Plot normal growth curve
Not same for every sector
New tech grows steeply
Showing posts with label growth. Show all posts
Showing posts with label growth. Show all posts
Monday, June 30, 2025
Monday, January 30, 2017
The Haiku of Finance for 01/30/17
Growth forecast model
ZIRP throws off future discount
Bad ways to adjust
ZIRP throws off future discount
Bad ways to adjust
Monday, January 19, 2015
Friday, September 26, 2014
The Haiku of Finance for 09/26/14
Meet product milestone
Sales increase with more clients
Investors line up
Sales increase with more clients
Investors line up
Sunday, September 21, 2014
The Limerick of Finance for 09/21/14
G20 says growth is ahead
While Europe's stagnation they dread
A black swan awaits
That collection of states
Contagion can easily spread
While Europe's stagnation they dread
A black swan awaits
That collection of states
Contagion can easily spread
Wednesday, May 21, 2014
The Haiku of Finance for 05/21/14
Growth investing fad
Comes and goes with bubble times
Praise lack of earnings
Comes and goes with bubble times
Praise lack of earnings
Saturday, May 03, 2014
The Haiku of Finance for 05/03/14
Forecasting earnings
Just add historic growth trend
Subtracting nothing
Just add historic growth trend
Subtracting nothing
Friday, February 21, 2014
G20 Leaders Go Nuts In Australia With Insane Growth Targets
The G20 finance honchos meeting in Australia are targeting insane economic growth rates. I mean, like, wow, Jesus H. Christ wearing a cardigan sweater in a chicken basket, they have gone absolutely nuts. Allow me to spell out for these lunatics exactly why their targets are unattainable.
Europe has not solved its problems. Accounting fictions allow the PIIGS economies to pretend that they are climbing out of their holes. Political naivete among Eurocrats puts lipstick on these pigs, or PIIGS if you prefer. The ECB's bank stress tests did not even touch worst-case scenarios. Don't even get me started on the derivative exposures of Europe's biggest banks.
China can only bail out so many wealth management products (WMPs). The one that breaks the bank will be the one no one among the world's top commercial bankers saw coming. I saw this situation coming but top bankers don't listen to me. That's too darn bad.
The US continues to add to its national debt, remove low-income earners from its taxpaying rolls, and eliminate frustrated job-seekers from its unemployment statistics. These are all growth headwinds.
The G-20 people want to convince us all that the above problems don't matter. Good luck to those of you who agree. I'll take my chances betting that unsustainable financial arrangements lead to a day of reckoning.
Europe has not solved its problems. Accounting fictions allow the PIIGS economies to pretend that they are climbing out of their holes. Political naivete among Eurocrats puts lipstick on these pigs, or PIIGS if you prefer. The ECB's bank stress tests did not even touch worst-case scenarios. Don't even get me started on the derivative exposures of Europe's biggest banks.
China can only bail out so many wealth management products (WMPs). The one that breaks the bank will be the one no one among the world's top commercial bankers saw coming. I saw this situation coming but top bankers don't listen to me. That's too darn bad.
The US continues to add to its national debt, remove low-income earners from its taxpaying rolls, and eliminate frustrated job-seekers from its unemployment statistics. These are all growth headwinds.
The G-20 people want to convince us all that the above problems don't matter. Good luck to those of you who agree. I'll take my chances betting that unsustainable financial arrangements lead to a day of reckoning.
Tuesday, January 21, 2014
Linking Innovation To Enterprise Strategy
I've heard a few things over the years about innovation. I heard a few more tonight at the Commonwealth Club event "R&D, Innovation Labs and Channeling Your Inner Startup." Large enterprises that have their own internal innovation efforts don't like discussing the secret sauce behind their creative process. I suspect a common approach has something to do with mixing specialists and generalists on cross-functional teams. Maybe they pick people who are naturally creative and driven, or who are misfits and need an unstructured outlet for their frustrated ambitions. I'm less interested in the interpersonal dynamics of enterprise innovation and more interested in the institutional processes that link innovation to strategy.
