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Saturday, August 18, 2012

Will China's Consumers Save It From a Hard Landing ?

Not likely, argues Cam Hui in his SEEKING ALPHA piece,'Could China Be Rebalancing Growth To The Wrong Consumer?' , excerpted below.

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China's official policy is to rebalance its engine of growth away from infrastructure-led investment to the Chinese consumer (for examples, see "Crouching Tiger, Hidden Profit" and "China Beyond The Hard/Soft Landing Debate"). Having hit a recent slow patch, it appears as if the Chinese authorities have decided to pull out all the stops to stimulate growth using the same old policy tools of infrastructure spending again ahead of the leadership changeover this year...

Already, the strains are starting to show. The Chinese competitive advantage of a seemingly inexhaustable supply of cheap labor is starting to erode. Wage pressures are rising as fewer and fewer workers are migrating from the countryside to search for work in the cities. In reaction, the decision of multinational companies to offshore production to low-wage countries like China is not the no-brainer it once was. Indeed, a recent poll by Boston Consulting Group (full study here) indicates that more than one-third of American manufacturers are considering reversing the offshoring trend and bringing the jobs back to American shores...

This development must be particularly worrisome to Chinese policymakers and makes the objective to rebalance growth away from infrastructure spending to the Chinese consumer far more urgent. In this way, the Chinese economy would be able to grow more sustainably by creating a new source of demand from their own domestic economy. Alas, it does not appear likely to happen as refocusing growth away from infrastructure spending would seriously hurt Party insiders who have gotten obscenely rich in this boom...

Ironically, the latest Chinese move to engage in the more-of-the-same infrastructure-based stimulus will have the effect of rebalancing growth away from infrastructure spending to the consumer. But instead of the Chinese consumer, it will be the American consumer as the reverse offshoring trend starts to take hold and accelerate.

Legal gambling a fix for state finance woes ?

Not so, reports Steven Malanga in his CITY JOURNAL article,'The State Gambling Addiction' :

"At least 12 states, facing downturn-depleted coffers, have already expanded gambling efforts over the last three years—including Massachusetts, which became the 16th state to sanction casinos. But this approach is utterly misguided, since gambling has often disappointed as a fiscal tool and as an economic-development strategy. As legal gambling has spread, competition for limited dollars has intensified, and the new gambling enterprises seem merely to be siphoning money from elsewhere in the economy instead of generating new economic activity. “This is not an industry that creates wealth,” says Les Bernal, head of the Stop Predatory Gambling Foundation. “It’s an industry that transfers wealth.” And that’s before taking into account the documented social costs, including the disturbing fact that a significant part of gambling revenues comes from problem gamblers."

Tonight, Blogger DJ gets literary, kinda sorta

Elvis Costello - Everyday I Write the Book
Missing Persons - Words
Icicle Works - Whisper To A Scream
Bruce Springsteen - Dancing In The Dark

Friday, August 10, 2012

In memory of a great friend, a good man, recently departed.

Eternal be your memory.

Desperate to flee fiat currencies and over-priced bonds for hard assets ?

Looking for serious hard-asset diversification in one handy ETP ?

Then check out Richard Bloch's post in SEEKING ALPHA, "Betting With Jim Rogers: Beyond The Agricultural Stocks". Bloch describes in some detail Market Vectors' Hard Asset Producers ETF (HAP), which is based on the Rogers - Van Eck Hard Assets Producers Index :
This is an interesting index because it's designed to track the overall performance of a diverse set of more than 350 hard asset companies. So instead of simply weighting companies by market capitalization, the sectors are first defined into broad categories - allocated based on estimates of global demand and production.
The current sector weightings look like this: