Tag Archives: China

Sun and Wine

The ongoing spat between China and Europe is heating up. In response to Europe imposing tariffs on Chinese solar panel manufacturers, China has started to target  (“investigate”) southern European Wine Exports. Now, here in France that’ll touch a nerve, just when we finally get some sun.

Interesting. There’s a bit of deja vu here.

Europe claims Chinese manufacturers of solar panels are selling them below manufacturing cost, in other words, they’re dumping their product on Europe and killing local manufacturing. The European commission is claiming 25, 000 jobs are at risk without the imposed tariffs. Jobs are something Europe needs desperately. In the press there’s conflicting information on the real tariffs. Obviously, they’re in serious posturing/spin mode. Bloomberg, says tariffs as high as 67.5%, Reuters is reporting that they’ve created a ‘initial duty’ of 11.8%.

Last October the US Commerce Department did essentially the same thing (New York Times). Solar has been a political hot potato for the Obama administration. It surprises me that China wasn’t more sensitive to this risk, if they are in fact dumping. So almost a year later they’re taking on Europe. Or Europe has decided to react, depending how you look at it. In either case, it’s a very aggressive stance, and a bigger deal than most people realize.

This US-China Market Review from last Spring, articulates the strategic importance that China places on its Solar Industries.

China is prepared to invest RMB 3 ($480 billion) in the clean energy and energy conservation/environmental protection sectors over the next five years.

As well as its agressive stance:

To hold an advantageous position in future international competition, we must accelerate the fostering and development of strategic emerging industries, control the key and core technologies and related intellectual property rights, and enhance our capability for independent development.

It looks to me like China’s success has been putting pressure on both the US and Europe. Is it possibly the West has failed to innovate around renewable energy and now they’ve decided to rely on protectionist tariffs? Throw in the towel? If that’s the case, it’s hypocritical at best.

Or is China being too aggressive and dumping product to secure a monopoly in renewable energy? They’ve staked these industries out as strategic, and have admittedly a cancer causing reliance on Coal and Oil. I can see why China’s investing heavily. I can also see why they’re fuming. But hitting French wine…

I’ve been intrigued for a few years with solar companies, you can see my early posts on First Solar. So considering the latest spat, I was wondering if Chinese solar companies are trading differently than, First Solar (FSLR) for example.

FSLR-SOL-JASOThe answer is: not really.

So is there a trade here? It’s worth thinking about…

Beer Mug

Why Do Pundits Take Weekends?

Beer MugSometimes a Friday rolls around and I turn off the computer looking forward to the absence of information but this weekend was different. Monday rolled around and the Americans were on vacation, deserved sans doute, but I was looking forward to some energy volatility in the markets. Friday’s action portened an interesting Monday, yet I had to wait until today.

The interns responsably reported on the Draghi buying of short-term bond story rumor, there was no reaction until today, almost no criticism. The complaining pundits were having a beer in the garden.( In any case, here’s today’s criticism – warning… ZH). To answer my own question, they take weekends to drink beer.

There was some interesting reporting on depressed Chinese Steel Production (here) and the slow drip of information from China watchers suggesting caution with anything “China”: Output, Funding, Property Prices, Demographics, US Listed Companies, Politics. Much of what I read was negative and sceptically, I see this as a runup to Hillary’s visit, with the exception of Bronte Capital’s analysis of Focus Media. I appreciate his thinking, and writing. He also has a humerous reflection on Ling Jihua’s son playing dying with two naked students in a Ferrari crash (here). They’re both worth reading.

My favorite weekly information without a doubt is, TTMYGH by Grant Williams. This week was especially academic, but insightful. A sort of, “Hello! Wake up… What are we thinking?” I learn something or place something lost each time. I’m happy to learn the popularity of TTMYGH is increasing and Grant is starting to work with Mauldin Economics. Keep it simple Grant. You’ve a great little franchise.