Prevailing wisdom holds that there are three critical paths to innovation, all of which tonight's CW Club experts understood. The first path is top-down, driven by product managers. The second path is from a distinct internal lab, like the classic case studies of Bell Labs or Skunk Works. The final path is from bottom-up intrapreneurship. I think these paths all have peculiarities that demand some kind of governance to ensure they stay on track and accomplish bottom-line results. The top-down path can be subject to internal political fights for resources and may ignore innovation that can move business units into more desirable quadrants on the BCG growth-share matrix. The internal lab can waste resources on ineffectual projects, like government scientists in the Federal Lab Consortium who sometimes churn out busy work to justify budgets. The bottom-up path intrigues me most because it can be an outlet for the pent-up creativity of unheralded performers, but it can go nowhere without incentives. I think gamification can incentivize plenty of little ideas that can later be subject to Technology Readiness Level (TRL) scrutiny.
I like arguing from first principles because it provides an epistemological foundation for whatever comes next. It's also a great way for me to show off my stellar intellect. My principles are quite bold, in bold type.
Link innovation to strategy. The top leaders of a small startup or large enterprise determine overall strategy. I mentioned the growth-share matrix above because it used to be a popular tool but its critics prefer to include more measures of profitability. That's why nature and Providence gave us key performance indicators (KPIs) and SWOT analysis. The strategy derived from these concepts should drive innovation goals that bolster strengths and mitigate weaknesses. This philosophy can prevent innovation from falling into a "paralysis of analysis" that destroys focus.
Measure innovation the way VCs measure startups. Success metrics for enterprise innovation have readily available comparables from the way VCs evaluate, fund, and manage their startup portfolios. One truism is that a stereotypical VC will look at 1000 business plans, listen to 100 live pitches, fund ten startups, and harvest one success. Let's copy that funnel and graft it onto enterprise innovation. Start with random generation of 1000 off-the-wall ideas, write the best 100 into basic proposals that are testable against the firm's KPIs, launch the best ten as live projects after assessing their net present value (NPV), and harvest one big success.
Use multiple testing methods, rapidly and repeatedly. This VC-style 1000:1 funnel helps innovators "fail quickly" by rapidly testing ideas and dropping the ones that are unlikely to succeed. Enterprises with a separate internal lab may have an advantage in testing if they can run projects that "decouple from a brand" in Lean Startup terms. Crowdsourcing and Twitter A/B testing are methods to covertly launch trial products to see if they gain CustDev traction.
Define success as meeting specific KPIs. A startup's KPIs are more growth-oriented and time-constrained than those of a large enterprise. Their definitions are different. The "success" of an externally oriented project is defined by its ROI compared to the capex spent on generating the 1000 ideas that led to its creation. The "success" of an internally oriented project can be defined as improvements in quality control or business processes that reduce cost or avoid liability.
Design a KM process to document innovation. The knowledge management role is to archive the 1000:1 process, locate the most successful iterative path from idea generation to ultimate success, and replicate that path in future iterations. KM should also track active projects the way VCs track their funded startups. The final documentation of an innovation series won't bear much resemblance to a typical BPM improvement effort. It will look more like case management with an artisan approach to photographing prototypes and archiving program code. KMWorld has an excellent white paper on BPM and case management.
Senior management's ultimate role is to link the innovation strategy that strengthens the enterprise's SWOT position with whichever of the three innovation paths resides within the firm's structure. The cultural incentives will be different for each path and the KM case documentation will be different for each result. That's the cool thing about innovation. It's always about something different. Vive la difference.
