More Hysteria

December 16th, 2017


If you woke up with a chill in your bones and a faint sense of dread, it could be this: On Thursday, the Federal Communications Commission decided to give internet service providers, like AT&T, Comcast and Verizon, the power to meddle with your internet traffic. Among other things, the decision permits the companies to discriminate against data that flows along their networks. That means Comcast could theoretically charge customers more if they watch a lot of Netflix, or potentially serve Netflix data at a slower speed. Internet service providers, or ISPs, had been accused of doing exactly that, before net neutrality rules were in place. Or Verizon, which owns HuffPost’s parent company Oath, could offer content it owns at faster speeds than content produced by rivals. (For the record, HuffPost’s staff is represented by Writers Guild of America, East, which supports net neutrality and opposed its repeal.) Or AT&T could decide that Amazon or some fledgling tech startup that doesn’t have billions of dollars lying around isn’t pulling its fair share and demand the company pay up or be forced into an internet slow lane. After the FCC decision, Sen. Ed Markey (D-Mass.) joined 15 other senators to contest the ruling via a Congressional Review Act resolution. Democrats and some Republicans have voiced skepticism about the FCC decision, and New York Attorney General Eric Schneiderman has pledged a legal challenge.

Many have asked, what happens next? How will all of this – Net Neutrality, my internet experience, look after today? My answer is simple. When the current protections are abandoned, and the rules that have been officially in place are repealed, we will have a Cheshire cat version of net neutrality. We will be in a world where regulatory substance fades to black, and all that is left is a broadband provider’s toothy grin and those oh so comforting words: “We have every incentive to do the right thing.” What they will soon have is every incentive to do their own thing. Now the results of throwing out your Net Neutrality protections may not be felt right away. Most of us will get up tomorrow morning and over the next week, wade through hundreds of headlines, turn away from those endless prognosticators, and submerge ourselves in a sea of holiday bliss. But what we have wrought will one day be apparent and by then, when you really see what has changed, I fear it may be too late to do anything about it, because there will be no agency empowered to address your concerns. This item insidiously ensures the FCC will never be able to fully grasp the harm it may have unleashed on the internet ecosystem. And that inability might lead decision makers to conclude that the next internet startup that failed to flourish and attempted to seek relief simply had a bad business plan, when in fact what was missing was a level playing field online.

So-called net neutrality existed for about 600 days, but not having it could be the end of mankind even faster than global warming. What a bunch of kooks.

PL had a similar analysis of this craziness.

Leverage’s power has decreased in China

December 15th, 2017

Good charts, showing the decreased effectiveness of adding hundreds of billions of dollars to government spending to create empty cities.

Bonus unfun: it’s called projection and Freud figured it out a long time ago. Translation: you accuse someone of the bad thing you are guilty of. Very clever in one sense: that’s how you know they can do a bad thing, since they just did it. Duh! Roger Simon writes on this a lot. This would be funny if it was just some stupid company doing this nonsense and not the government.

Longish read but worth it

December 14th, 2017


Here are four hard-earned and important lessons about China’s economy: The pessimists have always been wrong. Effectiveness — at allocating resources to produce sustained growth — trumps efficiency. The financial system is stronger than it looks. And a dynamic economy can survive even authoritarian politics.

These are the main conclusions drawn by Arthur Kroeber, the editor of China Economic Quarterly, which has been the most influential regular publication on China’s business world and economy in the English language for most of its 20 years.

Gavekal Dragonomics, the consultancy that has run the magazine, will replace it with one-off publications of in-depth research. Its final issue includes some telling assessments by top experts on China’s economy.

Kroeber concedes that many critiques who anticipated disaster have been well-reasoned. But “any honest assessment of the country’s economic prospects must acknowledge that China has a long record of defying the ­sceptics”.

China has excelled at mobilising a high domestic saving rate, with financial repression — lack of investment opportunities — playing a role. It has also introduced policies that consistently favour business investment, technological upgrading, and infrastructure.

Just as when the magazine was launched 20 years ago, the financial system is widely considered the nation’s Achilles’ heel, with too much money lent to projects that deliver too low a return.

