MarketWatch: Going Beyond the Instant Financial News?
One can hardly expect MarketWatch, being in the Dow Jones stable of financial news powerhouses like the Wall Street Journal and Barrons to be the most impressive. But Marketwatch is making a superb case for itself with a)its independence of point of view and b)its willingness to take on major issues and not tow the Wall Street/GOP line.
Take its recent story on the US Economy -
The three biggest lies about the economy
. The commentary, and this is the major strength of the MarketWatch financial news, have taken on an issue that the WSJ glides over and Barrons keeps balking on. Here is a sampler:
Myth 1: Unemployment is below 10%
What nonsense that is. The official jobless rate, at 9.7%, is a fiction and should be treated as such. It doesn’t even count lots of unemployed people. The so-called “underemployment” or U-6 rate is an improvement: For example it counts discouraged job seekers, and those forced to work part-time because they can’t get a full-time job.That rate right now is 16.6%, just below its recent high and twice the level it was a few years ago. And even that may not tell the full story. Many people have simply dropped out of the labor force statistics….
Myth 2: The markets are panicking about the deficitTo hear the G-20 tell it, the U.S. and other top countries had better slash those budget deficits before the world comes to an end. And maybe the markets should be panicking about the deficits. But they’re not. It’s that simple.If they were, the interest rate on government bonds would be skyrocketing. That’s what happens with risky debt: Lenders demand higher and higher interest payments to compensate them for the dangers.
But the rates on U.S. bonds have been plummeting recently. The yield on the 30-year Treasury bond down to just 4%. By historic standards that’s chickenfeed. Panicked? The bond markets are practically snoring….
Myth 3: The U.S. is sliding into “socialism”
For a system allegedly being strangled in its bed, U.S. capitalism seems to be in astonishingly robust shape.Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of “Wall Street Revalued,” calculates from the Fed’s latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.
Brett Arends offers a highly unconventional and one could say “contrarian” view on Wall street. And Marketwatch allows full rein to him and some of its other feisty commentators – thus full marks to Marketwatch.
Jon Stewart as the Best TV News Anchor
Jon Stewart of the Daily Show is making a case for being the best National News anchor. It shows how rotten the TV news has gotten when the Host with The Best F#@king News Team Ever and with the most baudy language, cheapshot headlines, and kiddies bathroom humor rises to the top of the TV news heap. Imagine Jon Stewart as deigned heir to the Walter Cronkite throne.
But as already pointed out, with the lone exception of Time magazine, only Jon Stewart has been willing to call out and take on the likes of Rush Limbaugh and Fox News. Certainly the Stewart Brand of pungent humor show these agents of mass deception as the calculating hypocrites they have grown ever more confident in being since both the TV media and the major national news sources like NYTimes, Wall Street Journal, and all 3 major TV networks fail to cite the extravagances of Limbaugh and Fox news. This failure then sets up the LowBall Trap – “Fox and Limbaugh only do it because everybody else lies, omits, and embellishes however they so chose to report the news”.
But the Daily Show has taken on other Elephants in the Room especially during the latter 1/3 of the show devoted to live interviews with guests. Yes, many guests are from arts and entertainment but there have been the likes of Senators John Kerry or John McCain, National Budget Director Peter Orzag, and the most recent, President Obama key advisor, David Axelrod. And the questioning is pointed:
Stewart shot back that the administration knew what they were walking into with the economy and wars, but Axelrod countered, “We didn’t know the extent of the economic problems. The recession occupied us for the first several months in ways that nobody could have anticipated”…..Stewart pushed Axelrod about bringing back familiar faces (including Ben Bernanke, Larry Summers and Tim Geithner) after Obama’s campaign comments about not expecting different results with the same people. Axelrod insisted that the administration needed their experience, and mentioned that the team had some fresh blood…..Politics aside, Axelrod admitted at least one regret in how they handled the agency that oversaw both the Massey mining disaster and the Gulf oil spill. “There is no doubt that, in retrospect, we would have liked to have moved faster on the MMS situation,” he said before trying to deflect some of the criticism. “But understand that we were also dealing with the economic crisis and the wars and a whole range of issues.” “I guess my point is … don’t we have to show a certain baseline level of competence?” Stewart asked. Axelrod insisted that it had been accomplished.
This latter point, the lack of promptly restoring good governance and shoring up the Federal regulatory agencies [think SEC, FDA, MMS, FCC, and many others] is running neck and neck with jobs as the number one issue sabotaging the notion of “Yes, We Can”. In tennis its called an unforced error. It is this ability in interviews with subjects – to frankly delineate the issues and then, with unforced errors [or with well stated rebuttal], Jon Stewart has been able to reveal to his viewers the heart of the thinking of major political players. Would that other TV media [with the notable exception of PBS News Hour] be able to achieve the same results – they are missing the equivalent revelations even on their Sunday News Analysis programs. Hence the nomination of Jon Stewart for his black humor laden but ever so more effective interviews as the Best TV News Anchor.
