There is an interesting phenomenon in the financial markets which I believe will continue to gain traction and could have implications for investors for years to come. Now more than ever, companies are allowing their stock prices to trade and remain above $100 (or par) per share without splitting their shares to allow sub par prices.
For many years, I could only recall two companies which consistently had stocks which were priced above $100: Berkshire Hathaway (BRK/a, BRK/b) and Alleghany Corp (Y). Now I can name several of the core holdings for LakeView Asset Management, LLC which are above $100 with no indication that a split is forthcoming. These holdings are Google (GOOG), Sears Holdings (SHLD) and Goldman Sachs (GS). Many more companies are joining the ranks of over $100 priced stocks. With its recent move, Apple (AAPL) is well above $100 and despite the company having split its stock 2 for 1 on three occasions since 1987, I wonder whether AAPL will split its stock or become part of the new “century” stock issues.
While splitting a stock has no implication for an investor’s holdings or tax basis, it does have some secondary psychological effects upon investors and the markets. First, investors are trained to think in terms of round lots of shares 100, 200, etc. rather than dollar amounts when making an investment decision. Some investors would prefer buying 100 shares of a $45 stock than 1 share of a $450 stock such as GOOG even though GOOG is a better investment value than the other company’s stock. Second, bid / offer spreads will tend to widen in absolute terms but not in relative or percentage terms as the price rises. This becomes more apparent when the stock rises above $100. Third, the wider price swings in absolute terms for the century stocks will give an appearance of higher volatility and increased risk even though the price swings may be equivalent on a percentage basis. In other words, a $5 swing on a $150 stock seems more precipitous than a 50 cent move on a $15 stock. Finally, anyone who desires to enter into options related activity will require more capital since the minimum option contract for most stocks carries a multiplier of 100 shares per contract. This will scare away speculators and likely drive spreads and implied volatilities higher.
On the other hand there are some benefits to maintaining a high stock price and not splitting a stock. Higher stock prices will decrease speculative activity and likely keep shares in the hand of long term holders. Furthermore, higher stock prices can be excellent marketing tools for companies as the media attention that is paid to such issues provides greater brand recognition for a company and could enhance customer appeal.
I believe that we should expect to see an ever increasing population of stocks which will be trading above $100 in the years to come. This will be beneficial for long term shareholders but will require the undoing of a deeply rooted mindset that believes stock splits and lower stock prices are in investors’ best interests.
At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, GOOG, GS and SHLD -- although positions can change at any time.
Saturday, June 9, 2007
Why Skipping the US Oil Fund ETF (USO)?
When it comes to exchange traded funds (ETFs) no two ETFs are alike. Also, not all are successful. For every S&P 500 Spyder (SPY) or Nasdaq Qs (QQQQ) there are several lightly traded ETFs. However, the one ETF that has failed investors consistently is the US Oil Fund ETF (USO). Investors have expected this ETF to trade in concert with the price of crude oil. However, nothing could be further from the truth. Unlike the Streetracks Gold ETF (GLD) which closely tracks the price of gold, the USO is a complex ETF which has failed to deliver. Since the USO relies on the use of derivative contracts rather than physical assets and gets caught up in the vagaries of the crude oil markets – such as price contango – the USO has a built in recipe for disappointment. If you want to use exchange traded instruments to take advantage of crude oil price movements then think twice. You are better off looking for an oil services or integrated oil stock that highly correlates with crude oil prices rather than playing around with the USO.
At the time of this Blog entry
, his family and or clients of LakeView Asset Management, LLC were short shares of SPY--- although positions can change at any time.
At the time of this Blog entry
, his family and or clients of LakeView Asset Management, LLC were short shares of SPY--- although positions can change at any time.
IBM Avoid $1.6 Billion Taxes
You have probably heard the saying before that high tax rates cause people to engage in behavior that enables them to avoid paying those taxes. Some of it illegal, some legal. When you do business in the US, with our 40% average corporate tax rate being the world's second highest, those efforts become pervasive. Take the recent case of IBM (IBM).
Why?:
It involves "Repatriation" of profits. The simplest way to describe that is foreign subsidiaries of US companies, if their earning are included in the results of the parent company, have profits taxed here is the US at US corporate tax rates in addition to taxes they may be paying in the country they are based.
To Avoid This:
IBM formed a new IBM subsidiary in the Netherlands. The unit spent $1 billion in cash and $11.5 billion in borrowed funds to buy 118.8 million shares -- 8% of shares outstanding. They did this from a group of investment banks that had borrowed the shares from institutional investors. The investment banks will then return the borrowed shares with shares they buy on the open market over the next nine months. If its stock rises and the investment banks suffer losses, IBM will cover them.
The transaction was structured to let IBM buy back stock without repatriating retained earnings from its foreign units to the U.S.
IBM does not have cash hidden overseas. It plans to repay the loans to the banks used for the stock repurchase with future earnings from international subsidiaries in different countries. The estimated tax rate after various credits would be 22%. That would result in saving about $1.6 billion, compared to the taxes it would have incurred by repatriating the sums to the U.S. the person said.
Very sneaky, and until the IRS caught on and issued a notice on May 31st, very legal. Now let's not get all upset at IBM. People behave in ways based on the conditions they find themselves in. Now, had we had the EU taxes rate of 26%, IBM may not have even investigated this. Were we in the US taxed at the 12.5% those companies in Ireland are, the topic would not have come up. When you tax folks the most, they will find ways around it. Management at IBM has a fiduciary responsibility to their shareholder and a move like this only show they take that seriously.
Rather than giving IBM a "tisk-tisk", I am trying to find out if the multinationals in my portfolio have done the same thing and if not, ask, "who was sleeping in accounting?"
Why?:
It involves "Repatriation" of profits. The simplest way to describe that is foreign subsidiaries of US companies, if their earning are included in the results of the parent company, have profits taxed here is the US at US corporate tax rates in addition to taxes they may be paying in the country they are based.
To Avoid This:
IBM formed a new IBM subsidiary in the Netherlands. The unit spent $1 billion in cash and $11.5 billion in borrowed funds to buy 118.8 million shares -- 8% of shares outstanding. They did this from a group of investment banks that had borrowed the shares from institutional investors. The investment banks will then return the borrowed shares with shares they buy on the open market over the next nine months. If its stock rises and the investment banks suffer losses, IBM will cover them.
The transaction was structured to let IBM buy back stock without repatriating retained earnings from its foreign units to the U.S.
IBM does not have cash hidden overseas. It plans to repay the loans to the banks used for the stock repurchase with future earnings from international subsidiaries in different countries. The estimated tax rate after various credits would be 22%. That would result in saving about $1.6 billion, compared to the taxes it would have incurred by repatriating the sums to the U.S. the person said.
Very sneaky, and until the IRS caught on and issued a notice on May 31st, very legal. Now let's not get all upset at IBM. People behave in ways based on the conditions they find themselves in. Now, had we had the EU taxes rate of 26%, IBM may not have even investigated this. Were we in the US taxed at the 12.5% those companies in Ireland are, the topic would not have come up. When you tax folks the most, they will find ways around it. Management at IBM has a fiduciary responsibility to their shareholder and a move like this only show they take that seriously.
Rather than giving IBM a "tisk-tisk", I am trying to find out if the multinationals in my portfolio have done the same thing and if not, ask, "who was sleeping in accounting?"
ADM Play with Dow's Playbook?
In what looks to be straight out of Dow (DOW)Chemical CEO Andrew Liveris's playbook, John Rice, VP of the Archer Daniels Midland Company (ADM)said "Investment in research, infrastructure, and transportation, and partnerships between ethanol producer countries are the measures required in order to ensure the future of renewable fuels." He said this at the panel Global Paradigms: The experience of ethanol in the United States and in Brazil, on June 4th at the Ethanol Summit 2007, São Paulo, Brazil.
The president of the São Paulo Sugar Cane Agroindustry Union (Unica), Eduardo Pereira de Carvalho, also believes a partnership between ethanol producer countries to be the best strategy for the success of renewable fuels. "Maize ethanol produced in the United States does not compete with our ethanol. My 'enemy' is gasoline," Carvalho joked.
He continued, "What we need to do is make the forecast investment of US$ 17 billion in the production sector come true, qualify ethanol as an energy product in order to overcome barriers to agricultural products, and sign long term agreements," he said.
