Niall Ferguson, The Great Degeneration, What We Can Learn - Part 2

Follow this link to Part I

Capitalism

In Part II, we examine the degeneration of the institutions of capitalism, the second key component of our modern day civilization.

Regulation is not to be blamed

Mr. Ferguson argues contrary to Washington's assertion, it is regulation rather than insufficient regulation that caused the financial crisis.  He says on the contrary, the banking industry is the most regulated industry and that post deregulation economic performance was much better compared to the 1970s in US and in Britain.

In his analysis, deregulation is not the main culprit, Mr. Ferguson sites that Bear Stearns and Lehman Brothers were pure investment banks whilst Countrywide, Washington Mutual and Wachovia were commercial lenders. 

It was rather rules outlined by the Basel Committee on Banking Supervision 1998 Accord which allowed banks balance sheets to explode relative to their capital and later modified to allow banks set their own capital requirements on the basis of their own internal risk estimates.   

In government, the Federal Reserve apparent lopsided policy of controlling core inflation failed to capture house price inflation.  And the US Congress was complicit in the blow up by passing legislation designed to increase home ownership amongst the lower-income families. 

The final layer of distortion was blamed on China's export driven policy which kept the value of its currency too low relative to the dollar over an extended period of time.  China was only happy to buy US Treasuries with its huge export surpluses which kept yields low.  Mortgages which were closely linked to Treasury yields helped to further inflate an already bubbling property market.

The only area where the lack of regulation were to blame for the blow-up were the unregulated OTC markets for derivatives such as credit default swaps.  Its economic and social utility are in doubt.

It's good to listen - Sa Sa - Strongest brand in the expanding personal care market - Part 1

I first became seriously aware of lipstick and mascara back in my final year of secondary school where for the one and only time, a four-eyed geek got an invitation to a dance party organized by Main Convent Girls School.  The girls school in Ipoh, Perak, Malaysia where all the girls were hot, fashionable, sophisticated and worldly - well that's how wide eyed boys perceived it anyway.  With their heavily painted faces I was not disappointed.

Dancing to Kylie Minogue's Locomotion, it still sends shivers done my spine till this day when I think of that pair of glasses - thick rimmed, thick glass.  What made it even worst was the sellotape...

Conspiracy Theory? Laugh all you want - it really happended this way!

Bernanke: Mr. President, you should start doing something about the economy you are almost half-way through your 2-nd term.

Obama: I am aware of that Chairman Bernanke, thanks for your concern for the American people.

Bernanke: I am concerned monetary policy can only do so much.  We can’t print to eternity

Obama: Hang in there buddy.

Good Means Up, Bad Means Up

It used to be over the last few quarters when the printing presses were humming to the tune 'bad news is good news' (for the stock market).  It was predictable and everyone felt richer (even when the majority of stocks are owned by less than 40% of the population of US) even those that did not owned any stocks felt the same.  Never mind the dropping labor participation rates to multi-decades low, or that food stamps recipients are rising or that many more Americans are now classified as disabled or that created jobs are mostly Mac or part-time jobs.  Things are looking up.  All was good.

That was so yesterday, now we only go up. 

Yesterday's US May 2013 durable goods (2013/06/27) printed at 3.6% on expectations of 3.0%.  The stock market took this as further confirmation that the US economy is improving.  It was bullish for stocks and the S&P 500 increased 0.7% to 1,588.

Today the Commerce Department reported that gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent.  So the Fed's printing presses is not slowing down after all.  That's a bullish signal right?  Right. We are now at 1,600.

All stations are a go.  Captain Bernanke.  Aye Aye Sir!  Warp speed Sulu, warp speed.

Niall Ferguson, The Great Degeneration, What We Can Learn - Part 1

Niall Ferguson, one of my favourite historian is Laurance A. Tisch Professor of History at Harvard University, a Senior Research Fellow of Jesus College, Oxford, and a Senior Research Fellow of the Hoover Institution.  Mr. Ferguson, a British historian in 2004 was named by Time magazine as one of the 100 most influential people in the world.  He is a prolific writer having published over a dozen books and often makes appearances on Bloomberg and other news channels.  He is well followed as his writings are seen as jump off points from history to understand our current maligned world economy and debilitated political class.  It is comforting to note from his writings that our current problems are not uniquely 21st century, it has happened before.  It is a matter of scale and the players are different this time round. 

His latest book, The Great Degeneration is an important read.  I will try to summarize the main points of interest.  However, it is a difficult book to read, not least there are many moral and philosophical questions that are raised; understanding the historical context is also of equal importance for one to truly appreciate the book.  There are a few areas which falls short and seemed disjointed or rushed through but in his defense, this is an extremely large subject and it is a balancing act between over analyzing and losing the main thrust of the book.  Put simply this a book that is a primer for further debate and research.