Pre-Market Chinindicators

The markets took a nice 1% pop this morning in Europe and duly followed with a 0.5% rise in the S&P Futures. I initially thought it was the formalisation of a $30 billion rescue plan and a deficit target extension announced for Spain. Alas, it looks more like the result of a meeting (strategic dialogue) between China and the European Union. That’s news worth fading.

This is the 3rd strategic dialogue in 3 years. I didn’t look at the market reaction to the others, but I’d bet the market bounced with a short half-life. 

Here’s the piece from AFP that caught my attention (in French).

On other fronts:

  • The EURUSD rests unchanched
  • Gold Futures are up slightly (GC) +0.3%
  • BOJ reportedly easing to overcome deflation
  • Grain Futures are pulling back a bit after yesterdays 5% rise
  • S&P Futures are on the rise (ES) +0.55%

The Big 4 and China

I can’t see China from my balcony, but this caught my attention. China orders Big Four auditors to restructure. Only 20% of partners can be foreign by 2017, Senior Partners must be Chinese citizens. This can’t be reassuring for investors in listed Chinese firms. The article I read spins the news as “positive”. It could have been worse, they say.

The foreign joint venture arrangements currently used by the Big Four were signed 20 years ago and allowed foreign-qualified accountants to dominate their China practices. All of firms’ licences, aside from PWC, expire this year.

Conspiracy Edition

Normally, I stay off the conspiracy bus, especially the hard-core conspiracy bus. Conspiracies exist, ok, but contrived theories about September 11th being orchestrated by the CIA or ranting right wing radio stars, leave me shaking my head in wonderment. It’s like Fox-culture for fanatics.

Austin Powers

And since the sky is falling on the financial markets I think it’s time for a good conspiracy theory. There must be one on the near horizon. Financial markets are so globally intermingled, that the potential for active manipulation is growing obvious. The bond market has disposed of leaders in Italy, Greece and Ireland. Sequestered funds have supported uprisings in Libya.

In my youth, the world feared Hollywood, not Wall Street.

So if you’re guessing I’m going to point fingers at the Republicans, Congress, the Fed, the ECB, the IMF, the EFSF, or peripheral Europe, you’d be wrong. I admit those players are tempting targets. And though I was lead down that path given the flagrant corruption and self-interest, in the end I couldn’t point fingers at western politicians, for the following reasons:

  1. Conspiracies assume coordinated action
  2. An interest in a higher cause
  3. And a fair amount of intelligence

One problem with a conspiracy theory is that it’s interpreted, after the fact; 9/11, DSK, Roswell, WMD, Birthers, etc. Another problem with deconstructing a conspiracy is that it can/will be fully manipulated. Wall Street, the popular press, and politics are each positioning the story to his/her advantage. The Conspiracy has become The Story, therefore everything around it is fair game. Fine. That’s life, but what if we imagined the potential conspiracy of tomorrow by looking at the under-reported stories of today? Is there a major manipulation ‘en cours’, who’s holding back and why?

Today’s financial train wreck will be a player in my hypothetical future conspiracy but I don’t think today’s financial crisis will be The Story. It will be a major part of it, for sure, but today’s crisis has been more a comedy of errors; hardly intelligent coordination. The result of a self-serving private club that was/is getting richer and richer with little understanding of the power they hold in their hands. Now with that private club, coming under attack, we see signs of the broader impact of their arrogance. Who would have predicted Berlusconi’s resignation as a result of bond vigalantes? (I might predict his return when the bond vigalantes look elsewhere…) Few saw the housing collapse coming and that a loan in Poughkeepsie could bankrupt Iceland.

Some would say China has this figured out already, but I’d say only partially. Projecting influence is a relatively new game for China.

The impact of the markets on how the world functions impresses and scares me at the same time. Again, I think the time is ripe for some major manipulation. There is an ongoing conspiracy staring me in the face, I’m sure of it; so it’s my turn to contrive a theory.

