Ok, Maurice, I gave you the good news in the previous post. I will ask two questions on your behalf. What are the bad news, and what will be my positioning in the coming upheaval?
You guessed it. When it comes to upheaval, I will play for a while, in the early days, when there is money to be made, mix it up, when there are social relevancies to be delivered on easily, and then abandon position, beat a retreat beyond the emergency exit, so as to play a different game on another day in a new place. We each have around 95-100 years to play with. The first 8 years were useless and last 10 possibly not fun, and are thus left with the middle portion to do as we wish and as others allow us.
The encouragement of returning Chinese students from overseas (one-time cash grants, help with job placement, etc) will increase the competitive pressure on my active business, namely advice giving and deal implementation. We provide an up-market premium service, but I do not believe up-market service, however premium and network based, is not affected negatively by down-market and hungry new competition.
I will gradually need to retreat to becoming more of a capitalist and entrepreneur than a professional advisor/facilitator. I am unwilling to play the role of a capitalist in China with any ‘old money’ already in my possession, due to my scaring over the previous three generations, and due to my eventual preference for a gentler island-based life style. Call me thick, as in a whale sandwich, but after three generations, even my unaware genes, disadvantaged or not, are able to learn:0)
<<’kept under by the weight of historic waves of adverse demographics, savage competition, and rigid structuring.
> $$ flow downhill, so why wouldn't Hong Kong end up much like Shanghai?
I think a good bet is that Hong Kong's incomes and stuff will end up like China's. That means some changes.>>
I am not worried about Hong Kong, because Wang 3-cups (W3C) can take a reduced income, move to Shenzhen and enjoy a life style superior to what he is less able to afford in more expensive Hong Kong.
Besides the W3Cs, the ‘THEY’ elite in HK will be able to take advantage, if THEY want to, of China’s cost base and further enrich themselves courtesy of HK’s low tax regime and near-faultless accouterments for a well-off life style. ‘THEY’ will be joined by newly well-off freedom seeking ‘THEYs’ from the mainland. It will be a long time before China makes it to Heritage Foundation’s #1 Economically Free spot.
Attention. Here comes the bad news.
I am more concerned about the world in this era of globalization. For example, China’s mobile subscriber, divided amongst only three companies (85/15/0%), just reached the one hundred thirty three million milestone. I believe Korea, Japan and Nokia will soon be out of the handset manufacturing business, except via owned or contracted factories based in China.
In fact, in Beijing, Nokia is building a ‘wireless communication park’ in cooperation with 30 parts suppliers, eventually employing 10,000 folks, complete with application and basic research facilities.
Toshiba Japan is out of the TV (analog and digital) making business, deferring to their mainland plants.
Minolta just announced that all their cameras, inclusive of the up-market sophisticated models, will henceforth be manufactured in China.
Sony Vaio PCs will be assembled in China.
GM just exported 3000 Buick sedans from their Shanghai plant to the Philippines.
Cisco just found out that a particular gizmo category they were selling at RMB 3000 is being offered at RMB 800 by a PRC company.
A bunch of international pharmaceutical and food biotech firms are looking to set up R&D, manufacturing and distribution.
Judging by the locally developed PDAs utility, quality and price, I would guess that Palm is as good as giblets within three years, and Compaq better move production from wherever.
As note, ominously, global companies are beginning to expand their newly (past 3 years) established China application R&D by adding basic R&D and even theoretical R.
A lot of muscle and brain have been located at less expense, say at 5% of the cost in Japan and USA, mined ferociously by the multinationals, with gains obtained that zeros out gains made by competitors, in the same way.
The absolutely intense business competition in China generated by ‘invading’ multi-nationals, defending locals, pirates and counterfeiters is super-charging development cycles, business methods, and compressing time to change, on a continental economy comprised of 18% of global population.
As you know, even <<the Long March>> started with a single step, and New Ec time compression will do the predictable.
I am troubled by this seemingly self-perpetuating, always productivity enhancing, but profitless prosperity. I do not understand money without wealth, prosperity without security, productivity without manufacturing, import without export, and service economy without manufacturing client base. I have no history as a guide. I suspect, as you do, that the ability to generate revenue is being redistributed.
Message 16212324
“Now, should the cataclysm be unobstructed, a new dawn may arrive sooner. We must lead the village idiots to the volcanic abyss of Inflation or the black hole of Deflation, to be sacrificed to the gods of work, thrift, family and savings. I am being optimistic and am of course assuming that all the market noise and propaganda smoke is not in fact camouflaging an inflection point connecting Silicon Glory to an as yet unknown “next abracadabra”, as the Rust Belt was once transformed into Silicon Glory but accompanied by much dying anguish and birthing pain.”