ADM is currently the world's largest producer of biodiesel and of corn ethanol and has stated it is looking for investment for ethanol in Brazil and will begin producing biodiesel there this month. This is exactly what Dow did recently in Saudi Arabia with it's petrochemical announcement last month. If you are a producer a product, produce it where the input costs are the cheapest. Since the Brazilian ethanol program is quazi state run, also like Dow's situation again, ADM will be going into business with the gov't.
Brazil wants US investment in it's ethanol program, ADM wants to produce cheap ethanol, this is going to happen
The president of the São Paulo Sugar Cane Agroindustry Union (Unica), Eduardo Pereira de Carvalho, also believes a partnership between ethanol producer countries to be the best strategy for the success of renewable fuels. "Maize ethanol produced in the United States does not compete with our ethanol. My 'enemy' is gasoline," Carvalho joked.
He continued, "What we need to do is make the forecast investment of US$ 17 billion in the production sector come true, qualify ethanol as an energy product in order to overcome barriers to agricultural products, and sign long term agreements," he said.
ADM is currently the world's largest producer of biodiesel and of corn ethanol and has stated it is looking for investment for ethanol in Brazil and will begin producing biodiesel there this month. This is exactly what Dow did recently in Saudi Arabia with it's petrochemical announcement last month. If you are a producer a product, produce it where the input costs are the cheapest. Since the Brazilian ethanol program is quazi state run, also like Dow's situation again, ADM will be going into business with the gov't.
Brazil wants US investment in it's ethanol program, ADM wants to produce cheap ethanol, this is going to happen
Wednesday, June 6, 2007
High Education Costs, Low Executive Pay
Rob Elliott
Numerous blog posts have discussed the costs incurred by overseas and Chinese students of studying for a degree in the US or UK. Overseas education is expensive but if I land a high paying job then it is worth the initial investment.
A similar cost-benefit analysis applies to Western Executives paying large sums to take MBAs at the top European and US Universities.
This recent article on C/Net is another reason that Chinese student numbers are falling in the face of continued and rapid growth. On one level, the large increase in the Chinese middle class should result if more students coming to the UK and US. However, the existing large numbers of overseas and local graduates are keeping pay low and making it harder to justify the initial expense.
The fault of the argument below is to assume all executives are the same. Whilst technology can be backward engineered and copied Executive skills are one thing that will take much longer to understand and copy. That is not to say that the Chinese will not learn quickly. Do not expect a fall in US executive pay any time soon.
Moreover, once living costs are taken into account are US executives really on that much more?
My bold highlighting.
China's new weapon: Low executive pay
Excessive executive pay has been a hot-button issue in American politics for years, but worldwide factors could one day make it a liability on the balance sheet.
As companies in countries like China and India move away from performing behind-the-scenes functions, they're selling products and services under their own brand names directly against U.S. and European counterparts.
Since high-level executives and other white collar professionals in Asian companies typically make less than their Western equivalents, these companies potentially will have a cost advantage.
How or even whether the differences in executive salary will impact the market remains unclear: multinational companies are hiring their own executives in these regions, too, after all. Nonetheless, the numbers are tough to ignore: engineers aren't the only "talent" that costs less in developing markets. Executives cost a lot less, too.
Shanghai's SunTech Holdings, for instance, has moved from being a bit player in solar panels to becoming one of the largest manufacturers in the world. Most of the company's panels end up overseas, and it can produce those panels more cheaply than American competitors for various reasons. Among them: the company isn't lavishing huge compensation packages on its executives.
"There aren't 10 executives in the company that make more than $200,000," said Steve Chan, vice president of business development at SunTech Power Holdings.
U.S. execs make far more. In a survey conducted by Forbes last year, the magazine found that the average big company CEO made $3.3 million in salary and bonuses.
It trickles down from there. Chinese engineers make about one-third to one-half the salary of their U.S. counterparts, said one executive who runs Asian operations for a U.S. high tech firm. Marketing execs can make about half as much as their stateside colleagues.
"If you have one (marketing manager) that makes about $100,000 in the U.S, you can hire one here for $50,000," he said.
Professional services firms also pay less than U.S. counterparts, said Ted Dean, managing director of BDA, an analyst firm specializing in Asian markets. New college graduates hired by services firms might make $400 to $500 a month, or $4,800 to $6,000 annually. A well-regarded person with years of experience might make $30,000 to $50,000 annually. In the U.S., the same person can graze around the $100,000 mark.
While executive compensation can be absorbed somewhat in manufacturing companies, it can be pronounced in purely white-collar service operations. Panorama Media Holdings, based in Beijing, sells high-resolution photos to advertising agencies, similar to Getty Images and Corbis.
Panorama, though, can sell its products for an eighth the price, according to Wayne Shiong, a partner in venture firm WI Harper, an investor in Panorama. Wherever Getty charges $50,000 for services, Panorama can charge 50,000 RMB (China Yuan Renminbi), or about $6,600.
Panorama primarily sells its photos to Asian advertising agencies. Shiong, though, said that the multinational photo outfits have not reacted to lower their prices for the local market. Additionally, Panorama is contemplating taking out office space in New York to test out the international opportunities.
The Spartan start-up The pay discrepancy starts during the start-up phase. Founding CEOs of some Chinese start-ups deliberately take low wages to keep costs down, according to Shiong and others. The CEO at a company that's just finished a Series A round of funding might pay himself 500,000 RMB a year, or about $67,000.
Documents filed by Chinese companies with the Securities and Exchange Commission back this up. Focus Media Holding, which specializes in outdoor advertising kiosks, paid $100,000 to its two executive officers in 2004 combined. In 2005, the year the company went public on Nasdaq, Focus had 13 executives and directors and the total pay for all of them for the year was $512,947.
In 2005, the company's four executives and directors pulled in $100,000 combined. The four executives and directors of Trina Solar Limited pulled in $128,039 in 2005. None had severance packages, the filing states.
Compare that to a pre-public U.S. company. DivX, which makes media software, paid its top five execs about $1 million in 2005, the year before it went public. Shutterfly paid its top five people $1.1 million the year before an IPO--only one made under $210,000.
Chinese executives make their wealth in stock options, which U.S. execs get, too. Suntech founder Shi Zhengrong is considered one of the richest individuals in China, with a net worth exceeding $2 billion, according to various studies. Focus awarded 22.5 million in options to executives and employees in 2005. Salaries also rise after an IPO, but generally not to U.S. levels. One reason, of course, is that the cost of living is lower. Someone making $50,000 in China will likely be able to retain a driver and other household help. That's not enough to rent a decent one-bedroom apartment in many American cities.
Conversely, to expand internationally, Chinese companies have to hire U.S. and European executives, who will command U.S. salaries. Suntech's Chan said that will be an issue for his company. In the first few years of the company's growth, the salespeople came out of China. Expanding internationally will also take quite some time.
Victor Canto, chairman of La Jolla Economics, added that many executives in Asian companies will also leap to U.S. competitors to get salary raises. "That will decrease the disparity," he said.
Still, in the end, multinationals of course have some of their higher-level people in more expensive countries, so a discrepancy should be expected.
"Foreign vendors might be able to achieve comparable manufacturing costs, but they still will have a huge R&D lab in Finland," said BDA's Dean.
Numerous blog posts have discussed the costs incurred by overseas and Chinese students of studying for a degree in the US or UK. Overseas education is expensive but if I land a high paying job then it is worth the initial investment.
A similar cost-benefit analysis applies to Western Executives paying large sums to take MBAs at the top European and US Universities.
This recent article on C/Net is another reason that Chinese student numbers are falling in the face of continued and rapid growth. On one level, the large increase in the Chinese middle class should result if more students coming to the UK and US. However, the existing large numbers of overseas and local graduates are keeping pay low and making it harder to justify the initial expense.
The fault of the argument below is to assume all executives are the same. Whilst technology can be backward engineered and copied Executive skills are one thing that will take much longer to understand and copy. That is not to say that the Chinese will not learn quickly. Do not expect a fall in US executive pay any time soon.
Moreover, once living costs are taken into account are US executives really on that much more?
My bold highlighting.
China's new weapon: Low executive pay
Excessive executive pay has been a hot-button issue in American politics for years, but worldwide factors could one day make it a liability on the balance sheet.