Prevailing wisdom holds that there are three critical paths to innovation, all of which tonight's CW Club experts understood. The first path is top-down, driven by product managers. The second path is from a distinct internal lab, like the classic case studies of Bell Labs or Skunk Works. The final path is from bottom-up intrapreneurship. I think these paths all have peculiarities that demand some kind of governance to ensure they stay on track and accomplish bottom-line results. The top-down path can be subject to internal political fights for resources and may ignore innovation that can move business units into more desirable quadrants on the BCG growth-share matrix. The internal lab can waste resources on ineffectual projects, like government scientists in the Federal Lab Consortium who sometimes churn out busy work to justify budgets. The bottom-up path intrigues me most because it can be an outlet for the pent-up creativity of unheralded performers, but it can go nowhere without incentives. I think gamification can incentivize plenty of little ideas that can later be subject to Technology Readiness Level (TRL) scrutiny.
I like arguing from first principles because it provides an epistemological foundation for whatever comes next. It's also a great way for me to show off my stellar intellect. My principles are quite bold, in bold type.
Link innovation to strategy. The top leaders of a small startup or large enterprise determine overall strategy. I mentioned the growth-share matrix above because it used to be a popular tool but its critics prefer to include more measures of profitability. That's why nature and Providence gave us key performance indicators (KPIs) and SWOT analysis. The strategy derived from these concepts should drive innovation goals that bolster strengths and mitigate weaknesses. This philosophy can prevent innovation from falling into a "paralysis of analysis" that destroys focus.
Measure innovation the way VCs measure startups. Success metrics for enterprise innovation have readily available comparables from the way VCs evaluate, fund, and manage their startup portfolios. One truism is that a stereotypical VC will look at 1000 business plans, listen to 100 live pitches, fund ten startups, and harvest one success. Let's copy that funnel and graft it onto enterprise innovation. Start with random generation of 1000 off-the-wall ideas, write the best 100 into basic proposals that are testable against the firm's KPIs, launch the best ten as live projects after assessing their net present value (NPV), and harvest one big success.
Use multiple testing methods, rapidly and repeatedly. This VC-style 1000:1 funnel helps innovators "fail quickly" by rapidly testing ideas and dropping the ones that are unlikely to succeed. Enterprises with a separate internal lab may have an advantage in testing if they can run projects that "decouple from a brand" in Lean Startup terms. Crowdsourcing and Twitter A/B testing are methods to covertly launch trial products to see if they gain CustDev traction.
Define success as meeting specific KPIs. A startup's KPIs are more growth-oriented and time-constrained than those of a large enterprise. Their definitions are different. The "success" of an externally oriented project is defined by its ROI compared to the capex spent on generating the 1000 ideas that led to its creation. The "success" of an internally oriented project can be defined as improvements in quality control or business processes that reduce cost or avoid liability.
Design a KM process to document innovation. The knowledge management role is to archive the 1000:1 process, locate the most successful iterative path from idea generation to ultimate success, and replicate that path in future iterations. KM should also track active projects the way VCs track their funded startups. The final documentation of an innovation series won't bear much resemblance to a typical BPM improvement effort. It will look more like case management with an artisan approach to photographing prototypes and archiving program code. KMWorld has an excellent white paper on BPM and case management.
Senior management's ultimate role is to link the innovation strategy that strengthens the enterprise's SWOT position with whichever of the three innovation paths resides within the firm's structure. The cultural incentives will be different for each path and the KM case documentation will be different for each result. That's the cool thing about innovation. It's always about something different. Vive la difference.
Monday, January 06, 2014
Financial Sarcasm Roundup for 01/06/14
The first Monday of a new year means the grind starts afresh for cubicle wage-slaves. I celebrate my freedom from such drudgery by unleashing sarcasm tinged with LOL photos. Taste the rainbow of sarcasm. Taste the flavor of Alfidi Capital.
