from the decision is that it saves both sides from major economic consequences. More importantly, it averted an embarrassment for China in the BRICS Summit that begins on 3 September in Xiamen. While the exact reasons for the end of the standoff are not known, there are a few clear reasons why China could not have afforded a prolonged standoff at the Sikkim border and eventually turned India into an enemy.

First, India plays an important role in emerging economies off the world. Among the BRICS (Brazil, Russia, India, China and South Africa) nations, undoubtedly India is seen as a major emerging economic power that has strong enough pillars to challenge the dominance of China in the decades to come. Even today, India plays a key role in the Asian economy, as the third largest in the region. In this backdrop, as the host, China could not have afforded facing India at the meet to discuss economic cooperation of BRICS countries when troops from both countries are positioned against each other in a high-tension scenario.

Besides, India’s emerging economic dominance in the region would make any country seek to befriend it, particularly China which wants to play the role of big brother in Asia. A recent Harvard study said that India has emerged as the economic pole of global growth by surpassing China and is expected to maintain its lead over the coming decade citing that it is particularly well-positioned to continue diversifying in new areas, given the capabilities accumulated to date. Further, according to Harvard University’s Centre for International Development (CID) growth projections, India will feature on top of the list of fastest growing economies till 2025 with an average annual growth of 7.7%.

Second, India now has much better diplomatic relations with world powers, mainly the US, which China cannot ignore any longer. If China escalates tensions with India and makes an enemy of its neighbour, it would naturally put China in the opposite camp and will erode the gains it has been making as a peace-loving, mature country that aspires to become a world leader. Beijing wouldn’t have wanted to gamble its hard-won image by prolonging the military standoff with India at a disputed territory.

Third, China will also suffer on the trade front if it cuts ties with India. It has more to lose than India as China traditionally has a trade surplus with India. Right now, India has a trade deficit of around $52 billion with China. In the past year alone, India exported around $9 billion worth of goods to China while China exported $60 billion to India. That’s a big trade opportunity for Chinese manufacturers. It wouldn’t be wrong to say that the Chinese presence is evident in almost all sectors ranging from electronic items to pharmaceutical products. Here too, China would have taken a heavy hit if tensions escalated to a war-like situation.

Fourth and perhaps the biggest reason China wouldn’t want to create an enemy of India would have been its One Belt, One Road initiative and the China-Pakistan Economic corridor, where significant investments have already been made, and both are critical to China’s long-term plan to build its dominance in the Asian region. China has invested at least $50 billion so far in CPEC. India has a problem with CPEC as the corridor passes through the contentious part of Kashmir, which is occupied by Pakistan and claimed by India.

India seems to have been making gains for quite a while. Interesting. You hear about China every day but almost never about India. We wonder why that is. Bonus: and from the just weird department, there’s this: “China and India said they had negotiated a solution to a more than two-month-long standoff on a remote Himalayan plateau, ending a stalemate that had raised concerns about a potential military conflict.” Who knew?


August 28th, 2017


China’s economy is in a sweet spot – for now. Its foreign exchange reserves have been expanding in the past six months, hitting a whopping US$3.6 trillion. The economy grew by 6.9 per cent in the first half of this year and the yuan has been rising steadily against the US dollar. After several years of declining shipments, China’s trade has rebounded, thanks to strong demand at home and abroad. July exports rose 7.2 per cent from a year earlier and imports expanded by 11 per cent. Both are below analysts’ consensus

One day it’s Ponzi, and then “sweet spot” — it’s enough to give you whiplash. The funniest bit is that 7% and 11% growth rates are “below expectations.” Ask Germany, the UK or the US about that.