But the system funds itself from domestic savings rather than borrowing from abroad. And while the government pursues sustainable growth-oriented policies, banks will generate enough of a return on their good loans to pay for the losses on the bad ones.

In recent years, though, the government has opened the doors to greater financial flexibility, which naturally involves greater risk, although regulators are working to contain it.

And because, Kroeber says, stability depends on a large pool of captive domestic savings, and strict limits on borrowing from abroad, “it is basically impossible for China ever to fully liberalise its capital account”. Thus it will be hard for China to achieve the same importance in the global financial system as it has in trade and infrastructure investment.

And on the authoritarian point, the notion that economic growth inevitably leads to the rise of a middle class that will demand democratic rights is debatable — especially when the ruling communist party has worked so hard to ensure that this class is the main beneficiary of its rule through monopoly power.

Kroeber believes that “authoritarian regimes fall because their legitimacy is too narrow, they have no mechanism for leadership successions, or they are too rigid and fail to keep pace with changes in society and public demands”.

The party has mostly succeeded on these counts, but has in recent times appeared to risk drifting into rigidity under Xi Jinping, who has also yet to develop a clear succession program.

The party will need to help China adapt to a rather different future, with the country’s demography set to shape up by 2040 similar to Japan’s today, with at best a couple of people of working age for every person over 60.

Kroeber is also troubled that “Xi and his colleagues seem determined to retain direct state ownership over large swathes of the economy, and to subject the workings of the market to perpetual discipline by the Communist Party” — at a significant productivity cost.

China has a strong economy and an elite ambitious to regain the great power status the country lost a couple of centuries ago. But the constraints on China’s ability to mould the rest of the world — even if it does overtake the US to become the biggest single ­economy — are enormous. Its share of global inbound direct investment has declined, while outbound direct investment surged in 2012-16 but has since been reined in by a government worried about capital flight.

We are not headed for a “Chinese century”, Kroeber says, for China lacks a globally trusted currency, military allies, a culture that anyone else is interested in, a political system that anyone else might want to adopt, companies that can reliably compete outside the protected cocoon of their home market, and a convincing claim on technological leadership.

Barry Naughton, who holds a chair in Chinese International Affairs at the University of California, says in the final CEQ that social and political change has lagged economic growth in China, while policy has become less reformist and more statist.

As Beijing pours ever more resources into low-productivity prestige projects, the economic ­future is unlikely to be as bright as the past, he says: “Government-dictated techno-industrial policy has become Beijing’s main tool to offset declining growth and drive China to the front ranks of the world economy”, with strategic ambition married to a disregard for cost.

James Kynge, emerging markets editor of the Financial Times, expects China will become over the next few years “all the following things simultaneously: the world’s biggest economy, but one that is nevertheless still ‘emerging’; the world’s biggest consumer market, but one in which people’s average income lags far behind ‘developed’ standards; and the world’s biggest trader, but one which sternly protects against foreign investment in key domestic industries”.

It will also be a non-market economy crackling with entrepreneurial energy, a leader in technology and innovation in thrall to an authoritarian government, and the world’s biggest emitter of carbon, hailed as a trailblazer in the fight against climate change.

Kynge quotes a European diplomat as saying China “keeps its own market to a large extent closed to acquisitions by our big companies while making the most of our open markets to buy up our technological leaders. This imbalance cannot continue indefinitely”.

BTW, China is busy constructing refugee camps along the NK border. Sensible. We think the only Fat Boy in NK is such a nut that he may well believe he can start and win a war.

CDB bonds 1% higher yield than government bonds

December 13th, 2017


When banks sneeze, property developers often catch cold first. Real estate made up 17 percent of all fixed-asset investment last year, and accounts for an even larger share of total economic output if related industries are included. The sector has close interconnections with steel and cement makers, producers of excavators and bulldozers, and of course real estate agents.

Corporate bond issuance is on pace to drop in 2017 for the first time in four years as surging yields make selling debt more expensive. Banks will also likely charge higher premiums on top of benchmark loan rates, raising the overall financing costs for companies, according to Nathan Chow, an economist at DBS Bank Hong Kong Ltd. That means companies may invest less in business expansion, he said.