Strategic Energy Coverage
Popular Mechanics has a very interesting article in its July 2010 issue – Energyland – The Race to Cheap, Sustainable Power. On the cover of the magazine PM promises “The truth about energy”, “No more hype-real world ideas to power our future”, “Debunking myths about: wind power, solar, shale oil, bio fuels”, “The Clean Coal Boondoggle”, and “Why Nuke Power is Safe (Really)”, Despite the “No more hype promise”, Takethe5th decided to proceed carefully.
Well page 70 revealed a sort of snakes and ladders landscape illustration of the major energy strategies. Notably, the road to energy independence started at Petroleum Swamp.
But right away I was impressed that PM did dare to take on many of the key issues and “myths” confronting the US [and much of the World for that matter - clean, cheap, and sustainable energy is big in Beijing as well and very lively in London]. And one can understand why – there is not just the Climate Change/CO2-Greenhouse gas issue, but also the limitations of Peak Oil and since the Gulf of Mexico blow out, there are the nasty reminders that Nigeria and the US are not the only countries that have to worry about oil and gas production from offshore and environmentally sensitive areas. So the fact that PM chose to discuss 10 key energy sources was impressive right off the bat.
But what really impressed this reader was the honest-to-goodnes myth busting approach. Okay, they went light on Nuclear and really did not give very promising Thorium approach due consideration. And in nofield did PM do a comprehensive Pros and Cons. Also missing was the big picture of how these various sources would help fill national energy tank. But compared to ther sources [see immediately below – a)PM delivered fairly well on its headline cover promises and b)did much more comprehensive review than a lot of the financial and news media.
As a point of comparison Takethe5th did onsite searches of some major business and news sources to see what they had to say about “energy policy strategy plan” then substitute “oil” for “energy” and here is what was to be found:
Barrons – almost all investment oriented, definitely slim on a national plan or strategy
Business Week – some good article about specific energy sources but no overview
Financial Times – mirrors Barrons having mostly financial coverage, few complete ideas
Forbes – had two good pieces: Green New Deal and the Clean Energy Race
Fortune – has some top stories on individual energy sources and Brainstorm Green
MIT Technology Review – best source by far for wide ranging studies
NYTimes – like theAtlantic, lots of Energy policy politics; see DotEarth Blog
TheAtlantic – lots of energy politics discussions – take a look for yourself
Wall Street Journal – lots of news stories and breaking features on energy policy
With the notable eception of Forbes, this reviewer was surprised to see how little coverage there was in major Financial press sources. Maybe the markets and quarterly results are absorbing all the time and attention- and diminishing time for the big picture at these financial media. Just talk to some CEOs who have to tread the QTR Treadmill.
News Coverage on TV
As noted here news coverage in the US TV media has been faltering badly, with Fox News being allowed to employ blatant lies and distortions while defiantly proclaiming itself as a source of “fair and balanced coverage”. But other networks, seeing Fox anomalous ratings success [the more you prolong and comfort public misconceptions the better your ratings?], are using Fox-like bombacity in their news coverage – think MSNBC’s Keith Obermann and some of CNN’s infotainment shows. Viewers are having to go to PBS or North of the Border to CBC or CTV to get “fair and balanced coverage”.
For those looking for solid news coverage, there seemed to be a last refuge – the Sunday Morning News Analysis shows on the major networks – ABC This Week, CBS Face the Nation, and NBC Meet the Press. But even here the trends are defiantly bad. Face the Nation is down to 30 minutes. But in effect so are the other programs as viewers have to endure 3 and 5 minute ad breaks. Yes, the shows do offer up serious subjects with sometimes excellent outside analysts. But the shortness of time often means key topics and ideas get discussed for 2 minutes tops and then cutoff. Major issues are just left hanging – or left unmentioned as the elephant in the room.
But the most perverse trend is that the major networks are leaning over backwards and then falling down badly in promoting their “fair and balanced” coverage. So that means trotting out one Senator from each party who when asked a tough question quickly diverts to the Party’s PR talking points regardless of relevance and simply does not address the issues. Given time constraints and the insistence of the counter party of getting their “right of rebuttal”, all viewers get is a clear demonstration of how polarized and partisan is Washington politics at a time when a roster of critical problems confront the nation. To make matters worse the “debate” often degenerates into the worst pettiness thus easily justifying the voters exasperation and rancor with their top politicians.
But even the second half of these programs which features 4-7 invited reporters and and analysts covering the week’s top issues is subject to fair and balanced distortions. The invited pundits are often split on 50-50 on their Democratic or Republican leanings. So then George Will tells us that free markets are working just fine despite the fact that the nation is still barely recovering from the financial free markets coming to a halt . Or Cokie Roberts says innocuously all the freedoms granted to women in Afghanistan under American/NATO auspices “have been a great thing” ignoring the great cultural rift and toll it may be creating for troopers in the country. Or incredibly inviting Liz Cheney on as a balancing Republican analyst forcing all of the other commentators to act as buffers correcting Liz and her patently false or less than fully forthcoming assertions.