A bunch of washed-up economists are mouthing off about rosy economic growth. Any economist who anticipates continued US growth in 2014 is either incompetent or on the Fed's payroll. I anticipate the US falling off a cliff at some point for several reasons. Corporate earnings are at all-time highs and must revert to mean. Personal indebtedness sustains consumer spending and uncontrolled government spending sustains the rest of the economy. The US's official GDP reached a new level of absurdity last year after the BEA recalculated it to include money already spent. Puh-leeze. Magical thinking about markets won't make them levitate in the face of reality.
Central banks will have trouble keeping a unified consensus for more stimulus. The developed nations' central banks have stimulated themselves into a corner, and everyone knows it. "Decoupling" was a big financial meme a couple of years ago when asset managers started worrying about which global sector would head down first. They all headed down more or less together in 2008 until central bank stimulus propped them back up. Now with competitive currency devaluation they all face variations on the Prisoner's Dilemma. The first one to defect from monetary stimulus will reap a more valuable currency, should they wish to attract FDI, and will set off a shockwave roiling currency markets. I'm hedging this madness with positions in currencies I trust not to play the game.
China faces a double-whammy. Western multinationals are moving production away from China and back to their home countries. Chinese local governments have rising default risk due to their reliance on the shadow banking system. This means that China's goose is cooked, so the only question is whether they'd like it medium rare or well done. China's perma-bulls still claim that learning Mandarin is a smart educational move. I hope they learn to file bankruptcy claims in Mandarin. I blogged a log time ago that China's rare earth element export quotas were set disingenuously low. Beijing's central planners can look forward to revising other data down from politically-determined highs.
My new year is getting off to a nice little sarcastic start. I am confident that the human race, and the finance sector in particular, will keep me supplied with amusing news items.
A bunch of washed-up economists are mouthing off about rosy economic growth. Any economist who anticipates continued US growth in 2014 is either incompetent or on the Fed's payroll. I anticipate the US falling off a cliff at some point for several reasons. Corporate earnings are at all-time highs and must revert to mean. Personal indebtedness sustains consumer spending and uncontrolled government spending sustains the rest of the economy. The US's official GDP reached a new level of absurdity last year after the BEA recalculated it to include money already spent. Puh-leeze. Magical thinking about markets won't make them levitate in the face of reality.
Central banks will have trouble keeping a unified consensus for more stimulus. The developed nations' central banks have stimulated themselves into a corner, and everyone knows it. "Decoupling" was a big financial meme a couple of years ago when asset managers started worrying about which global sector would head down first. They all headed down more or less together in 2008 until central bank stimulus propped them back up. Now with competitive currency devaluation they all face variations on the Prisoner's Dilemma. The first one to defect from monetary stimulus will reap a more valuable currency, should they wish to attract FDI, and will set off a shockwave roiling currency markets. I'm hedging this madness with positions in currencies I trust not to play the game.
China faces a double-whammy. Western multinationals are moving production away from China and back to their home countries. Chinese local governments have rising default risk due to their reliance on the shadow banking system. This means that China's goose is cooked, so the only question is whether they'd like it medium rare or well done. China's perma-bulls still claim that learning Mandarin is a smart educational move. I hope they learn to file bankruptcy claims in Mandarin. I blogged a log time ago that China's rare earth element export quotas were set disingenuously low. Beijing's central planners can look forward to revising other data down from politically-determined highs.
My new year is getting off to a nice little sarcastic start. I am confident that the human race, and the finance sector in particular, will keep me supplied with amusing news items.
Monday, April 22, 2013
Financial Sarcasm Roundup for 04/22/13
Whether good news or bad news, the news stream in business never ends. That is why my sarcasm will never end.
The grand poobahs of world finance have anointed the global economy as just fine, except for weak growth and not enough jobs. That kind of logic is so tortured it might as well reside in Torquemada's dungeon. If GDP growth is weak and job growth is scarce, then there is no real global recovery. The top dogs don't keep their jobs by generating spooky headlines but it's high time someone called them out. I have no idea what these fools are smoking but I'm glad I've never smoked anything (except a couple of perfectly legal cigars on special occasions). Oh, they're also giving moral cover to Japan's debt-fueled stimulus and currency devaluation because they can't think of anything better to do. Lots of policymakers are backing away from austerity now that economists are questioning the Reinhart-Rogoff 90% debt/GDP formulation. Austerity is on the ropes and Krugmanite stimulus is ascendant, with no brakes. The die is cast for hyperinflation and currency collapse in most of the developed world.