As companies in countries like China and India move away from performing behind-the-scenes functions, they're selling products and services under their own brand names directly against U.S. and European counterparts.
Since high-level executives and other white collar professionals in Asian companies typically make less than their Western equivalents, these companies potentially will have a cost advantage.
How or even whether the differences in executive salary will impact the market remains unclear: multinational companies are hiring their own executives in these regions, too, after all. Nonetheless, the numbers are tough to ignore: engineers aren't the only "talent" that costs less in developing markets. Executives cost a lot less, too.
Shanghai's SunTech Holdings, for instance, has moved from being a bit player in solar panels to becoming one of the largest manufacturers in the world. Most of the company's panels end up overseas, and it can produce those panels more cheaply than American competitors for various reasons. Among them: the company isn't lavishing huge compensation packages on its executives.
"There aren't 10 executives in the company that make more than $200,000," said Steve Chan, vice president of business development at SunTech Power Holdings.
U.S. execs make far more. In a survey conducted by Forbes last year, the magazine found that the average big company CEO made $3.3 million in salary and bonuses.
It trickles down from there. Chinese engineers make about one-third to one-half the salary of their U.S. counterparts, said one executive who runs Asian operations for a U.S. high tech firm. Marketing execs can make about half as much as their stateside colleagues.
"If you have one (marketing manager) that makes about $100,000 in the U.S, you can hire one here for $50,000," he said.
Professional services firms also pay less than U.S. counterparts, said Ted Dean, managing director of BDA, an analyst firm specializing in Asian markets. New college graduates hired by services firms might make $400 to $500 a month, or $4,800 to $6,000 annually. A well-regarded person with years of experience might make $30,000 to $50,000 annually. In the U.S., the same person can graze around the $100,000 mark.
While executive compensation can be absorbed somewhat in manufacturing companies, it can be pronounced in purely white-collar service operations. Panorama Media Holdings, based in Beijing, sells high-resolution photos to advertising agencies, similar to Getty Images and Corbis.
Panorama, though, can sell its products for an eighth the price, according to Wayne Shiong, a partner in venture firm WI Harper, an investor in Panorama. Wherever Getty charges $50,000 for services, Panorama can charge 50,000 RMB (China Yuan Renminbi), or about $6,600.
Panorama primarily sells its photos to Asian advertising agencies. Shiong, though, said that the multinational photo outfits have not reacted to lower their prices for the local market. Additionally, Panorama is contemplating taking out office space in New York to test out the international opportunities.
The Spartan start-up The pay discrepancy starts during the start-up phase. Founding CEOs of some Chinese start-ups deliberately take low wages to keep costs down, according to Shiong and others. The CEO at a company that's just finished a Series A round of funding might pay himself 500,000 RMB a year, or about $67,000.
Documents filed by Chinese companies with the Securities and Exchange Commission back this up. Focus Media Holding, which specializes in outdoor advertising kiosks, paid $100,000 to its two executive officers in 2004 combined. In 2005, the year the company went public on Nasdaq, Focus had 13 executives and directors and the total pay for all of them for the year was $512,947.
In 2005, the company's four executives and directors pulled in $100,000 combined. The four executives and directors of Trina Solar Limited pulled in $128,039 in 2005. None had severance packages, the filing states.
Compare that to a pre-public U.S. company. DivX, which makes media software, paid its top five execs about $1 million in 2005, the year before it went public. Shutterfly paid its top five people $1.1 million the year before an IPO--only one made under $210,000.
Chinese executives make their wealth in stock options, which U.S. execs get, too. Suntech founder Shi Zhengrong is considered one of the richest individuals in China, with a net worth exceeding $2 billion, according to various studies. Focus awarded 22.5 million in options to executives and employees in 2005. Salaries also rise after an IPO, but generally not to U.S. levels. One reason, of course, is that the cost of living is lower. Someone making $50,000 in China will likely be able to retain a driver and other household help. That's not enough to rent a decent one-bedroom apartment in many American cities.
Conversely, to expand internationally, Chinese companies have to hire U.S. and European executives, who will command U.S. salaries. Suntech's Chan said that will be an issue for his company. In the first few years of the company's growth, the salespeople came out of China. Expanding internationally will also take quite some time.
Victor Canto, chairman of La Jolla Economics, added that many executives in Asian companies will also leap to U.S. competitors to get salary raises. "That will decrease the disparity," he said.
Still, in the end, multinationals of course have some of their higher-level people in more expensive countries, so a discrepancy should be expected.
"Foreign vendors might be able to achieve comparable manufacturing costs, but they still will have a huge R&D lab in Finland," said BDA's Dean.
China: Coming to Grips with the New Global Player
Rob Elliott
Lead article in World Economy (an academic economics journal that does tend to publish accessible articles). Requires subscription for full PDF or ask a friendly academic.
China: Coming to Grips with the New Global Player
* Horst Siebert 11Kiel Institute for the World Economy, Germany, and SAIS Bologna Centre, Johns Hopkins University, Italy
Abstract
This paper analyses China's economic performance in the last 25 years and discusses its prospect for growth in the future. Exports and investment have been the two driving forces for the high annual GDP growth rates. FDI plays an important role. However, structural issues such as the loss-making state-owned firms and the fragile banking industry have to be solved. Monetary policy is complicated by the accumulation of reserves which, however, provide an insurance for the fragile banking system. Property rights, a crucial element in transforming a communist society, are far from being clearly developed. Major policy issues in the future include the correction of the distorted growth process and of the institutional deficits, especially with respect to the rule of law and the lack of democracy.
Lead article in World Economy (an academic economics journal that does tend to publish accessible articles). Requires subscription for full PDF or ask a friendly academic.
China: Coming to Grips with the New Global Player
* Horst Siebert 11Kiel Institute for the World Economy, Germany, and SAIS Bologna Centre, Johns Hopkins University, Italy
Abstract
This paper analyses China's economic performance in the last 25 years and discusses its prospect for growth in the future. Exports and investment have been the two driving forces for the high annual GDP growth rates. FDI plays an important role. However, structural issues such as the loss-making state-owned firms and the fragile banking industry have to be solved. Monetary policy is complicated by the accumulation of reserves which, however, provide an insurance for the fragile banking system. Property rights, a crucial element in transforming a communist society, are far from being clearly developed. Major policy issues in the future include the correction of the distorted growth process and of the institutional deficits, especially with respect to the rule of law and the lack of democracy.
Coal and Corruption
Rob Elliott
As part of our "corruption watch" we read in today's China government's offical website that:
China punishes over 5,000 officials for illegal coal mine participation
There are a number of interesting numbers that have been thrown into this small article that I must say I was unaware of. In the UK any coal mines that are left are operated on a massive scale. If it difficult to conceive that coal mines can just be set up illegally without anyone knowing but for China to have 100,000 illegal mine cases is astonishing.
The other figure that is of course a cause for concern in the 17 deaths per DAY in Chinese coal mines. This may be less surprising when read with the number of illegal mines in operation.
Linking to the previous article the environmental implications of such activity are also entirely negative.
More than 5,000 Chinese civil servants participating in coal mine operation have received punishment in almost 100,000 illegal mining cases since 2005, according to statistics released by the Ministry of Land and Resources (MLR).
By the end of 2006, China has investigated 89,926 cases of mining with no licenses, 1,907 cases involving illegal trading of prospecting and mining rights, and 5,795 cases of mining beyond boundary lines, said Jia Qihai, a senior official in charge of mining resources development in MLR.
A total of 2,154 people received penal treatment for illegal coal mining, he said.
However, the MLR official specified neither where or what ministries these civil servants come from nor the kinds of punishment they took.
China has been cracking down on illegal mining since the State Council, the country's cabinet, demanded an overall straighten-out campaign in August 2005.
"Generally speaking, the number of cases of illegal mining are declining sharply and mine resources are exploited in a more orderly manner," said Jia, who also called for more related efforts to address this issue.
"Officials in some regions still haven't realized the graveness of the situation and supervision and institutional construction remains weak," he said.
Coal mine accidents killed 4,746 people in China in 2006. On average, 17 miners lose their lives everyday in Chinese coal mines, which are the world's deadliest.
On May 10, the State Administration of Work Safety announced punishment on 133 people held responsible for five serious accidents that claimed 249 lives. Four of the five accidents occurred in coal mines.
