More numbers

September 24th, 2017


Government statistics show the services sector, accounting for just over one-half of China’s economy in the first half of 2017, grew 7.7% in that period from a year earlier, easily outpacing overall GDP growth of 6.9%. Caixin’s composite manufacturing and services PMI rose to 52.4 in August from 51.9 in July and was the highest in 6 months.

Wordy piece in the Economist that avers: “China is not bent on global domination. It has little interest in polities beyond Asia, except in as much as they provide it with raw material and markets.” Yeah, right. Bonus funny weird piece at PL.

16 long years, or “In the year 2525,” or something

September 24th, 2017

In 2001, the NFL postponed the September 16 games until the end of the season and Congress sang a song. Now the NFL and Congress seem fairly different. Moving on, take a look at this chart; why do the media and NFL players and owners sound more like the WNBA viewers in the chart than the NFL viewers? Maybe Roger Simon is correct and things are moving in a good direction, but we mentioned the song because maybe they aren’t.

Update: you know who escalates.

Bonus: 40 people get shot in Chicago on a weekend and it doesn’t make news; one person killed at a church and it leads all cable news channels. Huh? We were guessing that the channels all knew there was narrative value that would be revealed in time, and we were correct.

Some reading

September 23rd, 2017

Interesting piece by Sebastian Gorka. Compare this read to the 6th cartoon here. Amazingly, another interesting discussion by Ralph Nader with this guy. The comments section of this is fun.

Good news, if true

September 22nd, 2017


So far the U.S. has declined to sanction large Chinese banks, so will it do that now? It may not have to. Since the U.S. fired its warning shot by sanctioning the Bank of Dandong in June, Chinese banks have frozen or closed North Korean accounts. That has reduced trade flows across the Chinese border by 75%, according to a Kyodo report. Fuel prices began to rise in Pyongyang even before new United Nations sanctions this month capped trade in petroleum.

Relations between Beijing and Pyongyang have also clearly soured over the last year, and some Chinese scholars and media are openly calling for an end to support for Kim Jong Un. This suggests that Kim’s behavior and U.S. sanctions may be driving a wedge between China and North Korea. The increased pressure may have helped Beijing recognize that it would endure heavy costs if it continues to prop up a destabilizing regime.

On Friday Kim Jong Un responded to all of this by threatening to detonate a hydrogen bomb over the Pacific Ocean. That would be the first nuclear explosion in the atmosphere in decades, with radiation effects throughout the northern hemisphere.

If Fat Boy is only 10% as evil and crazy as this, China must get him gone.

Bonus: Walter Williams says things that are common sense, but as you all know, common sense has been declared worse than illegal.


September 22nd, 2017

We have postulated that the 1950’s and into the 60’s westerns were in part a result of WWII (and maybe a little Korea), when PTSD was studied to be vastly underreported (looking for fascinating academic link). So there’s a good guy and a bad guy, and the good guy kills the bad guy or else. Hence Wanted: Dead or Alive, and all the rest; the peak year was 1959, which makes sense. So the 50’s and early 60’s had TV as a palliative for the quiet ones who chose not to speak of the horrors of their wars. So if a major unspoken message of 1950’s TV was appealing to a huge group’s psychological needs, are there any messages in 1960’s TV, 1970’s TV, 1980’s TV? We’re now in a time when the audiences are so divided and fractionalized due to technology that we’re not sure how to make generalizations, but it would be interesting to be able to generalize about the 1960’s-1980’s. “Kookie, lend me your comb.” Comments welcome.

Late 1960’s, here and there

September 21st, 2017


Chinese firms have proven that they can make good products for less. Consumer prices for televisions, adjusted for quality, fell by more than 90% in the 15 years after China joined the World Trade Organisation (WTO). China’s share of global exports has risen to 14%, the highest any country has reached since America in 1968.


S&P Global Ratings on Thursday cut China’s sovereign credit for the first time since 1999, pouring cold water on Beijing’s optimistic reading of its economic prospects. The US rating agency said the downgrade, from AA- to A+, reflected increased economic and financial risks in China after “a prolonged period of strong credit growth”.

The downgrade was the second by an international rating agency this year, after Moody’s in May cut China’s rating for the first time since 1989. A day after that move, Moody’s also downgraded Hong Kong’s rating. Also on Thursday, S&P lowered the ratings of three foreign banks that operate in China, namely HSBC China, Hang Seng China and DBS Bank China.

