Dear rss free blog,
Reporter
Dan Markman e-mailed me:
“Last
March was much more predictive than Jan. for the year’s stock market
performance. One possibly alarming but significant explanation could
be that the first full Chinese month of the New Year is now a more
relevant predictor of the years’ overall equity performance than the
western one. Quite possible, especially when you consider that by far
the bulk of trading action is brought about by
emerging-market-related transactions.”
Comments
Michael Kurtz (of Macquarie
Bank) from Hong Kong:
there have been “substantial net redemptions from China-dedicated
equity funds, totaling up to 20% of 2009’s full-year net
subscriptions in just the last four weeks.”
Chinese
New Year this year is Valentine’s Day, Feb. 14, a Sunday. Gong hai
fat choy for the year of the Tiger, or, maybe of the kitten. In the
interim the IPOs are rolling in: Jinko Solar (JKS); IFM Investment
Ltd. (CTC, the local arm of Century 21); Andatee China Marine Fuel (AMCF); and Dago (sic) New
Energy Corp. (DG) of late.
Meanwhile
news of further Beijing restrictions on lending by state-controlled
mega-banks have again given world stock markets the vapors.
e
have been there before, as (London) Times writer Bill Emmott reminds
us. In the 1980s the world believed that the future belonged to
Japan. Here is Chris Loew’s comment on the coming lunar event:
“Japan
is on the Western calendar now, so the Chinese New year (spring
solstice) is no big deal. Feb 3rd is Setsubun, when devils are driven
out of houses by throwing dried soybeans around, and good luck is
invited in.
“Valentine’s
Day is maximized by Japanese chocolatiers. Women must give to men,
and men must return the favor on ‘White Day’ a month later. Then
there’s the custom of ‘giri-choco’ or obligatory chocolate for
co-workers and friends (I get chocolates from my mother-in-law and
daughter) as opposed to the US giving only to sweethearts. However,
in the tight economy, the giri-choco habit is declining.
“On
the upside for chocolate makers is the recent success of both cheese
and chocolate fondue. Japan’s major chocolate makers are Meiji
and Lotte (a Korean company). Glico also does well with its
Pokey stick chocolates.
Chris
goes on to consider other shares, but for paid subscribers only.
Vivian’s
reply to reader CP who said she was too rough to Marc Faber and too
soft on Barrack Obama:
I mentioned in my first piece about the Barron’s Roundtable that Marc
Faber, whom I know, has greatly outperformed all the other
panelists. (It was dated Jan 19; paid subscribers can confirm this on
the www.global-investing.com website).
I
too think Marc is a brilliant stock analyst. I boost our own local
man, Paul Renaud, because he is our man in Thailand. For the record
he also does brilliantly, if you buy his offbeat Thai stocks. Just as
with Faber’s, it is not easy to do.
But
Marc’s view on the supposed government intervention in stock markets
was stated without any supporting evidence. What bugs me is that
nobody hauled him up on it. I agree with you that indirectly (and if
you insist occultly and opaquely) the USG and the Fed do help the
stock market and lots of other bits of the economic system. But that
is not the purpose of the measures.
All Treasury and Central
Bank operations worldwide affect markets. But that is not the same
thing as saying their purpose it to affect markets. Or you support a
conspiracy theory.
I
think the reason for the opacity is that the Fed by tradition is
attacked by the left and the right for its independence. Do you
remember Dem. Cong. Harry Gonzalez of Texas? I do. Ron Paul is
from the same state. Right or left doesn’t matter. Consumer
protection is the least of it, which I think the Fed should give up
now to preserve its ability to intervene in the economy. Frankly, I
think if it had not done so we would be in a worse situation now.
Bernanke may be part of the cause of the problem, but he also handled
the solution.
As
for Pres. Obama, if you read between the lines you can see that I share your disillusionment. I have been
giving him advise over his economic team for a few newsletters now. I believe in the possibility that he is smart
enough to change course.
Based
on this commentary, I am changing course too. Paid subscribers can
read on:
If
a populist up-cry keeps Bernanke’s renomination in doubt, I think the
odds are that the Fed will not tighten credit conditions soon. The
fact that property resales have not recovered, and the looming growth
of unemployment will be the official reasons. Banks will have to cut
down on the payola, both in this country and in Britain, Germany, and
France (where various measures and pressures are actually in advance
of the US ones.) This is in the interests of shareholders because
bonuses and bonus stock cut into our return.
If
access to the Fed discount window comes with strings and fees
attached, that’s only fair. Bankerly round tripping, borrowing
discount money to buy T-bills, is obscene. The discount window can be
kept open with special terms requiring that banks use what they raise
to refinance mortgages (and proving it). Gummed-up credit arising
from the crash in real estate CDOs, recall, is why the window was
opened wide in the first place.
The
big winners from the unilateral US move to rein in banks may well be
foreign banks. There is no clean clear way that similar measures can
be put in place by the European or British or Swiss CB because they
use different open market mechanisms.
Moreover,
Glass-Steagall (and son of Glass Steagall, the Volcker Rules) are
both purely US regulations. Most European banks have long combined
investment banking and commercial banking operations. They are
so-called Universal Banks.
While
foreign banks will also have to cut back on the payola (as one of our
recommended foreign banks announced yesterday) they will not have to
pay the Fed fees or get out of underwriting.
As
for investing for their own account, there are prudential rules in
most respectable banking centers. And regulators and the institutions
they regulate will examine US precedents in deciding which kinds of
business should be turned down because they are too dangerous.
That
puts foreign banks in the sweet spot even compared to Goldman Sachs.
A
second new idea is that gold will rise again, with the inflation
unleashed by the likely delay of new US measures to cut liquidity and
quantitative easing. The Fed has been talking quietly about what is
needed but politics will get in the way, particularly if housing and
jobs remain in the dumps.
