Hi Tom!!!! Great to hear from you and I know you were amazed at Australian.... I spent 4 years in Sydney in my early 20's and they the happiest year of my life was my last year there. I was engaged to a beautiful and successful New Zealand woman Pam White, who was the New South Wales State Manager for CLinique with 5 mangers and 150 woman at exclusive store make up counters working for her. Pam was smart, beautiful ambitious, hard working, owned her own home. She was the best woman I ever had a mature relationship with and I was the one who was gun shy at marriage due to failing of my own.
I was working for Citibank, Had a company leased Alfa Romeo, had tax advantaged ability to buy Gasoline meals, and a PC through the company.... I was sitting on the bond desk, during the year I had a technical positions profit center (bond and bill futures trading and David Hoskins also was integrated into the PC) His dad was the CEO of Goldfields Australia.
I worked very closely and became friend with Stephan Haines our head bond dealer who went on to have great success with his father's very successful investment bank Portland House bases in Melbourne. I was also the firms technical analyst and then Chief Market Technician, and brought into the dealing room a the very first and only computer on the entire dealing floor of 75 people that had any type of charting capability..... and this was live time updated feeds... Anyone on the entire floor from the Bond and bill traders to, the FX spot Trading, to the FX Forwards desks, to the Floating Rate Note desks, the Funding desks, coporate FX and corporate bond sales...... the rather large Swaps book... and at that time we thought a 10 Billion Dollar inventory of Swaps was a lot!!!!! anyway anyone including the Treasury Manager John Rice , the English Swaps manager David Croft up through the firm 2nd in command David Lennon to the firm managing director John T. had to come by my desk to look at any type of intraday, daily or weekly chart....
It's simply amazing how far the information revolution has exploded, I belive when I put it in those terms. I was at a futures firm Richard Mann right before that with some really sharp people who went on to success running Reuters in Aus. My flatmate and fried Craig McIvor, Gary Holland who went on the set up a fairly large securities firm, his amour bibi de Malmanche... Graham Filmer, who introduced me to the astro cycle book of Raymond Merriman, and worked assiduously on advanced cycle work with Geoff Robson-Scott. We spent 50 to 60 hours at his house, sipping wine and hand generated analysis that guys like Bill Sarubi would soon make obsolete, with their computer software.
I also want to give recognition to Martin Tau and Shane Clinton, the guys at Citi's floating rate note desk.... Shane was a great friend, excellent golfer and alround good guy.
The head of our orginations department Greg M. who prodded more about what I was going to do career wise was a very huge influence on me; and he was commenting after to me when he when to National Aus. bank I believe that they had 6 billion in credit card debt outstanding and he was going to securitize it and sell it ... pretty visionary for 1987, especially for Sydney and for packaging credit card debt.
And then, of course Henry Volquardsen, was a very dear friend who was on the long dated FX desk in NY. He was a big guy (like me) who started out as a file clerk and was on Citibank NY's long dated FX desk at 55 Water street I believe. He would hang around in the New York evening to watch our currency and interest rate markets open, some days it was slow and he would talk to the bond dealers the AUD dealer and me as he was trying to get indications in to local market sentiment. Henry and I talked for hours on end about history, he was then studying the 100 year war in Europe, mass psychology, Ownership of central banks.... etc.
I actually got together with Henry, Bill Sarubi, Bob Blumetti (who I believe ran for president on the libertarian ticket once of twice), and D Goodman to play the board game Illuminati, which is a combination of RISK and Mononopoly on Steriods....
Ironically after watch the AUD float in mid 1985 at 1.15 or so and then watching it plummet to an intraday low of 57.30 in June of 1986, the local consensus in the dealing community was overly bearish on AUD and Ozzie debt. We had an inverted yield curve and I was actually coming to the belief that this was the normal state of affairs for Australian debt.
I remember the day when we where all awaiting the all important Austrailan balance of trade number and it went over some big round number of cummulative debt to other countries and David Lennon the Number Two guy at the bank was joking to us that they may as well get a tow-bar and drag the whole country up to Japan! .... So as Harrison Ford famously said in the board room in the movie "working Girl"... when he finds out that Melanie Griffith is not an investment banker and leaves the room suddenly...... The names may have changed but the name of the game is still... Lets Make a Deal
....pencil in China for Japan........
OK my apologies for this self-confessional walk down memory lane... but back to your central question.
My question to you, is the growth in China a natural sustainable economic growth or is the chinese government doing this through kiting checks? Where the chinese population tends to be very capitalistic, china as a whole isn't a free market and is still quite corrupt.
I tend to believe that the more government meddling in the economy, the greater the gyrations in the economic cycles. In other words, I expect the current boom in china to be followed by a pretty significant bust. And if the current boom in raw materials and oil is being largely stimulated by chinese demand, it would imply that oil and other raw materials would drop rather dramatically
The world's biggest proponent of China Jimmy Rodgers, who last year was commenting that the rest of the world's equity markets were coming out of bubbles but he would hold his Chinese equities even through a 40 % decline because he was bullish on the long term..... He stated that the Chinese equities went up another 30% or so he would be forced to sell them as China would be in a full blown long term bubble. Well we did not get quite there either. It's doubtful that China could implode prior to the Olympics, unless some type of geopolitical situation.... Taiwan... Tibet....and/or environment disturbances.... Tokyo being completely destroyed by an Earthquake ala 1923 ( I think)
I agree with you that there is fishing banking, many bankrupt state owned companies and that the government especially one that has got to believe they have mastered MacroEconomic theory... that economy is going to unwind badly, trees don't grow to the skies and We have the perrenial threat of a 27.5% tariff on chinese goods being implemented by Schumer and his colleauge down in the Carolina's.
Passions are already running quite hot in this election year. I predict this is going to be a Long HOT summer, an analogue of the turbulent summer of 1968 when some felt that the world was coming apart at the seems......
A china contraction at some point in the future would feed into my master scenario of a More syncronized global downturn in real and not nominal terms. And the ultimate 10 to maybe even 20 Trillion dollar contraction in the still ridiculously opaque Credit Default Swaps market. Do you realize that Swiss Re. the world largest Reinsurance company has finally confessed that they are taking some losses on Credit Default Swaps, However with all these write offs at Citi, UBS, Bear Sterns, LEH, etc.
How many of these are actual mark downs in the price of their credit default swaps books, considering that the overall credit markets are marking down in price derivatives with counterparty risk the reason that this Credit Default Swaps crisis is not front page news is that Bear Sterns did not go bankrupt!!!!!!!!!
The FED did a workout, because a Bear Sterns outright bankruptcy would have blown up the system. If the Leading Central Banks can intervene in the next couple of leveraged financial entities to be proverbially show to be "swimming naked when the tide goes out" Then we will weather these storms.. but with an inflationary monetary creating effect.
How is this all actually going to play out......
as the 1940's radio show famously said......(My dad used to quote it)
Who knows what evil lurks in the hearts of Men? Only the Shadow Knows....... so stay tuned for next weeks episode.
your good friend,
John |