The largest single accident was a mine blast in Hebei Province on Dec. 7, 2005, which killed 108 people.
As part of our "corruption watch" we read in today's China government's offical website that:
China punishes over 5,000 officials for illegal coal mine participation
There are a number of interesting numbers that have been thrown into this small article that I must say I was unaware of. In the UK any coal mines that are left are operated on a massive scale. If it difficult to conceive that coal mines can just be set up illegally without anyone knowing but for China to have 100,000 illegal mine cases is astonishing.
The other figure that is of course a cause for concern in the 17 deaths per DAY in Chinese coal mines. This may be less surprising when read with the number of illegal mines in operation.
Linking to the previous article the environmental implications of such activity are also entirely negative.
More than 5,000 Chinese civil servants participating in coal mine operation have received punishment in almost 100,000 illegal mining cases since 2005, according to statistics released by the Ministry of Land and Resources (MLR).
By the end of 2006, China has investigated 89,926 cases of mining with no licenses, 1,907 cases involving illegal trading of prospecting and mining rights, and 5,795 cases of mining beyond boundary lines, said Jia Qihai, a senior official in charge of mining resources development in MLR.
A total of 2,154 people received penal treatment for illegal coal mining, he said.
However, the MLR official specified neither where or what ministries these civil servants come from nor the kinds of punishment they took.
China has been cracking down on illegal mining since the State Council, the country's cabinet, demanded an overall straighten-out campaign in August 2005.
"Generally speaking, the number of cases of illegal mining are declining sharply and mine resources are exploited in a more orderly manner," said Jia, who also called for more related efforts to address this issue.
"Officials in some regions still haven't realized the graveness of the situation and supervision and institutional construction remains weak," he said.
Coal mine accidents killed 4,746 people in China in 2006. On average, 17 miners lose their lives everyday in Chinese coal mines, which are the world's deadliest.
On May 10, the State Administration of Work Safety announced punishment on 133 people held responsible for five serious accidents that claimed 249 lives. Four of the five accidents occurred in coal mines.
The largest single accident was a mine blast in Hebei Province on Dec. 7, 2005, which killed 108 people.
China's First Climate Change Action Plan
Rob Elliott
China today launched it's first Climate Change Action Plan. It is interesting to note that "economics" take precedent for entirely justafiable reasons.
The West will need to redouble their own efforts to cut emissions to offset Chinese growth in emissions.
The Chinese government is perfectly aware that many of the cost of climate change will fall on China itself. However, as with any developing country, growth, poverty reduction and political stability take priority.
Whilst China should be included in any multilateral discussions of emission reductions the West would be wise to allow China the leyway it requires.
China's First Plan on Climate Change: Poverty first
China puts economy before climate [BBC]
China to enact national action plan on climate change [Official Chinese government website]
China's climate change plan due ahead of G8 summit
China to enact first plan on climate change
EDIT:
Key Facts on China and Climate Change (from PlanetArk).
CLIMATE CHANGE IMPACTS:
- China says global warming poses a serious threat through rising sea levels, worsening droughts in some regions, more unstable rain patterns in others, and melting glaciers.
- By 2020, annual mean temperatures could increase by 1.3 to 2.1 degrees Celsius from 2000, and by 2050 the rise could be 2.3 to 3.3 degrees.
- If adaptive steps are not taken, global warming could cut nationwide crop production by up to 10 percent by 2030. Wheat, rice and corn growing capacity could fall by up to 37 percent in the second half of the century.
TOTAL EMISSIONS ARE HIGH, PER-CAPITA EMISSIONS ARE LOW:
- China's rapid economic growth and huge population of more than 1.3 billion have made it the world's second largest emitter of greenhouse gases after the United States.
- The International Energy Agency has said China could emerge as the top emitter of the main greenhouse gas, carbon dioxide, as early as this year, a claim disputed by Chinese officials.
- China's plan says that between 1994 and 2004, China's greenhouse gas emissions grew by an average 4 percent a year.
- Its average per-capita emissions from burning fossil fuels in 2004 were 3.65 tonnes of carbon dioxide, just 33 percent of the average for member countries of the Organisation for Economic Co-operation and Development.
INTERNATIONAL STEPS:
- In 2002 China ratified the Kyoto Protocol, which governs international climate change and greenhouse gas obligations.
- As a developing country, China is excluded from the current phase of emission cuts in the protocol, but other countries may demand it accept some targets when the next phase of cuts from 2013 are negotiated in coming years.
- China joined the Asia-Pacific Partnership for Clean Development and Climate in 2005. The group, made up of the United States, Australia, India, South Korea, Japan and China, aims to use technology to reduce emissions.
DOMESTIC MEASURES:
- In 2005, China depended on coal, the most carbon-dioxide heavy of the fossil fuels, for 68.9 percent of its primary energy consumption, the plan says, and consumption of oil is climbing as vehicle ownership and industry boom.
- China's plan proposes expanding nuclear power and clean energy sources to weaken dependence on fossil fuels, as well as upgrading to cleaner coal-fired power stations.
- It also aims to expand forests to soak up more carbon dioxide and developing new crop strains to withstand long dry periods.
- China's previously released National Climate Change Assessment proposes by 2020 nearly halving from 2000 levels the amount of greenhouse gases emitted to produce each unit of gross domestic product (GDP), but it states emissions per person are likely to top projected developed-nation levels before starting to fall.
- China has vowed to cut the energy used to generate each unit of GDP by 20 percent of 2005 levels by 2010. (Sources: China National Climate Change Assessment; China's National Climate Change Programme; Reuters)
China today launched it's first Climate Change Action Plan. It is interesting to note that "economics" take precedent for entirely justafiable reasons.
The West will need to redouble their own efforts to cut emissions to offset Chinese growth in emissions.
The Chinese government is perfectly aware that many of the cost of climate change will fall on China itself. However, as with any developing country, growth, poverty reduction and political stability take priority.
Whilst China should be included in any multilateral discussions of emission reductions the West would be wise to allow China the leyway it requires.
China's First Plan on Climate Change: Poverty first
China puts economy before climate [BBC]
China to enact national action plan on climate change [Official Chinese government website]
China's climate change plan due ahead of G8 summit
China to enact first plan on climate change
EDIT:
Key Facts on China and Climate Change (from PlanetArk).
CLIMATE CHANGE IMPACTS:
- China says global warming poses a serious threat through rising sea levels, worsening droughts in some regions, more unstable rain patterns in others, and melting glaciers.
- By 2020, annual mean temperatures could increase by 1.3 to 2.1 degrees Celsius from 2000, and by 2050 the rise could be 2.3 to 3.3 degrees.
- If adaptive steps are not taken, global warming could cut nationwide crop production by up to 10 percent by 2030. Wheat, rice and corn growing capacity could fall by up to 37 percent in the second half of the century.
TOTAL EMISSIONS ARE HIGH, PER-CAPITA EMISSIONS ARE LOW:
- China's rapid economic growth and huge population of more than 1.3 billion have made it the world's second largest emitter of greenhouse gases after the United States.
- The International Energy Agency has said China could emerge as the top emitter of the main greenhouse gas, carbon dioxide, as early as this year, a claim disputed by Chinese officials.
- China's plan says that between 1994 and 2004, China's greenhouse gas emissions grew by an average 4 percent a year.
- Its average per-capita emissions from burning fossil fuels in 2004 were 3.65 tonnes of carbon dioxide, just 33 percent of the average for member countries of the Organisation for Economic Co-operation and Development.
INTERNATIONAL STEPS:
- In 2002 China ratified the Kyoto Protocol, which governs international climate change and greenhouse gas obligations.
- As a developing country, China is excluded from the current phase of emission cuts in the protocol, but other countries may demand it accept some targets when the next phase of cuts from 2013 are negotiated in coming years.
- China joined the Asia-Pacific Partnership for Clean Development and Climate in 2005. The group, made up of the United States, Australia, India, South Korea, Japan and China, aims to use technology to reduce emissions.
DOMESTIC MEASURES:
- In 2005, China depended on coal, the most carbon-dioxide heavy of the fossil fuels, for 68.9 percent of its primary energy consumption, the plan says, and consumption of oil is climbing as vehicle ownership and industry boom.