I am previously secretly, and now less so, concerned about the passing of the always-yet-another storms of Japan banking crisis, Asian Financial Crisis, Russia, Argentina, etc etc. Not about their passing, but about what they collectively may have been masking all along, a Perfect Storm, comprised of:
(a) Globalization (Eurozone realization, China transformation/integration, ME disintegration, amongst the bigger of the events)
(b) Global banking crisis (Japan is banker to the world, and Japan is in trouble, along with all the public, private and individual piggy banks broken all around the world, necessitating all governments to print money, for both productive and unproductive acts)
(c) Tech bubble explosion (just happened, and biggest ever)
(d) Money bubble formation (has been happening, and bigger still)
(e) Synchronized global downturn
(f) Unfavorable demographics
(g) War/Peace and other distractions
(h) Political extremism and other nuisances, and
(i) Ever more technology-driven compressed time frame, affording little opportunity for acclimatization, to crouch, or to hide.
Do I know I can navigate this storm? No. I have to navigate it in any case. Neither do you and so do you.
The ultimate consequence of globalization is equalization of cost, and, by equation, the equalization of active income. I do not wish to be equalized away, in this way or any other way.
To offset the negative equalizing effects of globalization, the proverbial pie must expand. Failing so, I must own more of what makes money via application of capital, supplanting diminished active income with passive returns.
No shock to you, application of capital requires savings, liquidity, and borrowing capacity. Call me simple, as an amoeba, but the best and easiest way to build savings is by not losing what we already saved, and by not being nibbled to money heaven as we attempt to go crossing rivers such as Amazon.com or navigate a Globe called Crossing:0) Also, I must not spend all that I earn, much less consume more than I earn by borrowing via credit card or home equity loans.
I am getting back to the earlier mentioned proverbial pie. The pie has stopped growing and will probably shrink for a while. 46% of global output resides within US and Japan, and Japan accounts for 40% of global savings. When (not if) the US radically reduces buying, due to tapped out credit and impending retirement, the Japanese will stop buying raw material, withdraw credit from where it has been taken for granted, mistreated, and no longer needed, then … well, you get the picture, as global trade gets smashed with a sledge hammer.
The only remaining New Ec edifice yet to be wobbled is the so far impervious USD, used everywhere, and hoarded by plenty. When the USD collapses, it will be too late for us bull and bear threaders to be calmly discussing whether it will collapse or not, or whether another Greenspankie inspired false abracadabra will save the day. Can you say hedge?
Fast coming to the end of this tome, I fully agree with your …
<<I think a good bet is that Hong Kong's incomes and stuff will end up like China's>>
… and absolutely concur that <<means some changes>>.
I am ready to abandon position in Hong Kong, and leave you to stand in the way of progress in New Zealand, while I idle away the long days in faraway Tobago, amongst its 30 thousand docile, not so competitive, and beautiful inhabitants. Cool rum, chicken adobo, warm surf, floating on a bed of oil and gas.
Now perhaps you can sense why my enthusiasm for CDMA-enabled change is less than that of yours – because the world pie may not be getting big fast enough, with gusto and robusto, even as the changes are simply happening too fast for all of us to adapt in time.
To navigate this above described imagined scenario, I reckon broadly based long-term asset diversification across class, geography, industry, along with temporarily conviction-less equity positions, some small but high yield distressed bond bets. Once the situation, its down and upside, is more clear, we can change tact. If I am wrong in my concern, the discipline seems well advised in any case.
I do not know what is happening for sure, but have a hard time painting an upbeat picture at the moment believing that I will continue to get wealthier by accident. Accidents now happen to the likes of Enron, a typical New Ec company, puffed up by spin, boosted by investors, but, at the sound of the first bugle call, abandoned by all, including the FED:
quote.bloomberg.com
“As the news of Dynegy's rejection flashed across computer screens on Enron's trading floor in Houston, some employees started to abandon their desks and leave the office, an Enron trader said.”
New Ec of the late 90s is no more, fortunate accidents are no more, and in my fevered imaginings, I discern the possible outlines of the New New Ec, where (gad) even hard work and discipline is no guarantee of success, much less the ability to press the Buy Button on a web screen.
Are you ready?
If I am wrong, I will the happiest and most relieved of all.
Chugs, Jacko :0) |