The yield premium for China Development Bank bonds over government debt surged past 1 percentage point last month. The debt selloff, triggered by concerns about the deleveraging push and tighter liquidity, poses an increasing challenge to the credit CDB and other policy banks extend because they use market funding rather than deposits. This could be a drag on growth as those funds go to everything from renovating shantytowns to Belt and Road Initiative projects across Asia, Europe and Africa.

The 10-year yield on the policy lender’s bonds climbed four basis points to 4.87 percent as of 12:02 p.m. in Shanghai, extending a three-day advance to 11 basis points. The yield on similar-maturity government debt rose one basis point to 3.96 percent.

The financial services industry accounts for roughly 8 percent of China’s gross domestic product, yet it’s the sector most directly impacted by borrowing curbs, as banks and brokerages charge fees on debts issued and stocks sold.

China’s stocks will trade weaker than current levels for much of next year as deleveraging crimps credit growth and keeps interest rates elevated, according to Bocom International Holdings Co.’s Hao Hong. That would damp the output from financial services, which is more closely tied to equity markets and can affect overall growth by 0.5 percentage point.

In HNA news, did they mean freight or fright?

The folly at the onset of the Great Depression

December 12th, 2017

This is from ten years ago, but we thought it could be interesting today.

We had the good fortune to meet a man who was present as a child at one of the precipitating events of the Great Depression, the failure of New York’s Bank of United States in December 1930. His grandfather, who lost his savings in that bank, took him to witness the scene as depositors thronged to bank doors that were locked during normal business hours. The panic from bank failures in New York and elsewhere spread around the country — there was no deposit insurance — driving banks to maximize liquidity, sell assets, foreclose loans, and create the Mother of All Credit Crunches, which became known as the Great Depression. Here’s how the NYT described the scene in its December 12, 1930 city edition:


Perhaps you have been taught that the stock market crash of 1929 caused the Great Depression. That is not so. The crash both reflected and amplified the recession that the US economy was entering in 1929; however, it was the problems of the banking system and of monetary policy that cascaded recession into depression. We will quote from Friedman and Schwartz’s Monetary History of the United States (from pp. 309-313):

The stock market crash…left no mark on currency held by the public. Its direct financial effect was confined to the stock market and did not arouse any distrust of banks by their depositors.

The stock market crash coincided with a stepping up of the rate of economic decline. During the two months from the cyclical peak in August 1929 to the crash, production, wholesale prices, and personal income fell at annual rates of 20%, 7.5%, and 5%, respectively. In the next twelve months, all three series fell at appreciably higher rates…Even if the contraction had come to an end in late 1930 or early 1931, as it might have done in the absence of the monetary collapse that was to ensue, it would have ranked as one of the more severe contractions on record….

In October 1930, the monetary character of the contraction changed dramatically…A crop of bank failures, particularly in Indiana, Illinois, Iowa, Arkansas, and North Carolina, led to widespread attempts to convert demand and time deposits into currency…A contagion of fear spread among depositors…such contagion knows no geographical limits. The failure of 256 banks with $180 million in deposits in November 1930 was followed by the failure of 352 with over $370 million of deposits in December…the most dramatic being the failure on December 11 of the Bank of the United States with over $200 million of deposits.

That failure was of especial importance. The Bank of the United States was the largest commercial bank, as measured by volume of deposits, ever to have failed up to that time in US history. Moreover, though an ordinary commercial bank, its name had led many at home and abroad to regard it as somehow an official bank, hence its failure constituted more of a blow to confidence than would have been administered by the fall of a bank with a less distinctive name.