- China's plan proposes expanding nuclear power and clean energy sources to weaken dependence on fossil fuels, as well as upgrading to cleaner coal-fired power stations.
- It also aims to expand forests to soak up more carbon dioxide and developing new crop strains to withstand long dry periods.
- China's previously released National Climate Change Assessment proposes by 2020 nearly halving from 2000 levels the amount of greenhouse gases emitted to produce each unit of gross domestic product (GDP), but it states emissions per person are likely to top projected developed-nation levels before starting to fall.
- China has vowed to cut the energy used to generate each unit of GDP by 20 percent of 2005 levels by 2010. (Sources: China National Climate Change Assessment; China's National Climate Change Programme; Reuters)
Paulson Plays the Rude Card Against Chinese
Rob Elliott
An fascinating post on the state of US-China relations from a US perspective. The linked article comments on a Chris Nelson report (posted below).
Nothing is particularly surprising but what is of interest is whether we believe this to be a deliberate snub or simply misplaced (or not misplaced) US arrogance. Cock-up over conspiracy is my reading of it. My bold.
Perhaps the most telling quote in the article is:
Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"?
I suspect this statement is a true representation of the facts - a little surprising that this is only now being contemplated.Paulson Plays the Rude Card Against Chinese: No Windfall Expected
The Nelson Report by Chris Nelson, 23 May 2007
It may be that we are cranky because the meds are wearing off from our root canal this morning (just a swell way to start the workday) but it doesn't sound like the US-China cabinet level SED "dialogue" went all that well. In fact, there is some evidence it was a disaster.
So you have to ask if it will end up being the end. Barring some major breakthroughs at the JCCT, it doesn't sound like there will be any point in meeting again, as scheduled, in December.
This morning's session was called early. . .the game was stopped in what would normally have been the 6th inning. As one experienced China-hand asked, rhetorically, "you telling me Wu Yi came over here with 14 of her cabinet members and they couldn't find things to talk with us about?"
"Results", with one or two exceptions, either were minimal, or not what Secretary Paulson seemed to expect. And at the closing press conference, the Chinese didn't even pretend they had had a good time. Madam Wu Yi read her statement, and walked off. No pretence of a friendly hug for the US side.
At yesterday's press briefing, journalists were urged not to see the SED as an negotiating "event", but, rather, as a "discussion". Negotiations and "results", it was argued, are for the JCCT process chaired by Commerce.
Hummmm.
Today, an impertinent ink-stained scribbler asks, privately, "if Treasury chairs the SED, and Paulson isn't allowed to press his case on currency, and to get a Chinese response, what's the point?" In fact, sources indicate there was some "heated dialogue" on currency. But the bottom line is the same...after all the US pressure, all it got was last week's very minimal "float", increasing the maximum daily trading band by 0.2% to 0.5% total. . .exactly half what Bretton Woods defines as a "fixed rate".
So you have to wonder if this time, Paulson's patience has worn out, and the still-delayed Treasury report to Congress on undervalued currencies will. . .finally. . ."cite" China. Since that would formally kick-off mandated "negotiations", you have to wonder how Beijing would react, given its clear public heartburn over the IPR and other WTO cases.
Finally, you have to wonder how long it will take Ways & Means chairman Charlie Rangel to decide that maybe moving some China currency legislation is a small price to pay for Democratic Caucus approval of his Labor and Environment deal.
One normally hesitates to ascribe too much to the theater of body language, but here's something that just bashes you right between the eyes: Paulson, the guy with 72 private trips to China, all that hands-on experience, he who told the White House, State and USTR not to worry, that he would be the China Guy in this Administration...at the closing press conference, Paulson stalked in, well ahead of Wu Yi, and then started reading his statement before she even reached the podium.
Excuse me? An American or European would have cold-cocked the President for such calculated rudeness! In China (Japan, Korea, etc.) you watch older married couples walk into someplace. . .the husband is 10 feet in front, and the subservient wife is dutifully plodding behind. You think for one minute that elderly maiden lady Wu Yi didn't catch the insult here?
Or, are you telling us Paulson didn't mean it, that he was so focused on reading his prepared statement he didn't think? NONSENSE. This was a calculated act of rudeness which told everyone in the room, and anyone watching on TV, that a major failure had taken place.
Further evidence of a Paulson snit. . .he seemed to go out of his way to be rude to an Asian journalist, who had to ask him four times, in very good english, something about the N. Korea/Macao money problems Treasury is having with State (see separate item in tonight's Report). Paulson pretended not to be able to understand what everyone else in the room got the first time.
Is there a less personal problem going on? Perhaps Labor Secretary Elaine Chao, speaking to reporters last night, sensed today's result, when she said that from what she'd seen so far, even though she herself is of Chinese descent, "it's much harder than anyone thinks for the two countries to communicate". "Maybe", she mused, "we just have very different styles. . ."
Even if you discount Paulson's rudeness to his alleged friend as somehow unintentional, witnesses agree that something definitely was "missing" today. Commented one, privately, "it was as cold as ice in there. The Chinese just looked like they wanted to get off the stage quickly. They really didn't bother to put on a show for the cameras back home."
Maybe that was the point? Certainly, Chinese officials had made very clear their displeasure at the Administration's decision to start those three WTO cases at the beginning of April. . .that was a major point of Wu Yi's "frank" opening remarks yesterday.
And perhaps that explains why Paulson got nothing on something which he had already, in a sense, "leaked" to the press. . .China lifting it's 25% foreign ownership cap on domestic bank investment. Nope. . .not this time.
And even with yesterday's OIE announcement of "controlled risk" clearance of US beef exports, no one hinted if the US asked China to at least agree to talk about its continuing ban later on. . .much less did anyone say something specific today, despite the obvious political importance for pro-trade/pro-China trade senators like Finance Chair Max Baucus, and former chair Chuck Grassley.
OK, OK, so Paulson & Co did get a few things. . .the airlines deal is useful; China said it would remove its moratorium on allowing new foreign securities firms into the market. . .something it had hinted about last December; and the Chinese said that US insurance firms can get into the brokerage and property trading business, as US companies had been asking (although an insurance source said, basically, "nice, no big deal").
So. . .step back a few feet. What happened? Is Chao right? Have we run into a clash of negotiating cultures? Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"? Does that mean that when the Administration. . .finally. . .pulled the trigger on some narrowly drawn WTO cases, that when it also asked China for "deliverables" at the SED it was giving self-destructive offense to Beijing?
Somehow you think that by now, Chinese officials and negotiators are a lot more sophisticated than that. So maybe it was the substance, and capacity of the US negotiators?
Who knows? But one thing for sure, dressing up this SED as something which really moved forward the "responsible stakeholder" concept is delusional.
A final, frankly nasty thought: getting nothing on currency was not a surprise, of course, given the Chinese movement last week (Nelson Report, May 18). . .but this then raises a rather embarrassing question for Paulson personally: We noted in our coverage of his performance at a CSIS/PIIE currency conference (Nelson Report) that when unscripted, he has trouble putting two coherent sentences together. A friend in Beijing said he noted the same thing when Paulson was there last December. You have to ask if this guy is rich, tall, tan. . .and. . .and. . .
An fascinating post on the state of US-China relations from a US perspective. The linked article comments on a Chris Nelson report (posted below).
Nothing is particularly surprising but what is of interest is whether we believe this to be a deliberate snub or simply misplaced (or not misplaced) US arrogance. Cock-up over conspiracy is my reading of it. My bold.
Perhaps the most telling quote in the article is:
Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"?
I suspect this statement is a true representation of the facts - a little surprising that this is only now being contemplated.Paulson Plays the Rude Card Against Chinese: No Windfall Expected
The Nelson Report by Chris Nelson, 23 May 2007
It may be that we are cranky because the meds are wearing off from our root canal this morning (just a swell way to start the workday) but it doesn't sound like the US-China cabinet level SED "dialogue" went all that well. In fact, there is some evidence it was a disaster.
So you have to ask if it will end up being the end. Barring some major breakthroughs at the JCCT, it doesn't sound like there will be any point in meeting again, as scheduled, in December.
This morning's session was called early. . .the game was stopped in what would normally have been the 6th inning. As one experienced China-hand asked, rhetorically, "you telling me Wu Yi came over here with 14 of her cabinet members and they couldn't find things to talk with us about?"