In the era of the Internet, TV has a critical live video advantage that even blogs and Huffington Posts with their stream of screed commentary are hard pressed to match – that is live and relevant debate among experts. Meet the Press today, with its devoted discussion of the fast morphing Afghanistan issue with its panel of experts who have written, experienced and/or covered the scene in depth was a very good example of how TV News can press its advantage over the press of the oncoming Web Wave. Hopefully the networks will insist on much higher standards for “fair and balanced” political debate and expression. Also, the networks need to tie their own coverage better with the Internet. One simple way – have a short “What You Said”take the 2 best posted commentaries as voted on by the web viewers and as chosen by the show’s editors, also tell viewers what topics provoked the most and the best comments.
In sum, TV has long had the power to clarify and persuade effectively. Given the rapid and perilous change in these times, the major networks should seize the initiative against the avalanche and cacophony that is the Web.
Takethe5th Scoops NYTimes Apple as Bully Boy Story
Takethe5th modestly notes that it has scooped the NYTimes on its Apple Bully Boy story. In today’s NYTimes [June 24th, 2010] the story headlined for the Technology section is: Long the Upstart, Apple Plays New Role: Goliath. Here is a summary of the NYTimes storyline:
Apple is now seen by some as an anti-competitive industry bully. As Apple fans line up at stores on Thursday morning for the release of the fourth iteration of the iPhone, the company is riding high.And it’s not just the iPhone. Sales of the iPad tablet are strong too, and Apple has surged past Microsoft to become the most valuable company in the technology industry. But as one success follows another, the company finds itself in a bewildering position. As the tech industry’s perennial underdog, Apple was frequently scorned and dismissed by larger and more successful competitors like Microsoft or Dell. Now, with growing frequency, the company is seen by competitors and other industry players as a bully.
Companies like Google and Adobe have accused Apple of unfairly using its clout to exclude their technologies from the iPhone and iPad. And some application developers are fretting under Apple’s tight control of those devices, even though many of them built their fortunes on the popular gadgets.
But perhaps in the clearest sign that Apple has emerged as an industry superpower, government regulators are beginning to scrutinize its every move.
The NYTimes article then goes on to describe how Apple has worked to create a monopoly engendering ecosystem around its popular iDevices[=> iPod, iPad, iPhone] where Apple control all aspects of their deployment. This includes taking a cut on everything- apps sold, media sold, ads sold and even a payment for whose apps and media gets to be sold on its iDevices. But it also means tight control of whose software gets to run on iDevices or used to develop apps to run based on non-redundant functionality, security plus reliability of the code and performance. But in applying these controls the NYTimes points out that popular software like Google’s Voice, Adobe’s Flash, Sun’s Java and a whole host of code generation tools have been ruled “programma non grata” on Apple’s iDevices in an apparently arbitrary manner.
But Takethe5th readers have already read this basic storyline starting back on Feb 19th and continuing for the past 5 months:
Feb 19th – Apple vs Adobe: Take 5 … Who Cares? – Google! – tells how in unprecedented fashion Apple CEO Steve Jobs bad mouths Adobe Flash software – and unjustifiably so for some of his purported reasons. This is the start of the basic Apple-Adobe feud with Apple clearly being the heavy.
April 13th - Apple Has Mobile Monopoly Momentum – shows how Apple first starter lead in defining the nature of Lite Touch devices has given it momentum towards another IT monopoly.
April 18th – How Steve Jobs Has Scr#wed Himself – summarizes the basic “Apple as Gorilla” story. It describes how Apple has ruled out apps that clash with their own programs or directions. Most notable has has been exclusions of any software that allows iDevice apps to be reproduced in PCs, smartphones or other competitive devices. To add insult to injury, Steve Jobs has badmouthed software such as Java and Flash as not being fast enough. Then when Apple itself turns out to be the source of the performance/speed problems Apple switches to alleged security or reliability defects.
April 24th – Apple versus Adobe Feud – provides a recap of the main arguments in the Apple vs Adobe battle. One interesting angle is that Steve Jobs has been promoting HTML5 but then Apple is slowing down and/or going proprietary on some key HTML5 standards. Also Google rewrote the previously Apple rejected Google Voice app in the very same HTML5 that Apple is saying is one of the key standards for development on iDevices. Apple appears to demur still on approving Google Voice for iDevices.
June 15th – Apple vs Adobe: Take 6, Apple HW is SLOWWWwwwwww – uncovers some very clever and precise benchmarking that shows Apple’s graphics are 30-300% slower than those running on identically the same hardware and software on Windows vs MacOS/X. This is conclusive proof that speed problems with Adobe Flash are really poor graphics performance on MacOS/X.