In addition it was a member of the Federal Reserve System. The withdrawal of support by the Clearing House banks from the concerted measures sponsored by the Federal Reserve Bank of New York to save the bank — measures of a kind the banking community had often taken in similar circumstances in the past — was a serious blow to the System’s prestige…

Friedman implies that the reason that the Clearing House banks failed to bail out the Bank of United States, despite often intervening in other, similar cases, is that the BoUS’s customer base and board were Jewish. This contention seems to be supported by statements from the NY State Banking Commissioner of that time, Joseph A. Broderick (p. 310). Let’s take a look at how the New York Times reported the attendees of the meeting the day before the Clearing House pulled the plug on the Bank of United States:


We have no way of knowing if Milton Friedman’s contention is true or not, though it appears likely to us that, unlike Herbert H. Lehman, the “small, able” Mr. Isidor J. Kresel was probably not a member of Our Crowd. TIME Magazine summed up the banking community’s view of the Bank of United States in its December 22, 1930 issue on that fateful meeting:

Another late arrival was lanky Owen D. Young who came about 11 p.m. in full dress, accompanied by Thomas William Lamont of J. P. Morgan & Co. Looking taller than usual in his full dress, Mr. Young paused to peer down at and converse with small, able Isidor Kresel, counsel for Bank of United States…Conservative Manhattan bankers last week were angry at Bernard K. Marcus, dark-haired, heavily-built president of Bank of United States. His aim was perhaps much too high. Only last year he stated: “Often we’ve put two or three days work into one. We have gone ahead two or three times as fast as we would have had we been working only one day at a time.” To bankers, a day’s work is a day’s work, to be done well, thoroughly.

The tall and lanky in full dress versus the small, able, dark-haired, overreaching, and heavily-built. We get the picture. Thanks, TIME.

This piece has been quite educational to research. We see once again that great events can turn on small episodes of human weakness, prejudice and folly. And who knew at the time that a crowd gathered at a bank on a cold December day would become anything other than the “local” event that the head of the NY Clearing House opined that it would be?

We should not believe that we can’t make mistakes of similar magnitude or wrongheadedness again. The stagflation of the 1970’s was caused by foolish economics policies of three presidents in a row — Nixon, Ford, and Carter — that weren’t reversed for a decade until Ronald Reagan and Paul Volcker had the wisdom and courage to take the harsh steps required to kill inflation. Today, one new challenge is the anti-China, pro-protectionism movement increasingly vocal in the US today. The greatest folly can seem trivial or reasonable at the time, which is precisely why it is so dangerous.

Conflicting perspectives

December 11th, 2017


Wuzhong, China — In a packed auditorium in this Yellow River city, dancers in floral-pattern costumes twirl against a backdrop of a red star shining over the Great Wall. “General Secretary Xi’s words ring around our ears!” the dancers exclaim. Welcome to the “Spirit of the 19th Party Congress” publicity tour. The Communist Party traditionally launches propaganda drives to imprint new slogans unveiled at major conclaves. This time, after the party revised its charter in October to crown Xi Jinping as its greatest living theorist, an army of Marxist propagandists has gone to unusual lengths to spread their leader’s philosophy. Some rode camels across arid steppes to deliver lectures on Mr. Xi’s political manifesto. Others braved South China Sea waves to take his congress report to island outposts and fishing trawlers, or turned to communications satellites to beam the highlights.

Train passengers have taken part in quiz games on Mr. Xi’s policies. Subway staff in the northeastern city of Tianjin treated commuters to congress-related songs and tongue twisters. After some Xi allies started referring to him with labels such as “helmsman,” which is usually associated with Mao Zedong, such reverential terms have increasingly crept into broader use by officials and in state media. For some Chinese, such zeal skirts uncomfortably close to the adulation that underpinned Mao’s tumultuous rule. Though the party formally banned personality worship after Mao’s death, officials often use obsequious propaganda displays to signal loyalty to senior leaders, at times going too far in trying to strike appropriate tones of enthusiasm. A state-run newspaper in Guizhou province called Mr. Xi a “great leader” — a title that the party has granted only to Mao—under a portrait that dominated its Nov. 10 front page.

Pop idols and technology have been tapped to reach younger Chinese. In late November, film-industry regulators gathered some 120 movie stars and directors to discuss how to inject “core socialist values” into filmmaking. A smartphone quiz centered on Mr. Xi’s report has been attempted more than 2 million times since its October launch. A new combat-simulation smartphone game released by NetEase Inc. features Mr. Xi’s slogans on in-game banners.