Outstanding aggregated financing rose by 13.1 per cent at the end of August, according to the People’s Bank of China, despite its claims of adopting a prudent and neutral monetary policy to facilitate financial deleveraging and structural adjustment.

So China’s global exports have the same market share that the US did in 1968, when it was still reaping the benefits of WWII’s industrial destructions. But we see China getting downgraded, and that reminds us of something too. The US started some financial shenanigans around that time, bringing Social Security revenue into budget deficit calculations to keep the numbers ok in spite of Vietnam. Gee, cooking the books, who woulda thought?

Curiouser and curiouser

September 20th, 2017


China is “the only game in town” for North Korea, at least when it comes to merchandise trade. In 2014, the latest year of data, China bought two-thirds of all of North Korea’s exports, worth $2.6 billion, and provided almost as large a share of the country imports, at $3.9 billion. More critically, China’s importance to North Korea has grown significantly during the past two decades, as Pyongyang’s economic ties to the rest of the world have withered (most notably, with Russia, which had been a major patron.) In 1990, China accounted for less than 6 percent of North Korea’s total exports and only 13 percent of its imports.

Those figures may not tell the entire story. Eberstadt says the relationship between China and North Korea is so opaque that it is difficult to understand the true extent of their economic exchange. North Korea doesn’t release economic data, and the official statistics from the Chinese government could understate the amount of their trade. For instance, China is almost certainly the largest provider of oil to North Korea, but that may not be reflected in Chinese data.

China’s trade with North Korea has also helped Pyongyang dodge United Nations sanctions, imposed by the Security Council to compel Kim Jong Un to the negotiating table. In a September report, a U.N.-sponsored panel of experts concluded that North Korea “continued to export prohibited commodities,” which helped the regime raise much-needed funds. By the panel’s count, Pyongyang earned $270 million from such illegal exports over a recent period of several months. China figures prominently in this trade by buying silver and other restricted commodities. For instance, China’s imports of iron and steel from North Korea reached $37 million – more than 80 percent of Pyongyang’s total sold abroad – during that time period.

China has over a billion tons of steel capacity, though it is apparently trying to reduce that. Why buy an ounce of steel from the Norks? BTW, however bad you think North Korea is, it is far worse under this madman.

Super unfun bonus: when common sense is outlawed, only outlaws will have any.

Not many numbers

September 19th, 2017

Foreign Affairs:

neither the optimists nor the pessimists recognize that, a decade ago, China did not have a significant private property market. Once that market was created, credit surged into establishing market-based values for land—whose value was previously hidden in a socialist system. The fivefold increase in property prices over the past decade is the consequence.

The question now is whether current asset prices are sustainable. If they are not, a debt crisis is plausible. On that score, housing inventory has declined in recent years and affordability has improved. Many analysts have compared China’s housing prices with other major cities to get a sense of whether they are too high. But usually such comparisons are with much richer cities such as Hong Kong, Singapore, and Tokyo. Few realized that compared to India, prices in China’s megacities are actually much lower.

China’s financial situation does warrant serious attention, but it is not in crisis the way some observers suggest. Although China’s largely state-owned banking system has been too lax in its lending practices, the excessive pressure for credit expansion comes from local governments, which do not have the authority to raise revenue needed to fund the social and infrastructure services to support a rapidly growing economy. They have survived only because they have been able to borrow from state-owned banks to finance these expenditures. Thus, China’s debt problem is not so much a sign of typical banking problems but rather the consequence of a weak fiscal system.

Corruption is said to impede growth in developing economies because it dampens investment, both public and private. But China is different because the state controls all the major resources such as land, finance, and the right to operate commercial activities. Since privatization of those resources is not politically realistic, corruption allows for the transfer of use rights of these assets to private interests through formal or informal contractual arrangements with party and local officials. Such an arrangement encourages investment in infrastructure and industrial expansion in support of growth, with both sides sharing the gains. It is the major reason China has done so well economically even though it has lacked strong institutions and the rule of law.

Yet as China’s economy becomes more services-oriented and complex and public dissatisfaction with the inequities of rent-seeking behavior intensifies, sustaining growth may require getting the party out of its dominant role in controlling access to resources and economic opportunities.

Okay, enough of that. Now for today’s chuckle, tear down all those statues of Joan Baez!

Bonus: excellent feel-good piece from Scott Johnson.

Extra bonus: more feel good here.

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.