Fitch is flushing the UK's credit rating down the tubes. This is going to happen more frequently as the G-20 consensus referenced above endorses more mad Krugmanite spending and inflating. The UK's finance minister still pushes austerity but the IMF gave him a polite reminder that the global consensus is shifting to super-stimulus. Do they have any real sterling left to back the pound? Or will they pledge the Crown Jewels and the Queen's silver flatware as collateral to stem a run on the pound? When the dust settles they'll have to find a hard asset pool to back the value of Pound 2.0, or neo-pound, or whatever. I'd suggest pledging North Sea oil reserves but production may have peaked.
Budget pressure on the air traffic controller workforce is forcing flight cancellations. This is why I don't invest in airline stocks. Too much union influence and too much debt hurt profitability. Now a ceiling on human infrastructure is limiting the daily revenue passenger miles of the industry. I suspect the USDOT directed the furlough to a sector that would immediately cause the public an inconvenience, in the hope that travelers would whine loudly to elected officials about restoring full budgets. That's a cute trick. It will last until dollar devaluation forces a bond market exodus that denies deficit spending. The hyperinflation that follows will drive fuel costs through the roof and make airline travel unaffordable for anyone except Donald Trump.
I've got other material to write about so I'll finish with some sarcasm about my worthless alma mater, Notre Dame. Their star football player from these last few seasons is now getting mentioned as an active prospect for the NFL. The pro teams don't seem to care that this player had an imaginary girlfriend and that the school lied to cover up his friend's deception. It just goes to show that you don't have to be smart or honest to succeed at Notre Dame.
The grand poobahs of world finance have anointed the global economy as just fine, except for weak growth and not enough jobs. That kind of logic is so tortured it might as well reside in Torquemada's dungeon. If GDP growth is weak and job growth is scarce, then there is no real global recovery. The top dogs don't keep their jobs by generating spooky headlines but it's high time someone called them out. I have no idea what these fools are smoking but I'm glad I've never smoked anything (except a couple of perfectly legal cigars on special occasions). Oh, they're also giving moral cover to Japan's debt-fueled stimulus and currency devaluation because they can't think of anything better to do. Lots of policymakers are backing away from austerity now that economists are questioning the Reinhart-Rogoff 90% debt/GDP formulation. Austerity is on the ropes and Krugmanite stimulus is ascendant, with no brakes. The die is cast for hyperinflation and currency collapse in most of the developed world.
Fitch is flushing the UK's credit rating down the tubes. This is going to happen more frequently as the G-20 consensus referenced above endorses more mad Krugmanite spending and inflating. The UK's finance minister still pushes austerity but the IMF gave him a polite reminder that the global consensus is shifting to super-stimulus. Do they have any real sterling left to back the pound? Or will they pledge the Crown Jewels and the Queen's silver flatware as collateral to stem a run on the pound? When the dust settles they'll have to find a hard asset pool to back the value of Pound 2.0, or neo-pound, or whatever. I'd suggest pledging North Sea oil reserves but production may have peaked.
Budget pressure on the air traffic controller workforce is forcing flight cancellations. This is why I don't invest in airline stocks. Too much union influence and too much debt hurt profitability. Now a ceiling on human infrastructure is limiting the daily revenue passenger miles of the industry. I suspect the USDOT directed the furlough to a sector that would immediately cause the public an inconvenience, in the hope that travelers would whine loudly to elected officials about restoring full budgets. That's a cute trick. It will last until dollar devaluation forces a bond market exodus that denies deficit spending. The hyperinflation that follows will drive fuel costs through the roof and make airline travel unaffordable for anyone except Donald Trump.
