Hello N.Wayne Agee, Continuing this siliconinvestor.com and not wishing to disturb CFZ with a post longer than a paragraph ...
yes, my words sometimes stir up strong emotions, especially is folks read into them what is not there.
On this, <<Sorry but I don't see anywhere in the world that the minority makes the rules>> ... I believe it is the case in most places.
On <<lazy>>, at no time did I say the American workers are <<lazy>>, nor do I think that, because it is not untrue.
I have had the good fortune to walk through factories in America, China, England (NEI Mining before they disappeared), Germany, Japan, Korea, Taiwan, Philippines, and Hong Kong (yes, we still have factories), and I observe that all workers work diligently, but in aggregate, no one group more diligently than any other group for any sustained period of time.
The secret sauce is not the workers training or diligence, or perhaps better put, not totally. The secret sauce seems also to be (a) manufacturing systems bought with savings/investment money and order flows, (b) experience that comes with order flows, and (c) peaceful society in which the workers are doing their thing.
I know a bit about small/medium manufacturing enterprises in the US and in China, and in both countries, SMEs constitutes the majority of activities in manufacturing.
I observe that, in the aggregate, the Chinese factories are less leveraged (to the point of having no debt), have more obedient workers (one can argue whether this is good or bad or desirable, but I merely make an observation), learning at faster pace (though from a lower know-how base, but the acceleration itself may be energizing), use more female workers (even in the mold, tool and die shops) with their care for detail and finish, are less costly (land, building, red tape, taxes, working capital, even raw material when sourced from the same places the US factories source from due to handling costs all up and down the chain), and while the SMEs in China start out with used machinery and hand-me-downs, they eagerly upgrade to the latest as quickly as they can, just so that their neighbors do not eat their lunch, and so the average age of equipment and the upgrade cycle in China is generally younger (perhaps around 10 years younger) and faster (maybe 2 times faster) than in the US, financed by mostly internally generated funds and contract order flow.
The Chinese factories, on average and in the aggregate, do not yet have the number of master craftsmen of the same calibre as in the US who intuitively know how BEST to use the tool, jigs, fixtures, and measurement instruments, but this is changing fast, from experience that comes with order flow, and from craftsmen transplanted from Korea, Taiwan, Japan, Germany, and the USA.
Chugs, Jay
P.S. I attach some earlier observations about manufacturing, China, US, trade, and such ...
Message 15126319
January 4th, 2001
c The US will also need an invigoration of its manufacturing sector, as opposed to simply the designing and labeling that the CSCOs do. Human capital is simply too human, optioned and option-able. Land, buildings, equipment, warehouses, and now you are talking my language.
Message 15481977
March 10th, 2001
c I worked as a consultant to help ERICY establish seven of their China manufacturing joint ventures and forgot how much I made off the 5-year (f91-96) relationship and stock investment.
Message 16069928
July 13th, 2001
c The manufacturing boss-execs in HK (factories in China, markets in US, Europe and Japan) are now uniformly saying "I have never seen it this bad before". A large LCD maker boss said to me: "no orders placed in May".
Message 16124147
July 25th, 2001
c Psychological Profile B: The friend in Taiwan is scion of a listed textile/banking/manufacturing and real estate conglomerate. gJay, it is all over for Taiwan, and this time it is for realh.
c Psychological Profile C: Another Taiwan friend who is pro-Taiwan, part of family that benefited much under Japanese rule, now controlling (you guessed it) banks, TV and phone companies, etc, also got a sounding from me. gThe government is close to panich.
Psychological Profile D: The friend in 'forever troubled' banana republic of Philippines commented, git is fine here, everything is getting cheaper, and folks are more willing to work, and my business (packaging equipment and consumable distribution to beverage and food companies) is a necessity for local and SE Asia markets, and competitors are folding up tentsh.
Message 16172978
August 6th, 2001
c China (unlike Japan) has lots of folks (meaning just about everybody) needing to buy their first home in satisfaction of 50 years of pent-up demand. Each new home requires the emust havesf, from refrigerators to air-conditioners, laundry machines and of course, television and computers. Now, in embryonic fashion, even cars (along the lines of domestically produced VW Jetta, a model that was sold in the US in the late 70s to early 80s, and simpler still domestically manufactured cars of Japanese/Korean design). China is the largest manufacturer of many items, not because of export demand, but more because of domestic demand. In the cases of clothing, toys and possibly shoes, yes, China may be the largest exporter, but, simultaneously and obviously, would also be large or largest domestic consumer of such capacities.