The Black Swan has become a popular term, but I’m more interested in looking for something that’s sitting in front of me, not an outlier, so I extracted a few tidbits from the internet while searching for clues to a future event unknown to me, but known to someone. Obviously, more of an art than a science, and I’m doing this selfishly, for speculation (ironic?), and as a distraction…

I started looking at under-reported news, news that is swept under the carpet, misinterpreted, suspiciously left to die on the vine, or is largely ignored. This is my short list:

  1. Ron Paul
  2. Balanced analysis of the Middle East Iran and Israel
  3. Aljazeera
  4. Skrillex
  5. The Occupy Movement
  6. China, Myanmar, North Korea
  7. HFT
  8. Congressional Insider Trading
  9. Debt, Modern Finance, Market Behaviour
  10. Mars

That reads like a John Stewart brainstorm…

Might I find a future conspiracy by manipulating some of these subjects for some super-secret objective? If so what’s that objective and who’s doing the manipulating? Did someone conspire to unseat Berlusconi or was it just ‘the markets’? Either answer is scary and I’m reminded of a TED presentation on HFT but let’s assume it was ‘the market’. My guess is National Security Strategists (whoever they might be) are in a state of epiphany and studying the Italian case very closely.

We have a long history of trying to manipulate using ‘sanctions’ (through the UN as a proxy) against Iran, North Korea and Myanmar for example, but to support/manipulate other western countries through the manipulation of the bond market, that’s an eye opener. And what about Gold and the Venezualan repatriation? Chavez might be a paranoid megalomaniac but still, the only other example I found was Estonia in 1992.  The visibilities on American stockpiles are nearly non-existent and the falling confidence in fiat currencies, makes me wonder. Today for example the Bank of Korea increased it’s gold reserves by 39%, just this month. National Security Strategists pay attention.

Conspiracy theories related to monetary policy and investment bankers are recently very popular, much like fuckedcompany.com was during the internet bubble. I won’t add to that noise but if you’re interested in non-stop cynical commentary, ZH is a favorite place to read through a few.

So what might be the endgame here? To answer that question I think you need to answer the following: What elements of the financial markets are the easiest (least transparent) to manipulate as a proxy to meet a political objective?

  1. The Rating Agencies.
  2. The Federal Reserve Board. “The Fed” has a dual mandate described as a balance between price stability and full employement, and was established when congress passed the Federal Reserve Act in 1913.
  3. The Press.

There are two innate or base political objectives; the first, re-election and the second, wealth. Both mini-conspiracies are played out as political theater in Russia, the US, and in Europe this very moment. Maybe it’s unfair to call them conspiracies, but we can hardly call them fair and honest democracy, money and the press play a far too biased role. And yet this noise is probably a good backdrop for a larger objective.

On the cusp of the latest round of EU summits S&P offered another round of coincidences by warning 15 countries of simultaneous downgrade.

 “These observations arrive completely at odds with events,” said Christian Noyer, president of the Banque de France. “A very politically motivated action,” huffed Ewald Nowotny, the central bank governor of Austria.

I find it hard to deny that closed door politics are influencing S&P’s timing.

More later…

Social Unrest or Frappiccino

Just when the markets start to get back to the business of reporting earnings. Just when the markets start behaving ‘normally’, all the rest of the world starts looking out-of-sync.

The irony came fast and furious this week:

  • Ben and Jerry’s ice-cream and a growing group of protesters near Wall Street. (Known on twitter as  #OWS, or #OccupyWallStreet.)
  • Steve Jobs and his billions in wealth, genius, and factories in China.
  • Berlusconi’s confidence vote, while charges were dropped against DSK.
  • Gold jumps on unrest in north-africa and ignores unrest in NY and Washington.
  • A Giving Pledge or a No Giving Pledge? Starbucks will be serving at a protest near you, soon.
  • Corn mazes and 9-9-9.
  • Drug Cartels, Iran, Oil Cartels. Read WMD’s… Or not…
  • Google+ use surges, but nobody is using it.

What’s the weekend have in store?