I've got other material to write about so I'll finish with some sarcasm about my worthless alma mater, Notre Dame. Their star football player from these last few seasons is now getting mentioned as an active prospect for the NFL. The pro teams don't seem to care that this player had an imaginary girlfriend and that the school lied to cover up his friend's deception. It just goes to show that you don't have to be smart or honest to succeed at Notre Dame.
Wednesday, October 17, 2012
The Haiku of Finance for 10/17/12
Show me currency
Low-debt and high-growth country
Useful dollar hedge
Low-debt and high-growth country
Useful dollar hedge
Monday, October 08, 2012
Financial Sarcasm Roundup for 10/08/12
My Internet connection gives me a front-row seat to the end of the ancien regime, the post-Cold War era of U.S. dollar hegemony. The unpredictable vagaries of history will determine whether the American ruling elite gets thrown out with the currency they are about to throw away. Alright, let's get on with the sarcasm.
Lehman Brothers' diehard hedge fund creditors have reached some kind of legal milestone in their quest for $38B worth of assets. Yeah right. Legal judgments mean nothing if the money is long gone. Just ask MF Global's creditors. Most of the unsecured claims against rump Lehman will probably go nowhere and the smart creditors have already started throwing those claims away.
Dodd-Frank is being nickel-and-dimed to death by the financial predators who don't like being bound by laws. Tough luck for the little investor who hoped reform would have teeth. Our leaders like to mouth off about Dodd-Frank because low-information voters mistakenly think it matters.
The World Bank is throwing more cold water on the East Asia growth story. One factor they're missing is the tendency for authoritarian regimes to conquer their neighbors in search of new markets, cheap resources, and forced labor. China could just walk over its neighbors after a sufficiently robust military buildup masks its inability to generate GDP growth. That's another decade away but I didn't want to keep China exposure in my portfolio long enough to see that happen.
The latest U.S. unemployment report is complete baloney. I'm not sure whether it's driven by political factors. The simplest explanation is that a generation of mathematicians and economists are no longer able to recognize ground truth in statistics. Making seasonal adjustments, then throwing them out for new adjustments, then adjusting the adjustments based on prior adjustments that were never made can have that cumulative effect. John Williams easily deconstructs the silliness behind the adjustments that render these statistics meaningless.
I'm getting over the remnants of a headache I've had since last week and spewing this sarcasm really helps. I've got a pretty full plate of business meetings to attend this week, plus a stack of notes on previous meetings that I still haven't blogged. I'll get around to all of that as soon as people quit wasting my time.
Lehman Brothers' diehard hedge fund creditors have reached some kind of legal milestone in their quest for $38B worth of assets. Yeah right. Legal judgments mean nothing if the money is long gone. Just ask MF Global's creditors. Most of the unsecured claims against rump Lehman will probably go nowhere and the smart creditors have already started throwing those claims away.
Dodd-Frank is being nickel-and-dimed to death by the financial predators who don't like being bound by laws. Tough luck for the little investor who hoped reform would have teeth. Our leaders like to mouth off about Dodd-Frank because low-information voters mistakenly think it matters.
The World Bank is throwing more cold water on the East Asia growth story. One factor they're missing is the tendency for authoritarian regimes to conquer their neighbors in search of new markets, cheap resources, and forced labor. China could just walk over its neighbors after a sufficiently robust military buildup masks its inability to generate GDP growth. That's another decade away but I didn't want to keep China exposure in my portfolio long enough to see that happen.
The latest U.S. unemployment report is complete baloney. I'm not sure whether it's driven by political factors. The simplest explanation is that a generation of mathematicians and economists are no longer able to recognize ground truth in statistics. Making seasonal adjustments, then throwing them out for new adjustments, then adjusting the adjustments based on prior adjustments that were never made can have that cumulative effect. John Williams easily deconstructs the silliness behind the adjustments that render these statistics meaningless.