To support the manufacturing that is required for the mostly domestic demand, there is also a 200 (two hundred) years pent-up demand for electricity, roads, water treatment plants, harbors, airports, telecommunications, c. The list simply boggles the mind; c
Message 16243010
August 21st, 2001
I do not have any good news to share with the thread. Some sobering conversations I just got done with.
A friend of mine in the toys manufacturing business is having the worst time in 10 years. Another in textile manufacturing (NAV of around USD 100mm) is looking to relocate home from Hong Kong to Shanghai, shutting down 6 plants in ex-China locations (Thailand, Sri Lanka, South Africa, Mexico, Philippines) due to the worst business environment since 1991. These folks report a 30% decline in orders, and more alarmingly, that the US buyers (large outfits, like Gap, etc) are, instead of payment by Letters of Credit, demanding and getting goods on consignment, shifting their own intolerable debt crunch on to the manufacturers, who in turn are cutting output and volume to shrink their own respective balance sheet and output.
These folks are reporting US orders are falling much faster and deeper than European orders.
My Taiwan friends are reporting massive quantities (gall along the main streetsh) street light pole and curbside posters and billboards advertising apartments and commercial properties for sale. The burning of buildings for insurance claim is ramping up.
Message 17914187
August 24th, 2002
Hi Jay, Today I am going travelling to Beijing, Tianjin, Shanghai, Nanjing and Southern China with US visitors to check out how to increase small/medium enterprise participation in globalization/survival. I will be back say Sept 3rd or so. Will update on what anything interesting when back.
Message 17945676
Sept 3rd, 2002
Hi Snowshoe, I have just returned from a trip accompanying some folks from the US that took me to Beijing, Tianjin, Nanjing, Shanghai, Shenzhen.
We met Chinese and US officialdoms, US invested businesses, private and state-owned Chinese enterprises, a bunch of specialized development zones (geographically demarcated areas with special tax benefits, policies, incentives, for specific purpose), restaurants, night clubs, bars, and shops. I learned much and am scared plenty, vivid colours and surround fidelity sounds, and I am energized once again to move a bit more on the gold allocation scale.
Actually, I am very concerned, almost to the point of being scared, and in any case, in no mood to even remotely consider buying any stocks, most bonds, and all real estates in any serious way. More on the weekend.
Message 17959989
September 6th, 2002
c A number of days and a bunch of equity index points later, I completed my tag-along of a US delegation to Beijing, Tianjin, Nanjing, Shanghai, Shenzhen and Hong Kong, and visiting multinational invested companies, local companies, US and Chinese officialdoms. I appreciate the trip because I had a chance to go out of hotel rooms and conference rooms, and observe. In any case, I may have seen more than was possible in New Zealand.
Where are we in the Script of Collapse?
What? You say we are at the altar steps to Q nirvana?
You are dangerously wrong, to the ledge of committing financial suicide.
We are at the confluence point of Axis of Evil, Matrix of Malevolence, Vortex of Manufacturing Deflation, Hurricane of Service Inflation, Implosion of Equity Wealth, Collapse of Unencumbered Affluence, Dimming of Retirement Hope, Bloc of Big Governments, Nibbles of Tax Increase, Milieu of White Collar Theft, Eddy of Small Business Discontent, Cyclone of Vengeance, and Tapestry of Perpetual War.
If bullishness is climbing a wall of worries, can we get any more bullish than now?
Never mind about all the Chicken Little fears listed above. Let us simply focus our minds on the fact that Global Free Trade may soon be carbonized toast.
c.
In the coming November election, the US voters will likely chuck out the Free Traders deliberately or inadvertently for a variety of reasons (mostly because the free trader Republicans may get thrown out for all manner of reasons). The agitated population may want to throw up the border, turning their backs on globalization, and inaugurating an age of planet wide darkness and global decline, 1930s Part II.
Global Free Trade, you remember, was supposedly and probably responsible for the spreading of wealth, increase of wealth, cycling of money, smear of investments, growth of multinational companies, enhancement of efficiency, and all the good things leading to eventual pleasurable retirement.
As events turned out, Global Free Trade is also responsible for the pulverization of small manufacturing businesses in the US and around the globe, and the political blowback has started, in the US, the first and original champion of free trade.