In sum, for 4 months Takethe5th readers have had the inside on the Apple as Bully Boy story. Now the latest Takethe5th Apple Tidbits is about the end of cheap Chinese manufacturing [all iDevices are produced in China] and the recent prediction of a $45 price for Apple [down from current $270]. Just a little more modest, journalistic self-backpatting.
BAM: Apple at $45…
BAM Investor has rattled Wall Street cages by releasing a prediction of a $45 Apple stock price as of 3rd quarter 2010, latest 1st quarter 2011. Ha! Poppycock and nonsense. Apple as of June 23 end of day is at $270 and the cash and equivalents alone is north of $27/share. Who do these BAM “geniuses” think they are?
Glad you asked.
BAM Investor is the brainchild of JG Savoldi who has taken technical analysis into the behavioral domain using Behavior Analysis Models based on historical patterns of human trading and reactions to risk to predict/forecast Black Swan events – precipitous changes in prices. Apple at $45 certainly qualifies for precipitous.
Here is what BAM Investor says about its modeling:
The “guts” of the model are based on proprietary computations, the components of which include elements of—but are not exclusive to—the Fibonacci sequence and its golden ratio, fractal studies, and several unique capitulation thresholds. The B.A. model is equally effective in its ability to predict price movement whether the data input involves an individual stock, stock indexes, sector funds, currencies or commodities and can be used to trade or invest in any time period—intraday, intermediate, or long term.
As a rule, B.A. can be used to generate information about future price movement in any market as long as the primary traders in that market are human beings.
Now what makes BAM Investor of interest is who uses BAM for its financial radar. As it turns out a number of Wall Street Hedge Funds listen to BAM Investor… and the past track record for prediction is not completely out to lunch. But what is even more intriguing is a singular fact – There is a swell of contrarian opinion that a serious double dip recession is tripping towards reality very soon – before end of July. Is BAM’s forecast really a front runner for a broader “thumbs down” on the US/World Economy as a whole? A Short time will tell.
Made in China: Prices Going Up
For the past few weeks, a Labor revolt has been occurring in China … with hardly a peep about it in the TV media. First, there were the string of suicides at the Foxconn plant in Shenzhen which employs nearly 500,000 workers alone and manufactures almost all of Apple and Dell electronics and a big chunk of HP, Cisco, Nokias. Since the suicides, wages have been increased at the Foxconn plant by a minimum of 33% and another 70% in October is on tap. Even more ground breaking are labor strikes at Honda and Toyota plants among others. The developments are coming at a furious pace fuelled by the fact that China has over 500M cellphones. The net result is that for key sectors like electronics, prices will be going up as higher production costs get passed along to Apple etc. See the details at the BBC, Caixin Online [remarkably outspoken Chinese business magazine], and NYTimes.
The second factor that could cause Chinese prices to go up is the revaluation of the Yuan upward. The IMF and not just the US is pressing China to make this move. The news reports emanating from China wax and wane on this item. Caixin Online first says the Chinese government is committed to a Yuan reform policy on May 25th . Then today, June 17th, Caixin Online reports China said it will stick to the principle of independent decision-making regardless of U.S. pressure. the NYTimes reports that continued high growth plus inflation could increase internal pressure to revalue the yuan. Business Week sees a yuan revaluation as inevitable. And given G20 plus IMF pressure for such an appreciation. China can cite the wage increases noted above as equivalent to a currency raise and with its huge exports to US and Europe plus huge debt holdings, it may be able to hold off any serious revaluation. Nonetheless, China may have to do something if merely symbolic and onetime only. So expect to see Chinese prices going up due to currency revaluation.
The net result is that cheap and Chinese goods will have reached a minimum this Summer. And prices in the Fall and holiday season will either go up or margins will go down for retailers plus US vendors. In contrast outsourced jobs will just be shifted to new manufacturing centers in Southeast Asia and other low labor cost sites throughout the world. Thus the call for more domestic jobs, jobs, jobs will continue to founder. The recovery is looking more like Japan’s 10++ year economic blight.
Are PC’s in Danger of Becoming Redundant ?
Progress on smartphones and tablets which are touch and gesture enabled are moving so rapidly that laptops and PCs are in danger of becoming redundant. Well if not redundant, consigned to specialized development tasks. What has happened is that woefully untapped need for touch-enabled computing has been explosively released first with the iPhone then Android smartphones followed by the keyboard-less iPad and an upcoming flood of additional smartphones and tablets throughtout the next 2 years.
Clearly bright, portable and touch easy to use has won the day for many computing users.
The problem for PCs is that a monopoly by Microsoft has taken its Joseph Schumpeter toll. Microsoft demolished GO and Pen OS in the mid-1990s and then simply sat on touch and stylus based technology. Redmond’s efforts were very conservative and did not meet the need for a touch screen, a wider range of gestures, and the inclusion of sensors that could detect the orientation of the device. Also light and bright technology, although picked up in netbooks, has not been emphasized in PCs.