I'm getting over the remnants of a headache I've had since last week and spewing this sarcasm really helps. I've got a pretty full plate of business meetings to attend this week, plus a stack of notes on previous meetings that I still haven't blogged. I'll get around to all of that as soon as people quit wasting my time.
Wednesday, August 29, 2012
Friday, July 27, 2012
Tuesday, April 24, 2012
Monday, April 23, 2012
Monday, April 09, 2012
Encroaching Inflation Devouring China And Wrecking Growth
I'm a recovering former fan of the Chinese miracle growth story. Too much forced infrastructure development and not enough balance from domestic consumer spending has left China's economy bereft of any driver for sustainable growth. The evidence accumulates by the day.
Official inflation in March was 3.6% higher than in March 2011; more ominously, it is a rise from the trough recorded one month prior. We can see the effects of inflation in the rise in the China Purchasing Managers' Index for March. The index of activity is rising despite evidence that US-based manufacturers are departing China's increasingly costly factories for cheaper sourcing elsewhere in Asia. "Activity" measurements can be nominally skewed upwards by rising prices even if real activity is declining.
China's shipping industry is beginning to feel the squeeze of higher costs at home and weakening demand abroad. China Cosco lost $1.66B in 2011. China Shipping Container Lines lost $428M in 2011. Shippers' weakness will eventually pass through to port operators as China Merchants Holdings sees its profits dropping despite rising container volume. Chinese shipping companies pay more for fuel because China's previously secure oil supplies from Iran are now jeopardized by the US-EU policy of embargoing Iran. Hong Kong insurers are now refusing to fully cover shortfalls in oil shipments from Iran to China.
Tight oil supplies and declining world demand mean the Chinese growth train is off its rails. Domestic demand will not materialize until China gets inflation under control. With no end in sight to the curtailment of Iranian oil, relieving inflationary pressure on the average Chinese consumer demands a hawkish central bank orientation that would put severe pressure on the Chinese economy in the short run. Any remaining China bulls need to think of a case for buying and holding longer than the next five-year plan.
Full disclosure: Long FXI with covered calls.
Official inflation in March was 3.6% higher than in March 2011; more ominously, it is a rise from the trough recorded one month prior. We can see the effects of inflation in the rise in the China Purchasing Managers' Index for March. The index of activity is rising despite evidence that US-based manufacturers are departing China's increasingly costly factories for cheaper sourcing elsewhere in Asia. "Activity" measurements can be nominally skewed upwards by rising prices even if real activity is declining.
China's shipping industry is beginning to feel the squeeze of higher costs at home and weakening demand abroad. China Cosco lost $1.66B in 2011. China Shipping Container Lines lost $428M in 2011. Shippers' weakness will eventually pass through to port operators as China Merchants Holdings sees its profits dropping despite rising container volume. Chinese shipping companies pay more for fuel because China's previously secure oil supplies from Iran are now jeopardized by the US-EU policy of embargoing Iran. Hong Kong insurers are now refusing to fully cover shortfalls in oil shipments from Iran to China.
Tight oil supplies and declining world demand mean the Chinese growth train is off its rails. Domestic demand will not materialize until China gets inflation under control. With no end in sight to the curtailment of Iranian oil, relieving inflationary pressure on the average Chinese consumer demands a hawkish central bank orientation that would put severe pressure on the Chinese economy in the short run. Any remaining China bulls need to think of a case for buying and holding longer than the next five-year plan.
Full disclosure: Long FXI with covered calls.
Sunday, March 04, 2012
The Limerick of Finance for 03/04/12
China still says more growth is key
It brings increased stability
So promised reform
Might become the norm
And benefit society
It brings increased stability
So promised reform
Might become the norm
And benefit society
Tuesday, January 17, 2012
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