Also: In Feijia Village, on the city’s northeastern fringe, protesters hung a large white banner reading “Violation of Human Rights” across the front gate of the village committee office, according to smartphone videos verified by people on the scene. One man repeatedly yelled “violent evictions,” and the crowd chanted back, “violate human rights.”

Bonus: Spengler piece on the middle east. Also, if you marry a dog or a chandelier, can you compel a cake for the event?

Attention HNA

December 10th, 2017


China will seek solid progress on preventing major risks, and on targeted poverty alleviation and pollution control in 2018, according to the central authorities Friday. An overall plan should be made to “ensure the winning of the three tough battles,” said a document released after a Political Bureau of the Communist Party of China (CPC) Central Committee meeting. “China should contain the overall leverage ratio and raise the financial sector’s capability of serving the real economy to prevent and defuse major risks,” it said.

Gee, could they be talking about a company that has 10% of Deutsche Bank, 40% of Hilton, and has gone from nothing to being the 3rd largest aircraft lessor in the world after GECAS and AerCap?

Smile, you’re on Candid Camera

December 9th, 2017


Puyang, China—One night this September, construction supervisor Chen Shouli fired off a joke in a chat group. “Haha,” he typed on his black iPhone 7, followed by an off-color wisecrack about a rumored love triangle involving a celebrity and one of China’s most senior government officials. Four days later, he says, the police telephoned, ordering him in for questioning. “I thought, I haven’t done anything wrong, have I? I’m law-abiding,” recalls Mr. Chen, a wiry 41-year-old. “So I went in. Once I arrived, they wouldn’t let me leave.”

Mr. Chen was locked in a cell for five days, he says. According to the police report, his comment on the WeChat messaging app was deemed “picking quarrels and provoking trouble,” a broad offense that encompasses gang fighting and destruction of public property and is punishable by detention without trial.

In China’s swiftly evolving new world of state surveillance, there are fewer and fewer private spaces. Authorities who once had to use informants to find out what people said in private now rely on a vast web of new technology. They can identify citizens as they walk down the street, monitor their online behavior and snoop on cellphone messaging apps to identify suspected malcontents.

Years ago, in the Mao Zedong era, people were sent to prison, labor camps and death for opinions expressed in private. In the decades since China launched economic reforms after Mao’s death, prosperity and social mobility created room for more personal freedom and expression. Now China appears to be reverting to old form, empowered by new digital surveillance tools.

That means ordinary people such as Mr. Chen increasingly find themselves investigated and punished for imprudent comments they thought were private. It is now easy for a regular citizen to step over the brink, with a stray comment to family or friends screenshotted into evidence, without the need for an informant.

*Based on 511 censored posts found in an analysis of 36,000 unique public-account posts between June 2014 and March 2015. Mr. Chen is now marked as a troublemaker by local officials and police, who have warned him to mind what he does. Some friends, he says, now keep their distance.

WeChat also has a function to post publicly. Citizen Lab, an internet research center at the University of Toronto, examined 36,000 public posts in 2015 and found 4% were censored.

Software employed by WeChat appears to automatically scrub posts containing words on a blacklist, which is continually amended by human censors, according to Citizen Lab. The technology has now advanced to identify images deemed sensitive, which are then removed during transmission without the sender being alerted to the disruption.

The government has introduced rules and judicial interpretations making it a crime punishable by up to three years of prison time to spread what officials deem “false rumors.” A new rule this fall made any individual who forms a private chat group legally responsible for comments posted there by others.

3 years in prison for “false rumors.” Hmmmmm.

HNA Drama update 3

December 8th, 2017


HNA Group Co., one of China’s most indebted companies, is facing increasing difficulties raising funds as scrutiny mounts over the acquisitive conglomerate’s surging borrowing costs.

In the past week, S&P Global Ratings and Fitch Ratings have voiced concerns about at least four companies because of their ties with HNA. Separately, group flagship Hainan Airlines Holding Co. canceled a bond sale, another unit scrapped a share offering and HNA subsidiaries have been paying some of their highest borrowing costs ever.