But the critical form factor pioneered by iPhone and the Apple iDevices was to go keyboardless.
Okay, not a keyboard-less but a software GUI keyboard. Apple rightly assumed that the software-touch keyboard would be good enough for the new wave of Web 2.0 and iOS4 based apps. But what is waiting in the wings is a laser-projection keyboard and/or voice command recognition systems which can support faster input. But mobile device developers have to be careful. Any new input device will have to be small, light and not drain the batteries – one day battery life is also a key attraction of their new devices.
Finally, its worth emphasizing the key roll of the Web and Internet in the runaway popularity of light-weight, touch-enabled, portable devices. RIM has profited handsomely by serving those needs with a throwback device – a fat-finger defying keyboard and slow arrival to touch+gesture enabled phone+connection device. We call it a connection device because only RIM so far has invested in the server-side driven push technology that gets messages and emails out to Rim devices in a timely if not instantaneous fashion – no need to constantly check back.
So PCs and even netbooks got caught out a)first lacking a PDA-form factor staying light weight and bright for a full days work; and then b) not fully supporting phone connections and c)finally being derelict on becoming even easier to use with touch and gestures. The writing was on the wall when Redmond stopped all Web development for 5 years from 2001 to 2006 [no functional upgrade to IE6 browser] and, except for Skype, ignored phone connections. PC vendors have been asleep at the switch to touch+gesture. So now Acer, Dell and HP among other PC vendors are racing to catch up with their own smartphones and tablets – and they are hedging their bets. They are going Android, Meego, WebOS – not exclusively Microsoft Phone 7. And that is “deserting” of microsoft is based on survival – Microsoft Phone 7 is woefully behind.
But the capper was announced today – HTML5 touch-enabled development tools from Sencha[recently known as EXTjs, the excellent JavaScript framework developers] that work exclusively on iOS4 and Android – PC based HTML5 users are out of luck.
This will mean an explosion of Web apps that work best on Android and iOS4 – not MacOS/X nor Windows nor Linux PCs that do not have touch sensitive screens. A key indicator of this switch in emphasis is what updates Apple brings to its own laptops and PCs. My guess is that Steve Jobs will delay bringing touch screens to the Apple desktops and laptops. Apple has extended much effort [including cutting off Adobe Flash, Java, and other code generators systems] to set up a closed and highly profitable iOS4 ecosystem. iOS4 has a big first starter lead over everybody else. When will Steve “let in” MacOSx users with full touch+gestures based screens in the future? Your guess is as good as mine. Meanwhile the timely arrival of Microsoft Phone 7 goes “hardcore” – no vacations for many Redmond developers. And the whole PC World is turned upside down and keyboard-less [for the time being].
Apple vs Adobe: Take 6, Apple Graphics HW is SLOWWwwww
Takethe5th has been following the Apple versus Adobe debate with a bit of a jaundiced eye – wondering how Flash video and all its broad range of applications can run so fast on Windows yet slow on Macs [and Linux too]. Adobe claims that the latest Flash player 10.1 has not been tuned quite yet and the Mac OS graphics accelerator APIs have not been available to Adobe developers on a timely basis. And Apple and Steve Jobs bemoans the fact that Flash is too slow, insecure, buggy and without explicitly saying so – a piece of software crap.
However, a recent report in Engadget caught my eye. It point to a comparison of MacOS/X vs Windows 7 vs Ubuntu 10.04 done at Phoronix measuring the graphics performance of the 3 popular OS on what can be nearly the same Apples and Apples basic computing hardware – its always a Mac Mini platform. In fact Phoronix has taken pains to do so. The results [see one of several charts above]are most interesting and applicable to the Apple vs Adobe debate.
In 4 different tests over 6 popular resolutions [from 800 x 600 screen to HDR 1920 x 1080] Windows 7 running on the NVidia graphics hardware beat both MacOS/X and Ubuntu consistently – even when the graphics accelerators were changed. Now consider this – Windows 7 was never beaten and the margin of victory was 30 to 300% better than Apple. Even more intriguing Ubuntu Linux, though never besting Windows 7 , also consistently outperformed Apple MacOS/X.
So this raises a legitimate question – was Steve Jobs dissing Adobe Flash performance to distract attention from Apple’s own very poor graphics performance? With graphics performance on Macs 30-60% slower than Windows, wouldn’t Flash video inevitably run slower on Macs [and Linux too]? Phoronix is promising more benchmarks with other graphics software after its May 2010 posted results. I hope they include Flash Player 10.1. Here is one party that will be watching.
Singapore Ups the Ante
There is no doubt that there is an emerging contest open now for becoming the next and new World Financial Center. The opportunity broke with the breakdown of financial responsibility on Wall Street and European financial centers plus the caving of fiscal discipline [consistently running increasing budget deficits over the past 5-10 years]by many developed country’s governments. Couple this with the rise of petro-riches and the emergence of Southeast Asia, China and India as manufacturing and service providing powerhouses respectively – and suddenly managing the World’s money and finance does not seem to be the god-given domain of current Western financial centers.
Of course, the collective Wall Street waiver on Fiduciary Trust and discrete riders on any Code of Ethics along with Wall Street’s adamant rejection of almost all financial reforms certainly helps other financial centers. And sophistication plus capital sources are not lacking in the Emirates, Hong Kong, Shanghai, and Singapore among the leading contenders now that London, Geneva, and Wall Street have systematically ruined their respective brands.
And to add to the contest, Singapore is upping the ante with its move to fiber optically wire the small island nation for broadband services at hitherto astounding, data-center only speeds. I am talking 1Gbits/second. Just to compare, Sprint’s new 4G Wimax network is raving about its ability to deliver 4-10Mbits/second … just barely 1/100th the speed that Singapore users will receive. And Singapore is demanding a 2012 start-up date for its new network.
Now consider that Singapore has lead and Southeast Asia has dominated the Educational scores for math and science in grade and high school for the past 15 years and one can see a strong educational base for the network to further support. And China is not far behind in similar plans. In sum Southeast Asia is building up a brains plus technical brawn as well as entrepreneur advantage that will make their financial centers increasingly attractive to international businesses looking for less risky and less self-aggrandizing financial services.
Goldman Sachs on Ethics
There is a a fascinating post on Goldman Sach’s committment to Ethics at the Financial News:
Goldman Sachs, which publishes an ethics code on its website that emphasizes its “integrity and honesty”, adds a rider that reads: “From time to time, the firm may waive certain provisions of this Code.”
Yes indeed, the sound of weasel words that already proliferate and accumulate in various financial statements and contracts. A sign of the conditional morality of our times.
2 Huge Economic Developments under the Radar
There have been two huge economic developments in the past few weeks that are still under the radar. By under the radar, one means that it is possible to Digg or Stumble posts about the stories and still be “the first discoverer”. Second, though some aspects of the stories are covered – there has not been the big view or analysis. Yet these developments will have decades long and world repercussions:
1)The spate of 12 suicides at the huge 1/2 million employees Foxconn complex in Shenzen China has already a)caused wages to rise by 30% or more; b) caused major changes in how production is done at the complex; and c)may cause China to switch from lowest-labor cost model to an out-automate and out-innovate economic model [sounds like what every advanced economic country is trying to do - a crowded field]. John Dvorak writing at Marketwatch picks up the implications of this change.
Immediately all the major consumer electronics producers from Apple and Cisco to Dell and Nokia plus a whole lot of others technology giants who have outsourced almost all of their manufacturing to China are going to see their margins squeezed immediately. And probably a second time when China allows its currency to rise within the next 6-9 months.This has big implications for Tech stocks since increased competition is already putting downward pressure on prices in many tech markets.
But the long term implications are even greater. China’s leaders may be willing to bet now that China can out innovate and develop in the biggest industries while retaining a South Korean-like high productivity advantage. Watch for this strategy to be tried in key sectors like non-oil energy production. This is the green market where China has wrested the lead from technology pioneers in Europe and North America. These governments and economies are beset with debilitating problems such as divisive party partisanship that means the countries can’t respond to the Chinese challenges with any business-government co-operation set aside any agility. As well most advanced economies are running huge budget and/or trade deficits as the populace’s unwillingness to fully pay for government services at any better than 80 cenets ion the dollar. As well Southeast Asian countries have the highest maths, science and engineering scores and numbers of graduates. And US and Europe are willing to sell their pioneering patents and technology for a song. So China may speed up their conversion away from an exclusive low labor cost model.
2)Afghanistan is sitting on $1Triilion in mineral wealth. The story in the NYTimes has the sense of manufactured fiction on some of the key events and players but the essence is likely true. So $1trillion in mineral resources could change the narcotics based $12B Afghan economy very dramatically. The problem is that Afghanistan is like Yugoslavia – the different ethnic and linguistic groups are only loosely tied to the central government in Kabul. Also the level of corruption within both the provincial and national governments is not conducive to the massive capital investments required for large-scale mineral development. But nothing spurs nation building so much as the prospect of 50-100 years of huge mining profits.
Note to Wall Street Investors and President Obama
The number 1,2,3 problems in the US Economy are as of September 14,2008:
1)All the banks are not working and not willing to lend at all.
2)Both consumers and governments are not paying for what they consume.
3)Jobs are in rapid decline.
The number 1,2,3, problems in the US Economy are as of October 2009:
1)Jobs are still in precipitate decline despite the fact that more people quit the labor force.
2)Governments are not able to pay for what they are mandated to provide; yet the Bush tax cuts to the wealthy continue.
