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Thoughts

Optimism In Financial Markets – Of Acceleration and Accelerants

Preamble Bar the last condition in the definition* below we are living, right now, in an economic boom  i.e. a ‘Period that follows [The] recovery phase in a standard economic cycle. A boom is characterized by an economy working at full or near-full capacity, strong consumer demand, low rate of unemployment, and a rising stockmarket, […]

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Sunday Papers

The Sunday Paper – Trading with China: Productivity Gains, Job Losses

This is the first work I’ve seen that comes down unequivocally on both the the benefits and the dis-benefits of China’s (and others’ by implication) rise as a trading nation to the rest of the world; part of the process often sloppily summarized as ‘globalization’. First, the benefits. The authors of this IMF Working Paper, […]

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Sunday Papers

The Sunday Paper – The Vulnerability of Rising Powers: The Logic Behind China’s Low Military Transparency

Why is China so cagey about it’s military capability? Isn’t the fact that Beijing keeps the world and it’s neighbors guessing destabilizing; and couldn’t it lead to a dangerous proliferation of arms in the region if others end up over-arming on the better-safe-than-sorry principle? Surely that outcome isn’t in Beijing’s best interest, so what explains […]

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Sunday Papers

The Sunday Paper – China’s Disaffected Insiders

Writing in the Journal of Democracy (July 2017) Professor Kevin J. O’Brien from the University of California, Berkley notes that China’s development model is tired and, for different reasons, some former supporters are now somewhat brassed-off. He looks in more detail at three such groups: frustrated cops, former military officers and bullied cadres, teachers, hospital […]

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Thoughts

10-Years Ago Today, I Predicted Financial Calamity. Yes, I Really Did

I was flicking through my archive recently and found the note, written exactly ten years ago today, reproduced in its entirety at the end of this short message. If you don’t have time for the full read here’s the micro-summary. In August 2007 it was obvious that losses banks were taking and inevitably heading into […]

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Sunday Papers

The Sunday Paper – The Economic Impact of China’s Anti-Corruption Campaign

Does corruption grease the economic wheel or is it sand in the gears? The question is perennial because corruption, by it’s very nature, is hard to gauge. The paper highlighted this week may be a landmark in addressing this question and, certainly, I’ve seen nothing like it with regards to China. The authors, Nan Chen […]

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Sunday Papers

The Sunday Paper – In the Red: The Effects of Color on Investment Behavior

The paper summarized this week got a lot of press when released last month because it sounds, sort of, TED-talkie-right. In a nutshell it tries to show that color, particularly the color red, negatively affects investment decisions. The researchers, William J. Bazley, Henrik Cronqvist and Milica Mormann from the universities of Miami and Southern Methodist […]

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Sunday Papers

The Sunday Paper – Income Disparities, Population and Migration Flows Over the 21st Century

The piecemeal approach adopted so far by European governments to the recent waves of migration from the Middle East and North Africa (MENA) and sub-Saharan Africa won’t do. This migration trend will persist, perhaps for a very, very long time; and the paper highlighted this week explains why. Frédéric Docquier and Joel Machado writing in […]

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Sunday Papers

The Sunday Paper – Use of Leverage, Short Sales, and Options by Mutual Funds

A car is faster than a bicycle, a plane faster than a car. Apes are smarter than trees, humans (most anyhow) smarter than apes. Examples of higher complexity leading to better results are all around. However, when it comes to investing, this is not the case. Hedge funds, as a group, have been unmasked as […]

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Thoughts

Boom Baby!? Maybe

The world, economically at least, is in the best shape it’s been since before the GFC. Whether it was the quantitative easing or just the passing of time not only have the world’s major economies been spared a great-depression they’re now in synchronous recovery. Perhaps this is as good as it gets? Or perhaps gains […]