"Results", with one or two exceptions, either were minimal, or not what Secretary Paulson seemed to expect. And at the closing press conference, the Chinese didn't even pretend they had had a good time. Madam Wu Yi read her statement, and walked off. No pretence of a friendly hug for the US side.
At yesterday's press briefing, journalists were urged not to see the SED as an negotiating "event", but, rather, as a "discussion". Negotiations and "results", it was argued, are for the JCCT process chaired by Commerce.
Hummmm.
Today, an impertinent ink-stained scribbler asks, privately, "if Treasury chairs the SED, and Paulson isn't allowed to press his case on currency, and to get a Chinese response, what's the point?" In fact, sources indicate there was some "heated dialogue" on currency. But the bottom line is the same...after all the US pressure, all it got was last week's very minimal "float", increasing the maximum daily trading band by 0.2% to 0.5% total. . .exactly half what Bretton Woods defines as a "fixed rate".
So you have to wonder if this time, Paulson's patience has worn out, and the still-delayed Treasury report to Congress on undervalued currencies will. . .finally. . ."cite" China. Since that would formally kick-off mandated "negotiations", you have to wonder how Beijing would react, given its clear public heartburn over the IPR and other WTO cases.
Finally, you have to wonder how long it will take Ways & Means chairman Charlie Rangel to decide that maybe moving some China currency legislation is a small price to pay for Democratic Caucus approval of his Labor and Environment deal.
One normally hesitates to ascribe too much to the theater of body language, but here's something that just bashes you right between the eyes: Paulson, the guy with 72 private trips to China, all that hands-on experience, he who told the White House, State and USTR not to worry, that he would be the China Guy in this Administration...at the closing press conference, Paulson stalked in, well ahead of Wu Yi, and then started reading his statement before she even reached the podium.
Excuse me? An American or European would have cold-cocked the President for such calculated rudeness! In China (Japan, Korea, etc.) you watch older married couples walk into someplace. . .the husband is 10 feet in front, and the subservient wife is dutifully plodding behind. You think for one minute that elderly maiden lady Wu Yi didn't catch the insult here?
Or, are you telling us Paulson didn't mean it, that he was so focused on reading his prepared statement he didn't think? NONSENSE. This was a calculated act of rudeness which told everyone in the room, and anyone watching on TV, that a major failure had taken place.
Further evidence of a Paulson snit. . .he seemed to go out of his way to be rude to an Asian journalist, who had to ask him four times, in very good english, something about the N. Korea/Macao money problems Treasury is having with State (see separate item in tonight's Report). Paulson pretended not to be able to understand what everyone else in the room got the first time.
Is there a less personal problem going on? Perhaps Labor Secretary Elaine Chao, speaking to reporters last night, sensed today's result, when she said that from what she'd seen so far, even though she herself is of Chinese descent, "it's much harder than anyone thinks for the two countries to communicate". "Maybe", she mused, "we just have very different styles. . ."
Even if you discount Paulson's rudeness to his alleged friend as somehow unintentional, witnesses agree that something definitely was "missing" today. Commented one, privately, "it was as cold as ice in there. The Chinese just looked like they wanted to get off the stage quickly. They really didn't bother to put on a show for the cameras back home."
Maybe that was the point? Certainly, Chinese officials had made very clear their displeasure at the Administration's decision to start those three WTO cases at the beginning of April. . .that was a major point of Wu Yi's "frank" opening remarks yesterday.
And perhaps that explains why Paulson got nothing on something which he had already, in a sense, "leaked" to the press. . .China lifting it's 25% foreign ownership cap on domestic bank investment. Nope. . .not this time.
And even with yesterday's OIE announcement of "controlled risk" clearance of US beef exports, no one hinted if the US asked China to at least agree to talk about its continuing ban later on. . .much less did anyone say something specific today, despite the obvious political importance for pro-trade/pro-China trade senators like Finance Chair Max Baucus, and former chair Chuck Grassley.
OK, OK, so Paulson & Co did get a few things. . .the airlines deal is useful; China said it would remove its moratorium on allowing new foreign securities firms into the market. . .something it had hinted about last December; and the Chinese said that US insurance firms can get into the brokerage and property trading business, as US companies had been asking (although an insurance source said, basically, "nice, no big deal").
So. . .step back a few feet. What happened? Is Chao right? Have we run into a clash of negotiating cultures? Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"? Does that mean that when the Administration. . .finally. . .pulled the trigger on some narrowly drawn WTO cases, that when it also asked China for "deliverables" at the SED it was giving self-destructive offense to Beijing?
Somehow you think that by now, Chinese officials and negotiators are a lot more sophisticated than that. So maybe it was the substance, and capacity of the US negotiators?
Who knows? But one thing for sure, dressing up this SED as something which really moved forward the "responsible stakeholder" concept is delusional.
A final, frankly nasty thought: getting nothing on currency was not a surprise, of course, given the Chinese movement last week (Nelson Report, May 18). . .but this then raises a rather embarrassing question for Paulson personally: We noted in our coverage of his performance at a CSIS/PIIE currency conference (Nelson Report) that when unscripted, he has trouble putting two coherent sentences together. A friend in Beijing said he noted the same thing when Paulson was there last December. You have to ask if this guy is rich, tall, tan. . .and. . .and. . .
China's Stockmarket - "how does it work"?
Rob Elliott
I am aware that there have been a number of posts on the Chinese stock market on this blog recently.
However, given there may be a more general "economics" audience and other interested travellers I am posting an article from today's Independent that gives a nice little overview of the Chinese stock market and how it works (it is part of a much larger article dealing with the Greenspan comments - see previous post).
Before the article here is my prediction - let time be the judge.
1. Stockmarket will continue to rise perhaps by another 25-30% over the next 6 months to a year. 5000 could be the psychological barrier that is a digit too far. There will be a series of small hiccups on the way.2. What will follow will be a trigger than may, by itself, seem quite unimportant that will lead to a widespread sell off of Chinese stocks with perhaps a 10-15% one day fall.3. Over the next year shares will fall by as much as 40-50% off their all time highs before stabilising.4. The knock on effect on the world markets will not be as great as some commentators fear but there will be some contagion effect on neighbouring exchanges.5. Internally, real estate prices will fall and many individuals will be wiped out. Given the large share holdings by the Police, Army and state owned enterprises what happens then is anyone's guess but it could conceivably get quite ugly quite quickly.
Greenspan's warning for China
China operates two stock exchanges on the mainland, in Shanghai and Shenzhen, as well as the Hong Kong Stock exchange, which is entirely separate.
The Shanghai bourse is the larger of the two - the Chinese government maintains a controlling interest in many of the companies listed in Shenzhen - but the combined total market was capitalised at around $500m at the end of last year.
Domestic investors have a choice of around 900 stocks, but two types of share are traded. A shares, with prices in the local currency, were originally off-limits to overseas investors, though this restriction was relaxed to some extent in 2002. B shares, meanwhile, are priced in US dollars, tradable by both domestic and foreign investors. The Chinese government plans eventually to merge the two classes.
Investment amongs the Chinese middle classes has until recently been limited, but has rocketed over the past year.
According to the China Securities Depository and Clearing Corp, which is jointly owned by the Shanghai and Shenzhen stock exchanges, the number of trading accounts has risen by 30 per cent over the past year to 95 million. One sixth of these have been opened in the past four months, and on one day alone last week, investors opened 552,559 new accounts.
I am aware that there have been a number of posts on the Chinese stock market on this blog recently.
However, given there may be a more general "economics" audience and other interested travellers I am posting an article from today's Independent that gives a nice little overview of the Chinese stock market and how it works (it is part of a much larger article dealing with the Greenspan comments - see previous post).
Before the article here is my prediction - let time be the judge.
1. Stockmarket will continue to rise perhaps by another 25-30% over the next 6 months to a year. 5000 could be the psychological barrier that is a digit too far. There will be a series of small hiccups on the way.2. What will follow will be a trigger than may, by itself, seem quite unimportant that will lead to a widespread sell off of Chinese stocks with perhaps a 10-15% one day fall.3. Over the next year shares will fall by as much as 40-50% off their all time highs before stabilising.4. The knock on effect on the world markets will not be as great as some commentators fear but there will be some contagion effect on neighbouring exchanges.5. Internally, real estate prices will fall and many individuals will be wiped out. Given the large share holdings by the Police, Army and state owned enterprises what happens then is anyone's guess but it could conceivably get quite ugly quite quickly.