3)Banks are still not lending to small businesses nor to homeowners; but they are giving out biggest bonuses in history.
The number 1,2,3, problems in the US Economy are as of June 2010:
1)Governments at every level are only able to pay about 80% of what services they provide; and increasingly those services are delivered inefficiently and /or less effectively than desired.
2)Jobs are barely increasing despite the hundreds of billions of TARP funds and other government spending while the number of marginally employed or leaving the workforce increases. Unemployement rates for recent graduates of high school and college are topping 20%.
3)Banks are still not lending to small businesses nor to homeowners; but they are making huge profits with hundreds of days of no trading losses as the Fed gives Banks fund at near 0% while the banks charge others 3%++ including the Federal Government that gave the funds in the first place. Finally, the banks have effectively stymied financial reform as too big to fail protection, derivatives gambling, and no prosecutions for 2007-2009 financial malfeasance have all been achieved by financial institutions and their lobbyists.
The Obama Administration Economic Team has no solution to the country’s problems and needs to be replaced. The “Cater to the Banks”, “Deficit Spend Yet Again” and “Ignore the Rampant Own Problems in Effective Government Regulation of Industry” strategies are simply not working. Its well over time to change the Economic Team – starting with the Three Stooges – Larry, Tim and Ben.
Wall Street, you are cutting all our collective throats. The US is rapidly losing its middle class, its manufacturing/innovation base and its home grown capital advantage. If you think doing a Switzerland is good enough, think again. London, Arab Emirates, Singapore, Hong Kong, and Shanghai will have something to say about that.
In sum, these are questions of management of change and adaption – something the US has prided itself on doing effectively, especially in the business/corporate sector and during national crisis. Have too many years of “meeting quarterly earnings expectations” dulled the strategic perspective and the ability to drive long term consensus. The bitter partisanship in Congress and resorting to the Lobbyist Well all too often would seem to confirm that “God Bless America” is now the only Hail Mary Play that business and government can agree upon.
View from China: Chinese Low Labor Cost Economic Model
In our previous post on Chinese views as published in the Beijing based Chinese Business Magazine Caixin Online, Takethe5th found the posting tainted – written by an American and not yet translated into Chinese. The following article is dramatically more authentic – written by a Western-exposed, Chinese journalist and available in Chinese as well as English. Here is critical portions of the postings:
Dismantling Factories in a Dreamweaver Nation
A new generation is challenging China’s labor-squeezing business model and an older generation that apparently doesn’t get it.A decade ago, I took a group of fund managers to an assembly line at an electronics manufacturing contractor in China. We saw rows and rows of young women hunkered down, concentrating on putting together tiny parts. They had few toilet breaks, and during rest periods they had to sit at their benches.
“They’re all 18,” the line manager told me. “We need nimble fingers. In a few years, we will replace them with another batch of 18-year-olds.”
I wrote a story after that visit. I didn’t judge the situation but stated that a compliant labor force willing to be pushed to the extreme was the fuel for China’s economic miracle. The engine was the mutually beneficial relationship between western companies with technologies, brands and distribution channels, and China-based manufacturing outsourcing companies that specialized in taking advantage of China’s vast, cheap labor force. These included Taiwanese companies, which have been by far the most successful in the original equipment manufacturer (OEM) business.
The fund managers with me on the visit wanted to determine sustainability and profitability before deciding whether to buy the company’s shares. They thought an endless supply of labor would ensure the model’s profitability, and they were bullish about the company. What’s happened in the years since has proven them right….
An even more important factor is labor management. What I observed during my visit 10 years ago was actually the key to economies of scale. To put it bluntly, the key competence of a successful OEM in China is to squeeze labor to the maximum extent possible. That skill is developed within an organization. When a company employs hundreds of thousands from all over China, it needs a massive machine that involves recruiting, housing, training, and worker management on the factory floor.
For example, the factory I visited derives its economies of scale from 1) knowing where to find all the 18-year-old girls, 2) convincing them to stay in factory dormitories, 3) training them to put the parts together, and 4) ensuring that no one takes too many toilet breaks. This is all part of a huge system that can derive considerable economies of scale by processing hundreds of thousands of workers.
The girls at the factory I visited were earning US$ 100 a month, which was not a bad wage. That money could be used to pay for a younger brother’s tuition, a mother’s medical bill and, if circumstance permitted, building a house for the whole family. Each worker was willing to sacrifice herself for the family; she was not living for herself. Essentially, she accepted hardship.
These factors have changed. Today’s young adults are less willing to eat bitterness. They are the first generation to grow up during prosperity, without worrying about food and shelter. Many were pampered by parents sensitive to the one-child policy. They are more like counterparts in other countries, which is good for China’s international relations….
Moreover, rural families are not desperate as they were a decade ago. Siblings are few, and the government pays much more for rural education. Health insurance is decreasing the numbers of families facing financial crises due to sickness. Most rural families have built houses. And familial obligations for today’s rural youth are not as urgent as in the past.