The US multinational companies may not be able to maneuver the rapids of negative sentiments towards corporations and their leaders this time and save free trade, because ø¥ig business?is politically incorrect, tarred with the broad brush of all that has happened to the little guys savings, pension, jobs, and hopes.
Putting Free Trade worries aside for a moment. Let us wrap our mind around an important bilateral relation, namely that between the US and China.
The holy alliance of labour unions, anti-free traders, environ-greens, small businesses, and cold warriors are arrayed against China, fearing what they had never visited, terrified by what they do not bother to understand. I saw them looking for the hidden evil empire and failing to find such. Others may have better luck.
We saw:
(a) spanking new foreign invested workshops equipped with the absolute latest machines turning out goods rated by all as the best and cheapest in their portfolio of globally dispersed factories,
(b) spanking new domestic entrepreneur invested workshops equipped with second-hand equipment turning out goodies of every kind,
(c) local USD multi-millionaire entrepreneurs who started out as factory hands only 10 years ago,
(d) automobiles starting to be exported,
(e) girls in bars who could convert Mormans,
(f) neatly arranged industrial development zones taking in new workers from the countryside,
(g) beautifully built education zones, one aggregating 76 universities, housing 400,000 students, studying science, technology, education, law, and medicine, each paying USD 1,500 tuition per year,
(h) Japanese trading companies staffing up for yet another wave of Japanese plant relocations,
(i) hundreds of thousands of Taiwanese working in Taiwan businesses, eating in Taiwan restaurants, watching Taiwan movies, and studying in Taiwan schools, but near Shanghai,
(j) tens of thousands of Hong Kong folks transplanted permanently to the mainland,
(k) young Americans unwilling to return home after graduation,
(l) ancient city walls and antique houses being renovated,
(m) old factories being cleared from the cities and grass and trees being planted, aiming to cover 20-30% of cities,
(n) viewed plans for three magnetic levitation rail lines, and
(o) I saw in the news that 10 Chinese pharmaceutical companies have lodged legal case against Pfizer to invalidate its patent on Viagra in China, and if PFE does not defend itself or loses, their patent will mean naught in China. Now, I am not saying a Viagra is on the same order of significance as one Q photon, but one wonders about whether your Q will ever see their $.
We randomly talked to one humble peasant standing on a dike ladling manure into the irrigation ditch and asked about his life, and concluded that his is a hard life, but he is looking forward to his grand daughter having a better life.
We did not find the evil empire, at least not in China. Others may have better luck, elsewhere, and later. Americans seem forever destined to try to find things: evil empires, canned mass death, wandering Osama, poppy fields, and Elvis.
In any case, I do sharply sense two dangers: on-going worldwide blowback on free trade, and early bubble economics at work in China (enhanced by Japanese money, as usual, and always).
Blowback on free trade is part of our Script of Collapse, as borders close, tariffs rise, currencies fall, and money stops flowing.
Bubble economics at work in China is a new theme, as Chinese domestic borrowing cost is lowered along with the Maestro÷Õ music score, and the Chinese Yuan is tagged to the USD. The bubble may burst as soon as and if the incoming Chinese leadership stops issuing state bonds. Social unrest may follow, Argentine style, and if not pricked early, bigger problems later on.
In the mean nasty time, Eureka, virtuous circle, as the Chinese borrow, build, sell, save, and build some more, even as the the Japanese bleed cash and factories, and Americans borrow and buy. All very symmetrical.
The politicians in the US tends to think that their constituency are all people and entities within the US border, but I believe the broader constituency are all who hold USD assets.
Later, watch the November elections of House of Representatives in the US, by the people for the people, to carry out the will of the people, and consider your investment moves and counter-moves.
What are you going to do? Buy Q with borrowed money;0)
I had bought more paper gold and am now at 7% of NAV (NAV increased 4.91% YTD), but cash allocation increased because Euro, CHF and AUD all went up. My South African gold shares also rose. I must count my blessings, again.
Message 18323330
December 10th, 2002
c I just completed a trip with a somewhat anti-freetrader (and therefore anti-China) US businessman (factory, radio station, boxing gym owner), who, before he came on the trip, was of the belief that China's rivers had no live fish.
I quote from him as he saw what was going on with the country, economy, workers, education, officialdom, etc, 'I came, and saw Jesus'. |