The setbacks add to the pressures piling up at the largest shareholder of Deutsche Bank AG as the Chinese conglomerate stares at about $28 billion in short-term debt at a time the company is unable to earn enough profits to cover its interest payments. As difficulties mount — HNA has also been under scrutiny from the Chinese government over its debt-fueled acquisitions — Chief Executive Officer Adam Tan said last week the conglomerate is considering selling assets, suggesting the company is reversing a shopping spree that cost tens of billions of dollars.

HNA hasn’t given up on fundraising. Tianjin Airlines Co. plans to issue 1 billion yuan of bonds, while Bohai Capital Holding Co. is seeking to offer 1.5 billion yuan of bonds this week, according to Chinamoney. “There has been a clear revision downward in investor perception of the HNA entity and its subsidiaries,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd. “For potential debt issuance, the net result will be significantly higher coupon rates.”

On Wednesday, Fitch voiced concerns about Avolon Holdings Ltd., the airplane-leasing company, and its ties with Chinese parent HNA. The ratings firm highlighted $365 million in loans originated from Avolon that were provided to another HNA unit during the third quarter, bringing into question the independence of Avolon’s decision-making process. Fitch also cited concerns about reports that HNA units have been delaying airplane-lease payments. Avolon didn’t immediately respond to requests for comment, while Hainan Air said said it has good cooperative relationships with lessors, and that they have been keeping positive and friendly communication with them.

“HNA’s biggest challenge is that the market has always been struggling to understand the internal money transactions of HNA,” said Lyu Pin, a credit analyst at Citic Securities Co. “It is difficult to sort out the intricacies around a myriad of money transfers between these HNA units.”

And: The debt-laden Chinese conglomerate HNA Group Co., whose airline unit scrapped a bond fundraising plan this week after financing costs soared, said it won’t default on borrowings anytime soon. “Currently we have a healthy and stable debt structure,” Zhao said. “The high interest rates in December are for all companies, not just for HNA. HNA’s cash flow is stable currently.” Yeah, right.

Someone is probably wrong

December 8th, 2017


China clocked in GDP growth of 6.9% in the first three quarters of 2017, and is set to end the year at 6.8%. But Peking University finance professor Michael Pettis believes that the figure is no indication of the actual state of the Chinese economy.

Unlike in the U.S., in China “it measures not output but input into the system, as local governments are encouraged to borrow however much is necessary in order to generate that GDP growth,” he argued, pointing out that the number is “astonishingly stable”, even more so than Switzerland’s.

Pettis spoke on panel on the Chinese economy at the Fortune Global Forum on Thursday, which briefly turned into a sparring session between Pettis and Tsinghua University economics professor David Li, both prominent economists and China specialists.

“Since we already know what the number will be in any given quarter, what we need to look at is how much debt it will take to get from the current growth rate to that level of GDP growth,” Pettis said.

There have been at least three dozen historical precedents of decade-long investment-driven growth miracles similar to China’s since World War One, but all of them had a “terrible adjustment”. “The factors that led to their adjustment, they are all there,” he said of the current state of the Chinese economy. “But the difference between China and the precedents is that we’ve not seen imbalances at such deep levels and debt at such high levels.”

Tsinghua’s Li counter-argued that any discussion on debt should take into account savings, as the source of debt is savings. “In Japan, they have high savings rate but their debt is 350% of GDP. In China, it is 250% of GDP.” He further suggested that China should increase its debt, as its 40% savings rate, which is two to three times the savings rate of the U.S., is currently too high.

What’s missing in the discussion of SoCal wildfires?

December 7th, 2017

As background, read the report of the 1961 Bel-Air fire that torched 484 homes. Burt Lancaster and Zsa Zsa lost their homes, in an age before the intersection of cruelty and publicity became the Eighth Wonder of the World. So now we have rather similar Santa Ana conditions, but some of today’s actions in the 1961 fire area are a little odd, at least at first glance. The exits on the 405 on the 11 mile trip between the 10 and the 101 are closed. On some residential streets that run from Sunset to Mulholland, such as Roscomare, substantial police presence at both ends has stringently limited vehicle access, even sometimes turning away residents (and some of the long-time homeowners have taken to using arcane and complicated routes to get to their homes). Finally, at a shopping center a mile from the top at Mulholland are positioned more than a dozen firetrucks and related equipment, with their very professional crews just sitting around.