Greenspan's warning for China
China operates two stock exchanges on the mainland, in Shanghai and Shenzhen, as well as the Hong Kong Stock exchange, which is entirely separate.
The Shanghai bourse is the larger of the two - the Chinese government maintains a controlling interest in many of the companies listed in Shenzhen - but the combined total market was capitalised at around $500m at the end of last year.
Domestic investors have a choice of around 900 stocks, but two types of share are traded. A shares, with prices in the local currency, were originally off-limits to overseas investors, though this restriction was relaxed to some extent in 2002. B shares, meanwhile, are priced in US dollars, tradable by both domestic and foreign investors. The Chinese government plans eventually to merge the two classes.
Investment amongs the Chinese middle classes has until recently been limited, but has rocketed over the past year.
According to the China Securities Depository and Clearing Corp, which is jointly owned by the Shanghai and Shenzhen stock exchanges, the number of trading accounts has risen by 30 per cent over the past year to 95 million. One sixth of these have been opened in the past four months, and on one day alone last week, investors opened 552,559 new accounts.
"Greenspan on China" - more than a little exuberance
Rob Elliott
Alan "irrational exuberance" Greenspan has weighed in on the "China Bubble" debate.
Not surprisingly he also feels that the Shanghai stock market is due for a serious correction.
It is interesting to compare this speech with his Nasdaq comments back in the mid to late 1990's.
Whilst he was undoubtedly correct "eventually", after a small correction, the NASDAQ continued to rise for a number of years and to some extreme highs before eventually crashing to earth. Figures in the article below.
My feeling is that whilst the bubble will burst at some point, there is some way to go before we reach that point.
Greenspan says China’s stocks may post a ‘dramatic’ decline
Madrid: Former US Federal Reserve chairman Alan Greenspan said he was concerned that Chinese stocks might undergo a “dramatic contraction” after its main stock index jumped more than 90% this year.
The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China’s two exchanges, rose to a record 3,938.95 on Wednesday. It closed 0.5% lower on Thursday, 24 May 2007.
The index more than doubled last year as investors bet corporate profits would be boosted by the world’s fastest-growing major economy.
“It is clearly unsustainable,” Greenspan told a conference in Madrid on Wednesday by satellite. “There is going to be a dramatic contraction at some point,” he said.
China last week increased the amount it lets the yuan move against the dollar and raised interest rates to restrain economic growth and a swelling trade surplus. The changes came ahead of two days of meetings in Washington between US treasury secretary, Henry Paulson, and his Chinese counterpart, vice-premier Wu Yi, aimed at smoothing trade frictions.
Greenspan’s comments contributed to the first decline in US stocks in four days and Chinese stocks also declined in US trading on Wednesday.
“The strength of the Chinese market has kind of spilled over into the positive sentiment here in the US,” said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles. “To have someone like chairman Greenspan calling for a dramatic contraction in the Chinese markets might have made a few people a little nervous,” he added.
Greenspan, 81, continues to move financial markets with his utterances since he retired from the Fed in January 2006 to return to his previous career as an economic forecaster.
His 26 February comment that a recession in the US is possible this year contributed to a brief global sell-off in stocks that started in China, according to some traders.
Chinese shares have since resumed their climb, prompting concerns among some investors and regulators that a sudden collapse may ensue should the Chinese government succeed in its efforts to cool the economy.
“The Chinese have lost control of monetary policy and now it has reached the stock markets,” said Nouriel Roubini, chairman of Roubini Global Economics in New York. “There’s a bubble, and eventually it’s going to collapse.”
Greenspan said the global financial system remains resilient. “I am not worried about the system overall, but I am worried about some parts,” he said. “I am concerned, for example, about China.”
The People’s Bank of China had, on 18 May, announced that it will let the yuan rise or fall 0.5% a day, up from 0.3%.
The central bank also raised interest rates for a fourth time in the past year and ordered banks to put aside more money as reserves.
China’s practice of limiting the yuan’s gains has sucked in overseas capital, contributing to $1.2 trillion (Rs49.2 trillion) in reserves and fuelling a property and stock-market boom. It has little room to raise interest rates to damp its economy, because higher borrowing costs would only attract more money, Roubini said. US lawmakers say an undervalued yuan is responsible for a record US trade deficit with China that has cost American manufacturing jobs.
They say China’s steps to loosen curbs on its currency aren’t enough to forestall punitive legislation. Since China ended a strict peg to the dollar in July 2005, the yuan has risen 7.9%, less than the 12% gains in currencies, including South Korea’s won and Malaysia’s ringgit.
As Fed chairman for 18 years, Greenspan was known for convoluted prose that was occasionally punctuated with memorable phrases.
In a December 1996 speech, Greenspan wondered whether asset prices were being driven by “irrational exuberance”, a phrase that was later seen as foreshadowing the technology-stock bubble of the late 1990s.
His musing on that day sent stocks lower around the globe, though they soon recovered and extended their rally for more than three years. The Standard & Poor’s 500 Index stood at 744.38 on 5 December 1996, the day of the remarks, and climbed to a record close of 1,527.46 on 24 March 2000.
Since his retirement, Greenspan has been giving paid talks to audiences around the world and writing a book, The Age of Turbulence, to be released in September. He will advise the world’s biggest bond fund, Allianz SE’s Pacific Investment Management Co. (Pimco), on strategy during quarterly economic forums, Pimco said last week. Greenspan will join Bill Gross, Pimco’s chief investment officer who also manages the $100 billion Total Return Fund for the Newport Beach, California-based company.
Alan "irrational exuberance" Greenspan has weighed in on the "China Bubble" debate.
Not surprisingly he also feels that the Shanghai stock market is due for a serious correction.
It is interesting to compare this speech with his Nasdaq comments back in the mid to late 1990's.
Whilst he was undoubtedly correct "eventually", after a small correction, the NASDAQ continued to rise for a number of years and to some extreme highs before eventually crashing to earth. Figures in the article below.
My feeling is that whilst the bubble will burst at some point, there is some way to go before we reach that point.
Greenspan says China’s stocks may post a ‘dramatic’ decline
Madrid: Former US Federal Reserve chairman Alan Greenspan said he was concerned that Chinese stocks might undergo a “dramatic contraction” after its main stock index jumped more than 90% this year.
The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China’s two exchanges, rose to a record 3,938.95 on Wednesday. It closed 0.5% lower on Thursday, 24 May 2007.
The index more than doubled last year as investors bet corporate profits would be boosted by the world’s fastest-growing major economy.
“It is clearly unsustainable,” Greenspan told a conference in Madrid on Wednesday by satellite. “There is going to be a dramatic contraction at some point,” he said.
China last week increased the amount it lets the yuan move against the dollar and raised interest rates to restrain economic growth and a swelling trade surplus. The changes came ahead of two days of meetings in Washington between US treasury secretary, Henry Paulson, and his Chinese counterpart, vice-premier Wu Yi, aimed at smoothing trade frictions.
Greenspan’s comments contributed to the first decline in US stocks in four days and Chinese stocks also declined in US trading on Wednesday.
“The strength of the Chinese market has kind of spilled over into the positive sentiment here in the US,” said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles. “To have someone like chairman Greenspan calling for a dramatic contraction in the Chinese markets might have made a few people a little nervous,” he added.
Greenspan, 81, continues to move financial markets with his utterances since he retired from the Fed in January 2006 to return to his previous career as an economic forecaster.
His 26 February comment that a recession in the US is possible this year contributed to a brief global sell-off in stocks that started in China, according to some traders.
Chinese shares have since resumed their climb, prompting concerns among some investors and regulators that a sudden collapse may ensue should the Chinese government succeed in its efforts to cool the economy.
“The Chinese have lost control of monetary policy and now it has reached the stock markets,” said Nouriel Roubini, chairman of Roubini Global Economics in New York. “There’s a bubble, and eventually it’s going to collapse.”
Greenspan said the global financial system remains resilient. “I am not worried about the system overall, but I am worried about some parts,” he said. “I am concerned, for example, about China.”
The People’s Bank of China had, on 18 May, announced that it will let the yuan rise or fall 0.5% a day, up from 0.3%.