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Sunday Papers

The Sunday Paper – Crony Banking and Local Growth in China

Listed in Hong Kong there are now several Chinese City Commercial Banks (CCBs); and many more have plans in the pipeline to come here. If you’ve invested in the sector, have been or might be tempted then read on. What follows is depressing work on why this sector is (most likely) a solid avoid. Writing […]

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Sunday Papers

The Sunday Paper – The Great Chinese Inequality Turnaround

The issue of whether inequality is rising or falling in China is not a trivial one. Since the beginning of the reform and opening up in 1978 inequality widened and carried on widening for many years. In a Discussion Paper for the International Food Policy Research Institute Ravi Kanbur and Yue Wang of Cornell University […]

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Sunday Papers

The Sunday Paper – Facts about Formulaic Value Investing

As ETFs and passive strategies continue their march into the lunch-rooms of the world’s biggest active managers they’re resorting to a series of rearguard actions. One of these getting a lot of press has been the concept of so-called ‘Smart Beta’ [Eeeew!]. If the term is new for you a smart-beta strategy is supposed to […]

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Sunday Papers

The Sunday Paper – Height Conditions Salary Expectations: Evidence from China

Studies, mostly in the developed West, have shown conclusive evidence that tall people (men and women) get paid more than shorter peers. In the paper highlighted this week Xiao Yang et al from the University of Electronic Science and Technology of China in Chengdu decided to look at the phenomenon in China. It would have […]

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Sunday Papers

The Sunday Paper – Disrupting the Chinese State: New Actors and New Factors

The Chinese government’s relationship with the internet and information technology has shifted significantly in recent years. From playing whack-a-mole with pesky micro-bloggers, when Xi Jin Ping first took over in 2012, to today, the authorities’ relationship has matured as a) the net penetrates deeper into society than ever before and b) the information that can […]

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Sunday Papers

The Sunday Paper – Economic Policy, Corporate Governance and Fintech-Driven Decisions: The Case of Alibaba and the Cross-Listed Chinese Companies

Black Swans anyone? The paper highlighted this week is dense; but there’s a part I have to abstract in full because its highly topical and I can’t summarize it easily. Alibaba fans please take time to digest independent research analyst Mr. Michael C.I. Nwogugu’s thoughts here: “..Alibaba poses a substantial financial stability risk due to […]

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Sunday Papers

The Sunday Paper – Unveiling China’s Stock Market Bubble: Margin Financing, the Leveraged Bull and Governmental Responses

Writing in the Journal of International Banking Law and Regulation Lerong Lu and Lu Longjie, both from the University of Leeds, provide the clearest account I’ve seen to date about how regulators in China lost control of margin finance in 2014 which led to the spectacular bull and bust market that followed in Chinese A-shares. […]

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Sunday Papers

The Sunday Paper – Is FinTech a Threat to Financial Stability? Evidence from Peer-to-Peer Lending in China

Using data from one of China’s largest P2P operations, Renrendai (Renrendai 人人贷), the authors of the paper highlighted this week, Fabio Braggion, Alberto Manconi and Haikun Zhu from the universities of Tilburg in the Netherlands and Bocconi in Milan, set out to provide an answer to the question in the title. What they needed for […]

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Sunday Papers

The Sunday Paper – Air Quality and Manufacturing Firm Productivity: Comprehensive Evidence from China

I’ve summarized and posted links to a number of papers in the past year or so on atmospheric pollution in China. The paper highlighted and linked to this week will be the last in this series. Today’s paper from Shihe Fu, V. Brian Viard and Peng Zhang of the Southwestern University, the Cheung Kong Graduate […]

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Sunday Papers

The Sunday Paper – Anomalies in Chinese A-Shares

What happens if you take a strategy that’s (sort of) reliably worked in the U.S. over a long period and see if it can be applied to the A-share markets in China? That’s what Jason C. Hsu, Vivek Viswanathan, Chenhui Wang and Philip Wool with the University of California’s Anderson School of Business and Rayliant […]