What’s going on? Well, if you google california, fire and arson, the most recent stories date from October, not yesterday or today. The A word is silent. Huh? To state the obvious, lightning has caused precisely none of the multiple huge blazes that afflict Southern California. It’s clear that very evil people have caused much of the vast devastation we all have seen on TV. If you look at the precautions above, it seems obvious that the closed exits, roadblocks and checkpoints are designed to prevent some Pennywise from attempting Bel-Air Fire II, and part of the rationale for the large and stationary Rapid Response Team is to act swiftly if the clown does get through. (BTW, there’s a pretty good argument for arson being a capital offense; no 40+ year Manson sentence please for arguably worse people).

We hope the paragraph above makes it clear that we agree that you don’t keep shouting arsonist! in a crowded hayfield if you want to catch him and them; instead you quietly carry out a sensible plan. (We pause to note that we think LA mayor Eric Garcetti and the fireman and police have done an excellent job in very tough circumstances. Well done.) However, this being California, silence also could be related to the possibility there are also Kate Steinle angles to all this.

HNA Drama update 2

December 6th, 2017


Airlines owned by Chinese conglomerate HNA Group have missed payments due on leased aircraft, the chief executive of lessor Aergo Capital has told industry publication FlightGlobal. HNA had “stopped paying – via their owned airline subsidiaries – some lessors for leased jets for the past two to three months,” Aergo CEO Fred Browne was quoted as saying. “We only have one aircraft exposed, but I know others have a lot more,” Browne told FlightGlobal. “If those lessors turn around and say ‘no more’ and pull those aircraft out, that could truly shake the market.”

WSJ: “Pressure is mounting on China’s HNA Group Co. A Shenzhen-listed unit of the Chinese company said it scrapped plans to sell up to 5.2 billion yuan ($785.7 million) worth of shares to a small number of investors. HNA Investment recently had a market value of $741 million, down sharply from a peak of $3.5 billion in mid-2015″ Tick, Tick Tick.

6.5% once again, give or take

December 5th, 2017


China’s economic growth target for 2018 will show new changes in its economy as the government place more importance on higher quality development. Policy sources have told Reuters that China look set to continue this year’s growth target of “around 6.5 per cent” in 2018 even as they attempt to control the risks arising from a rapid build-up of debt. China’s growth last year was at a 26-year low at 6.7 per cent but it has grown to 6.9 per cent during the first three quarters of 2017. Numerous economists believe that a slowdown next year to 6.4 per cent due to strategies taken on to curb housing prices and efforts to deal with debt risks.

Of course even these numbers are greeted with skepticism. Bonus reading, not necessarily fun.

Ho Ho Ho

December 5th, 2017

Busy on other matters, we’ll just link to the utter insanity that has enveloped much of the country. Mark Steyn also has an interesting piece, minus the insanity of course. Have a nice day!

Bonus: watch the first half hour of the Godfather on TCM, now playing, and then this. Oy!

Openness and shared benefits?

December 4th, 2017


“The theme of this conference – developing a digital economy for openness and shared benefits – is a vision we at Apple share,” Cook said. “We are proud to have worked alongside many of our partners in China to help build a community that will join a common future in cyberspace.”

Cook’s words appeared carefully chosen so as not to upset his Chinese hosts, who routinely curtail access to online services seen as a potential threat to the country’s internal cohesion. Facebook and Instagram have been blocked by China’s Cyberspace Administration since 2009 and 2014, respectively.

It turns out that there are some things after all that left and right can agree upon. Quite a few of these companies are far worse than Standard Oil ever was.