The central bank also raised interest rates for a fourth time in the past year and ordered banks to put aside more money as reserves.
China’s practice of limiting the yuan’s gains has sucked in overseas capital, contributing to $1.2 trillion (Rs49.2 trillion) in reserves and fuelling a property and stock-market boom. It has little room to raise interest rates to damp its economy, because higher borrowing costs would only attract more money, Roubini said. US lawmakers say an undervalued yuan is responsible for a record US trade deficit with China that has cost American manufacturing jobs.
They say China’s steps to loosen curbs on its currency aren’t enough to forestall punitive legislation. Since China ended a strict peg to the dollar in July 2005, the yuan has risen 7.9%, less than the 12% gains in currencies, including South Korea’s won and Malaysia’s ringgit.
As Fed chairman for 18 years, Greenspan was known for convoluted prose that was occasionally punctuated with memorable phrases.
In a December 1996 speech, Greenspan wondered whether asset prices were being driven by “irrational exuberance”, a phrase that was later seen as foreshadowing the technology-stock bubble of the late 1990s.
His musing on that day sent stocks lower around the globe, though they soon recovered and extended their rally for more than three years. The Standard & Poor’s 500 Index stood at 744.38 on 5 December 1996, the day of the remarks, and climbed to a record close of 1,527.46 on 24 March 2000.
Since his retirement, Greenspan has been giving paid talks to audiences around the world and writing a book, The Age of Turbulence, to be released in September. He will advise the world’s biggest bond fund, Allianz SE’s Pacific Investment Management Co. (Pimco), on strategy during quarterly economic forums, Pimco said last week. Greenspan will join Bill Gross, Pimco’s chief investment officer who also manages the $100 billion Total Return Fund for the Newport Beach, California-based company.
My two cents on Thomson-Reuters deal
Amy or koala
It's a quick deal, taking only a few weeks to finalize the US$17 billion deal for Thomson to buy Reuters. Thomson, which doesn't have the news service, could now add Reuters News into its portfolio. The target is very clear, beating Bloomberg, who has been beating Reuters on news, and beating Thomson on data. After the deal, Thomson-Reuters, will own 34 percent of the market for financial data, while Bloomberg currently has 33 percent.However, my view is that they couldn't win just based on simply plus each other's market share. Bloomberg has got its reputation by quality news and simply user interface. I got the opportunity to use both Bloomberg and Reuters every day, and frankly speaking, the news is more structured, and the data is easily found. Don't forget that Content is always the King(look at the Wall Street Journal and Financial Times). So I would like to read more news from bloomberg because of its clear structure.Now my question is if the deal will affect My. Murdoch's decision to buy Dow Jones. Positve, or the other side?
It's a quick deal, taking only a few weeks to finalize the US$17 billion deal for Thomson to buy Reuters. Thomson, which doesn't have the news service, could now add Reuters News into its portfolio. The target is very clear, beating Bloomberg, who has been beating Reuters on news, and beating Thomson on data. After the deal, Thomson-Reuters, will own 34 percent of the market for financial data, while Bloomberg currently has 33 percent.However, my view is that they couldn't win just based on simply plus each other's market share. Bloomberg has got its reputation by quality news and simply user interface. I got the opportunity to use both Bloomberg and Reuters every day, and frankly speaking, the news is more structured, and the data is easily found. Don't forget that Content is always the King(look at the Wall Street Journal and Financial Times). So I would like to read more news from bloomberg because of its clear structure.Now my question is if the deal will affect My. Murdoch's decision to buy Dow Jones. Positve, or the other side?
Well connected Couple in HK suspected of insider-trading in the Murdoch bidding to Dow Jones
Amy or koala
Drama is always in the real life. Today, U.S. SEC filed a lawsuit towards a well-connected couple in Hong Kong of insider trading. (WSJ did a good story on this, but u could also have a look on the Reuters story. Anyone need the WSJ story, please send me ur email, I will forward to you)
Several big individual and company names appeared in the drama-like process happend between April 13 and April 30, the day before the Murdoch bidding was annouced.
Hong Kong businessman Michael Leung Kai Hung, a good friend of David Li
Dow Jones director,David Li, chairman and chief executive of the Bank of East Asia Ltd.,Hong Kong's largest locally owned banking group.
China Mobile Peoples Telephone Co. Ltd., a mobile-phone operator inHong Kong
Is the US$8 million that attractive?
Drama is always in the real life. Today, U.S. SEC filed a lawsuit towards a well-connected couple in Hong Kong of insider trading. (WSJ did a good story on this, but u could also have a look on the Reuters story. Anyone need the WSJ story, please send me ur email, I will forward to you)
Several big individual and company names appeared in the drama-like process happend between April 13 and April 30, the day before the Murdoch bidding was annouced.
Hong Kong businessman Michael Leung Kai Hung, a good friend of David Li
Dow Jones director,David Li, chairman and chief executive of the Bank of East Asia Ltd.,Hong Kong's largest locally owned banking group.
China Mobile Peoples Telephone Co. Ltd., a mobile-phone operator inHong Kong
Is the US$8 million that attractive?
Finally back
Amy or koala
After the one-month trip, I finally came back to Hong Kong, the "home" with friends and my bed. Fighting with the jet leg, It seemed I got recovered in two days, which is a bit faster than I thought.
I took the continental airline back, and met such a happy flight attendant. He, in his fifties or sixtieth, is so happy, either when he handed me the towels, or gave me another ice cream. He talked to passengers just like old friends. When he said goodbye to everyone at last, he even started singing. Such a happy person. Compared to some others, (especialy a young male attendent who has no expression in the face at all), this elder man really make travellers feel relaxed.
So here is what I learnt: love your job; if you don't love the current job, then find the one you love. Life is short, and why don't live happily?
After the one-month trip, I finally came back to Hong Kong, the "home" with friends and my bed. Fighting with the jet leg, It seemed I got recovered in two days, which is a bit faster than I thought.
I took the continental airline back, and met such a happy flight attendant. He, in his fifties or sixtieth, is so happy, either when he handed me the towels, or gave me another ice cream. He talked to passengers just like old friends. When he said goodbye to everyone at last, he even started singing. Such a happy person. Compared to some others, (especialy a young male attendent who has no expression in the face at all), this elder man really make travellers feel relaxed.
So here is what I learnt: love your job; if you don't love the current job, then find the one you love. Life is short, and why don't live happily?
Lampert Saying Farewell to AutoNation Board
Lampert Saying Farewell to AutoNation BoardThe chairman of Sears Holdings (SHLD) and ESL Investments, Eddie Lampert, will step down from the AutoNation (AN) board in May. He will not seek re-election in order to spend more time with his duties at Sears and ESL.
"I look forward to continuing to be involved with the company, and ESL currently plans to remain a significant shareholder for the foreseeable future," Lampert said.
Similarly, Lampert stepped down from AutoZone (AZO) last September.
"I look forward to continuing to be involved with the company, and ESL currently plans to remain a significant shareholder for the foreseeable future," Lampert said.
Similarly, Lampert stepped down from AutoZone (AZO) last September.
Berkshire Increases Tesco Stake Berkshire Hathaw
Berkshire Increases Tesco Stake
Berkshire Hathaway (BRK-A) increased its Tesco stake from 2% of the retailer to 2.9% today. Tesco is Britain's largest retailer and plans on expanding into the U.S. West Coast with grocery stores in Arizona, California, and Nevada and in Asia (see Forbes article).
Bloomberg.com notes, ``Buffett is realizing that with Tesco moving into the U.S. with a fantastic format and great management, they are the ones to back,'' said Chris Gower, an analyst at Man Securities in London. ``I wouldn't be surprised if other investors start piling in. They look at Buffett as the shining light.''
Berkshire Hathaway (BRK-A) increased its Tesco stake from 2% of the retailer to 2.9% today. Tesco is Britain's largest retailer and plans on expanding into the U.S. West Coast with grocery stores in Arizona, California, and Nevada and in Asia (see Forbes article).
Bloomberg.com notes, ``Buffett is realizing that with Tesco moving into the U.S. with a fantastic format and great management, they are the ones to back,'' said Chris Gower, an analyst at Man Securities in London. ``I wouldn't be surprised if other investors start piling in. They look at Buffett as the shining light.''
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