Do we want Want Want? Not Just Yet

Recently Bloomberg put up a video clip of Asia's most profitable food companies.  Amongst them was Want Want China a constituent of the Hang Seng Index.  I have been tracking the stock for awhile but have not done anything about because I had a feeling that it was 'fully priced'.  So with all the excitement I am allocating some 'kick-the-tyre' time to analyze if the price is right.  Want Want (旺旺) is a well known brand name in rice crackers, snack foods, beverage and dairy products in China.  If you walk to the snack foods and beverage section in China's supermarkets, you will see it prominently displayed.

China Fake Export Trade Data Reached US$75bn January - April

Following on from my article about China exporting inflation which I argued that one of the ways money is leaking out of the country is through inflated trade.  Officials in China have confirmed that fake exports through Shenzhen special supervision zone reached US$75 billion.

Small cap dogs - screaming buy or value trap?

The Hong Kong Hang Seng Index is down nearly 13% from its recent peak of 23,945 in mid-February 2013.  It is currently trading at a PE 9.6 (adjusted to reflect recent fall in index). Data below courtesy of my stocks investing journey.  I  cannot vouch for the veracity of the data, I have merely presented it to set into context against other indices.

The Bear Explains the Bank Bailouts

The creeping reality of big brother

Recently there has been an explosion of the 'right to surveillance', 'licensing of freedom of expression, 'criminalizing defamation over the internet' and a string of other justifications that creep into what little freedom remains of people from US, to Europe, to Middle East and Asia.  The interesting thing is that people seem not too bothered with it.

The common thread is that there is a need to root out terrorism, prevent cyber criminal activity, protect its citizens or merely that its citizens need to obtain the 'truth' from governments channels because the people cannot be trusted to make up their mind or they are incapable of making up their own mind or so it seems.

According to a recent study by Pew Research a substantial majority, or 56% of Americans, "say the National Security Agency’s (NSA) program tracking the telephone records of millions of Americans is an acceptable way for the government to investigate terrorism, though a substantial minority – 41% – say it is unacceptable."  Society it seems is dumbed down by the constant barrage of reality TV shows, talent shows (the entertaining type) that they are now incapable of appreciating enshrined basic human rights.  A law that is passed does not make it either ethical or legal.  Laws need to follow basic constitutional rights.  More people die from traffic accidents and heart related diseases from each year than from terrorist acts.  In 2011 Global Terrorism Index reported that there are under 5,000 people that have been killed as a result of a terrorist act.  The majority of these incidents happen in the Middle East, Pakistan and Africa.  In fact in 2012, only 17 people died in terrorist attacks.

Unfortunately American hegemony still rules and where it goes others follow.  If the supposedly freest country in the world can steam roller over its constitution to infringe the privacy of its people and hand information to the few without strong protest, then what do other nations have to complain about?  It legitimizes the continue gagging of humanity and the unseen hand of the threat of violence if you do not fall in line.

"They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety" Benjamin Franklin

The Bear Explains Quantitative Easing

Cute China, Russia and the Dollar

 

Makes you laugh.  But it is a subverts US dollar hegemony

Pu Erh Tea 普洱茶 at the front line battle against zero interest rate policies

I am pleased to report that despite the ubiquitous Starbucks, Gloria Jeans Cafe, Wild Bean Cafe, Café Nero, Coffee Republic, The Coffee Bean, Pacific Coffee and countless other mom and pops that line our high streets, CDBs and petrol stations; tea, according to Wikipedia, remains the second most popular, after water. 

Wall Street sell side analyst are that interested in you.

If you are still wondering whether you should waste your time pouring through sell side analyst reports read on...

A recent study by a group of university boffins find that you are probably at the bottom of the food chain.  The report is an interesting read, the most important needs no further explanation.

The Truth About Wall Street Analysts & Why You Need Independence

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2228373

HuaBao International (0336.HK) a fool's gold? Part 2

While there are many dos and don'ts that you can find online.  This is a quick and dirty checklist on Asian stocks you can use to raise red flags.  It is not meant to replace detailed due diligence.

HuaBao International (0336.HK) a fool's gold? Part 1

Yesterday, wondering through my spreadsheet of all listed companies on the Hong Kong Stock Exchange, I came across this amazing company called Hua Bao Holdings International Limited 华宝 or so I thought.

Where does money come from?

If you would like to know how modern fiat currency works please see this documentary.  The title is a bit misleading but the first part about fractional reserve banking is interesting.

China Exporting Inflation?

Its been widely reported that the US's quantitative easing program or QE as it's affectionately known has flooded the global monetary system with cheap US dollars causing monetary inflation throughout the world.  Could China be doing the same thing?

VividSydney running until 10 June 2013

Congressman Ron Paul's Farewell Speech to Congress.  It is only apt that my first blog would be dedicated to the man who has dedicated the majority of his professional life in the pursuit of civil liberties and sound money.