Something rare in history, and destructive

December 3rd, 2017

Dictators like Mao and Stalin knew how to affect history by moving peoples back in time to subsistence, if that. But as we were watching the current pathetic SNL, we observe that the youngsters today know almost nothing, except for snark and what they see on their phone-computers. Nothing. Farmers and soldiers: forget it. The world of a few generations ago, ditto. This is incredibly self-destructive. Q: how many youngsters would sign up for the Army on Dec 8 this year; how many would charge Omaha Beach? No one has ever seen in all of human history the incredible changes in tech in the last hundred years, quintupling or so every generation. Unbelievable. BTW, we’re not kidding in suggesting that it become a requirement for high school graduation in the US for every student to live and work for a few weeks in a 19th century US farmhouse. We have no doubt that it could be transformational, since they have zero, zero, zero, no contact with the ways of thinking required there for survival and prospering.

1861 or something like that

December 2nd, 2017

As you know, we jog for an hour daily and listen to the radio while doing that. Today we heard from one country during the Ralph Nader radio program, and yesterday we heard from a completely different country, courtesy of Dennis Prager. They were of course discussing the same subject.

Smile, you’re on Candid Camera

December 1st, 2017


Maya Wang, a Hong Kong-based researcher for Human Rights Watch, contends the proclaimed benefits of such wired cities mask their true purpose. “This whole safe city idea is a massive surveillance project,” she said. The government-sponsored Smart Cities Work Committee didn’t respond to a request for comment. China’s latest five-year development plan calls for 100 smart-city trials to be rolled out next year. By 2020, the plan says, smart cities will make up a “ubiquitous system” that is expected to “achieve remarkable results.”

Along with access to online data, China’s government wants something else from tech companies—the cloud computing prowess to sort and analyze information. China wants to crunch data from surveillance cameras, smartphones, government databases and other sources to create so-called smart cities and safe cities.

Alibaba’s computers and artificial-intelligence algorithms power a “city brain” in Hangzhou that improves traffic flow and clears the path for ambulances by using mobile mapping and data from traffic cameras to time traffic signals. The company said its cloud and data services also have helped manage aircraft parking in Guangzhou and deploy tour guides in Wuhan.

Meanwhile, the US quietly is addressing some trade issues.

Too many bikes and mopeds

November 30th, 2017


After two years of ferrying thousands of meals across the capital on his moped for Chinese food-delivery startups, Li Xiaolong was rushing to leave the city Wednesday rather than face the eviction crews that come knocking on doors around him each night. Mr. Li, 29 years old, is one of thousands of workers clearing out of Beijing’s poorer neighborhoods this week, in the latest and more brutal phase of the city’s campaign to revamp itself as a sleeker capital with fewer people. Years of urban growth have clogged the city’s streets and strained its water supply. Beijing officials have said they want to cap the metropolis’s inhabitants at 23 million by 2020 and shrink the population in the city’s center by some 2 million.

The evictions have left a number of well-known companies scrambling, with e-commerce companies Alibaba Group Holding Ltd. and arranging housing for employees of their delivery services who suddenly found themselves homeless. Food-delivery services Meituan and both said they were attentive to delivery workers needing help. Meal delivery has become wildly popular in China by combining low cost and convenience — a business model heavily reliant on an abundant pool of cheap urban labor.

Wu Panyong, 21, who delivers fruit and vegetables to an elementary school, said he woke Monday morning to his mother pounding on the door, frantic at a notice posted that they had to move out by 6 p.m.—a nine-hour heads-up. They had already taken away several carloads of belongings when word came just hours before that they could stay through the end of the year. But the next day, their deadline changed again: Everyone now must clear out by Thursday. Despite having lived in Beijing all his life, Mr. Wu, the son of migrants, doesn’t have residency rights. Now, for the first time, he faces a move to Kaifeng, 400 miles south in Henan province, a “hometown” in which he has never lived.

And: More than a hundred Chinese intellectuals signed a statement calling the abrupt evictions a violation of human rights. “Any civilized society, any society with rule of law, cannot tolerate this,” the statement said. The intellectuals’ statement was quickly removed online.

PS: don’t try reading the WSJ piece in the affected area.

ANZ chart

November 29th, 2017

In a year we’ll come back and see whether ANZ was right, and to what extent. Meanwhile, we’re not going to deal with the craziness today, even to link. A few years from now google the major newspapers headlines for this week. Pretty funny if the NK war hasn’t happened.