Meanwhile, inflation has severely eroded income value. Today’s rural youth aspire to live in big cities, yet property prices in cities have grown twice as fast as wages. Dreams of owning a house in a comfortable city are becoming more distant.
Recent events at Foxconn and Honda factories are symbols of this new China. The labor force isn’t as plentiful or compliant as before, and the ways that governments and businesses are handling the situations expose their ignorance of a new reality. They still think these are isolated incidents and, through pressure and bribery (such as a little wage increase for all and then firing rebel leaders) can bring the situation back to normal.
They think this way because of a generation gap, and the unusual relationship between local governments and businesses in China. The economy has raced three times faster than western economies did a century ago, and the generation gap seems three times larger as well. Today’s young adults and their parents may as well be from different centuries. But government and business leaders are all from the parental generation, handling labor crises from this old perspective.
The governing class judges everything on short-term, marginal economic improvement rather than according to dreams and long-term goals. Today’s young people are more concerned about what will happen to them in the future. They want to settle down in big cities and have interesting, well-paying jobs – just like their counterparts in other countries. This vast generation gap in perception is the force behind social tension over China’s property bubble as well as factory working conditions.
The current factory system is unable to realize the dreams of today’s young people. China’s factories are often in isolated locations and self-contained. Youths who leave villages for these jobs find themselves more isolated than at home, with little hope of integration into urban communities. Indeed, they are neither in city or village. It’s the most isolated life possible.
The compensation system makes their lives extremely difficult as well. Base pay is low, and only with massive overtime can they expect close to 2,000 yuan a month. They have no time for self improvement or integrating into modern urban life. In a few years, they will lose their youth and jobs, but they still will not have the ability or financial resources to live in cities.
Go here for the complete story.
While watching Jay Leno I often cringed at the “Chinese Child labor” jokes as being too extreme. Since the emergence of the story on Foxconn suicides where 420,000 workers labor in military fashion most notably on Apple and HP electronics, the viewpoint has shifted. And with Foxconn suddenly raising wages by 30% and the NYTimes shedding light on the even grotesquely and gothically worse conditions in North Korea – this story picks up even more creditability. In sum, the Foxconn Suicides may be the tipping point in which China forgoes its cheapest labor-cost economic model and starts to compete on its ability to out innovate the West. The proof of the pudding will be A)more Chinese companies competing with their own products and services on World markets, B)Chinese currency rises and C)whether China starts reining in rampant IP and western goods copying as it seeks to have its own goods sold without pirating on World markets. A) appears much more likely than B) or C).
Wall Street Reform: View from China
Wall Street Reforms: Small Change
This week, legislators will come together to write a final bill on financial legislation, despite an outcry on the dearth of scope and depth in current reform proposals
As legislation finalizes on the financial and banking industry, efforts are finally beginning to reach a boiling point and prominent critics have come out saying the Chris Dodd-Barney Frank brand of reform will produce nothing but steam. The bill reads as too weak to stop big banks from getting bailouts and, as giving too much power to bureaucrats to write rules for consumer protection.The newest critic to call the reform bill hollow is a heavyweight. Richard Fisher, president of the Dallas Federal Reserve Bank says the new law would do nothing to stop another too-big-to-fail bank crisis. In a speech on June 3, titled, “Financial Reform or Financial Dementia,” Fisher said the reform bills won’t prevent another giant bank from getting bailed out because it doesn’t deal with bank size. Americans will spend some US$ 800 billion on taxpayers through a special government fund. With that money is being paid up, nothing seems to have incensed voters more than saving large banks and Wall Street firms who then went on to make near-record profits last year and pay their managements large bonuses.
Fisher said the fundamental problem with the reform legislation is that there are no limits on bank size, and as a result, the banking industry has tilted in favor of “bigness.” At a conference in May, Fisher said the efficient size for a large bank ought to be capped at US$ 100 billion in assets.
Paul Volcker, the former Federal Reserve Chairman and also a large bank critic said US$ 100 billion in assets is a good top limit, and Federal Reserve President Thomas Hoenig of Kansas City has also endorsed the US$ 100 billion cap.
Volker has also advocated separating large banks from trading derivative securities – or securities that are designed for hedging but that in practice create what Volcker calls “casino banks,” who trade to purely speculate on price. The legislative reform would make many but not all derivative securities trade through exchanges so that investors could see actual prices, but would not exclude big banks from playing in the market.
The following appears to be the view on US Financial reform from the Chinese Business Magazine, Caixin Online. “Appears to be” because the story is written by Bob Dowling, former Business Week editor for Caixin, and it has not been translated for the Chinese Language edition. But it does appear with a whole series of five articles on Budgetary Reform in China which are being featured in the Chinese edition. So think of it as a Chinese elites view on America’s Financial Reforms – or how much financial room does China have to maneuver.