Your editor had lunch Thurs. with a much more powerful counterpart, Yanqing Yang, PhD, the deputy editor of China Business News, of Shanghai, one of the two top business magazines in China. (The other is 21st Century Business; each has about 200,000 readers.) Ms. Yang was on one of the two foreign trips she is allowed to take annually, stopping over in New York after a couple of days in Paris before heading to the International Monetary Fund-World Bank annual meeting in Washington, DC. We were introduced by Martin Wolf, chief economics commentator of The Financial Times.
The ground rules required me to be ladylike and not press Ms. Yang about renminbi revaluation or nasty remarks about Chinese statistical legerdemain.
So we chatted about how New York and Shanghai are alike, both vibrant cities which never sleep. Ms. Yang revealed that one difference she had spotted the night before was that NYC has quiet places where you can listen to lovely music and meditate, lacking in Shanghai. She went to a Christian church and was refreshed by the service. If you try that at a Buddhist ceremony the only sounds, apart from words, are bangs of the gong to tell you to kowtow (genuflect) at certain points in the service.
We also noted how impressive the Paris Banque de France building is, a rococo town palace built for some Bourbon bastard before becoming part of the state patrimony, and how hard it is to keep that sort of edifice going, unless (as I said) you bring in Russian craftmen used to restoring palaces.
I avoided any chatter about how France (among others) will be asked to reduce its IMF quota in order to give a more substantial weight to China on the Fund’s board. A compromise apparently also will require that the USA give up its 15%-plus voting rights; but we aren’t about to do that and lose our veto over Fund policy which goes back to the Bretton Woods Treaty after World War II.
Ms. Yang, while a Han Chinese, was born in Inner Mongolia, and I had to bite my lip to not start to talk about China’s export restictions on Inner Mongolian rare earths. She told me that Mongolians have their own langugage which she does not speak. She has not been back to her home town for 5 years and got her PhD at Shanghai’s Fudan U. Her family moved to the city. I also refrained from asking her how many apartments she owned in Shanghai. I was very tactful.
Meanwhile Martin Wolf was being asked for his autograph, something Ms. Yang and I were spared.
The luncheon was in the margins of the FT Conference on The Future of Finance. Speakers, apart from the moderators, Martin and Gillian Tett, were the Great and the Good including Bob Rubin, Larry Summers, Gerald Corrigan, Mohammed El-Erian, and their ilk.
George Soros and Economics Nobelist and Columbia Prof. Joe Stiglitz gave the genl mgr of the Bank for International Settlements, Jaime Caruana, such a hard time about the Basel III reforms that I felt sorry for the Spaniard. More on this for paid subscribers below.
Soros also made a good joke and gave some advice to equity investors. His joke first, while criticizing the high-risk correlated trading of banks considered to big to fail:
“I’ve been in the business of risk-taking, but I’d never risk more than my capital in any one direction. I’d also never risk more than my capital in any one direction in securities, stocks, or (very rarely) in currencies.”
He added: “I was there when the banking system came to life. Banks had been dead. Bankers had been risk-averse bureaucrats” (back in the early 1970s). Now he added “leverage has become abnormal.” As is known, Mr. Soros wanted the govt to inject equity into the hole banks dug themselves into, essentially diluting existing shareholders. This was not done.
Here are some more ideas from Soros. “It is remarkable that corporations having good earnings are not investing, but building up liquidity. This is a strange and disappointing phenomenon. The don’t want to have to rely on banks, and are acting out of a self-generated uncertinaty about the future.” He said that this trend will reinforce itself, meaning “the economy is unlikely to grow and investment opportunies will remain scare.”
However, there rise of mergers and acqusitions, in Mr. Soros’ view, means “companies will devour each other.” After saying that earnings “may have peaked” and “may decline from current levels”, he added “if you throw a lot of money at equities I can see them rising quite a bit.” He also thinks fear of taxes will keep a ceiling on dividend payouts, further encouraging corporate liquidity build-up and mergers between companies. As you can see, he is hedging his forecasts, but suggesting that investors look for acquisition candidates. We discuss one for paid subscribers below.
More for paid subscribers from Australia, New Zealand, China, Latin America, Canada, Abu Dhabi, Britain, Spain, France, India, and Israel. We incorporate reports from Martin Ferera, Fei Chen, and Frida Ghitis with stock idea. Since we pay them, you have to pay for their advice, and that of the Queen Bee, Vivian.
