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May 31, 2006
The Problem with Chinese Manufacturing in Two Easy Paragraphs
In yet another article on labor shortages, a couple of short paragraphs explain some of the big problems affecting the Chinese manufacturing industry:
Since China initiated reform and opening-up policies in late 1970's, noted Prof. Wen Tiejun with elite Remin University in Beijing, factories and enterprises, obtaining cheap land thanks for governmental preferential policies and mainly engaging in processing materials supplied by overseas clients, have mushroomed in southern and eastern China cities.
The factories and enterprises reaped profits by capitalizing on cheap land and labor resource, but did not establish their own brands and intellectual properties, as they failed to inject enough input into research and development. Therefore, overproduction and excessive competition emerged in the country's manufacturing industries. For the sake of survival, some factories kept the salary at a low level for the rural migrant workers without buying their social insurance, Wen said, adding that poor salary and welfare system cooled the migrant workers' zeal for working in cities.
And some rural labor began returning home because of poor welfare system for migrant workers in cities. . . .
In just a few lines, you can get an explanation for:
Posted by John at 5:06 AM | Comments (0) | TrackBack--Why a "low cost labor advantage" is ephemeral
--Why China has a trade deficit with the rest of Asia (much of its manufacturing base is devoted to "processing materials supplied by overseas clients")
--Why Chinese officials are placing such an emphasis on upgrading technology and enhancing research & development
--Why China's equity markets, this year's surge notwithstanding, have been relatively lousy over the last several years
--Why value-added manufacturers in the United States (and the West generally) who make innovation a priority don't have to cower at the mention of "China"
--Why some Chinese manufacturers will find it increasingly attractive to locate facilities in the United States
Washington-Area Community Banks: "The Easy Money is All Gone"
This week's Washington Business Journal examines the state of affairs for community banks in the D.C. area, and finds that
Investing in banks, long considered a conservative place to put money, has become a hot market for capital in recent years. Since 1998, the Washington region has seen 20 bank startups.
"When the availability of capital is great, the market gets overbuilt," says Barry Watkins, CEO of Bethesda-based Fidelity & Trust Bank. "That is what has happened to banks." . . .
"Everything is tougher," says Cardinal Financial Chairman and CEO Bernard Clineburg. "Everyone is on alert, and it just makes everything tougher."
Says Potomac Bank of Virginia CEO Larry Warren: "The easy money is all gone."
Meanwhile, more banks are opening -- at least two groups of organizers are planning new banks in Greater Washington next year -- and other established banks are looking to break into the region. Competition for deposits, retail space and loans is fierce . . .
One of this article's main points is that the competitive environment is pushing community banks to sell. If you're thinking that some big dumb super-regional bank is going to bail you out at four times book, however, think again:
The good news for the sellers is that there are many hungry newcomers and bigger regional players who consider themselves growers. Mercantile Bankshares and Provident Bankshares in Baltimore, Pennsylvania-based Fulton Financial, West Virginia-based United Bankshares and New York's M&T Bank have shown their penchant for expansion through acquisitions in the past few years, and no one would be surprised if they continue to gobble up smaller banks.
The small size and relatively poor performance of the banks already in the market, though, suggests to some that the buyers will come from a crew of younger, less-established banks in the region looking to quickly grow their assets. [Emphasis mine]
"It wouldn't surprise me to see a merger of equals," says Cardinal's Bernard Clineburg. Indeed, at least in terms of size, that was the case with WashingtonFirst's planned acquisition of First Liberty National Bank. . . .
If smaller banks make up a proportionally larger number of interested buyers, by definition sale prices for community banks will go down. Smaller banks do not have the balance sheet resources, much less patient enough shareholders, to pay foolish prices.
Posted by John at 4:43 AM | Comments (0) | TrackBackQuote of the Day for Wednesday, May 31, 2006
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May 30, 2006
Regions Financial: Bank of America with Training Wheels
I was amused by the comments my friend Chris Marinac at FIG Partners made regarding the announcement late last week of the Regions Financial-AmSouth combination:
AmSouth was greeted with a 3% decline in RF shares - hardly a vote of confidence. The ASO deal is slightly accretive to Cash EPS in 2007 (goal is $2.93 per share). Ironically, $2.93 per share was the same identical goal laid out for 2005 Cash EPS by RF/UPC in January 2004! But hey, what's two years among friends? We remind investors of past proclamations by RF because today's prediction carries limited credibility, unfortunately. Another good statistic is the ratio of merger charges-to-cost savings promised. RF/UPC was 1.5x, but RF/ASO is 1.75x - this is $100 Million difference. Cost savings of $400 million are planned by mid-2008. This equates to 30% of ASO's 1Q06 annualized overhead base (remember - this is an acquisition of ASO, so ASO stand-alone costs are more relevant in our view). In the UPC deal, RF promised just 18% of UPC's expense base. This history is key for investors to remember. A look back at RF/UPC shows that RF shareholders lost 8% on their stock price (i.e., $37.69 when UPC was announced vs. $35.53 on Wed 5/24 prior to the ASO deal). UPC owners fared better as the stock was about 7% higher. However, strong dividends the past 10 quarters have yielded 9.4% for RF shareholders since late January 2004 (no reinvestment was assumed). The S&P 500 is 12.6% ahead over this time frame, BEFORE dividends. But, fear not, RF should eventually return to buying back its stock and raising dividends. Perhaps such financial engineering smoothes out the rough edges on this transaction. But, like most large mergers, Caveat Emptor!
Two years of postponed earnings growth? Cost savings projections which look high? Financial engineering? It all sounds like Bank of America with training wheels to me.
Posted by John at 9:23 AM | Comments (3) | TrackBackThriving Young Latino Entrepreneurs in Washington . . .and Atlanta, Too
The Washington Post has an excellent article on probably the least understood and appreciated part of the Hispanic community: the rising young Latino entrepreneur. This group of twenty- and thirty-somethings, the Post reports, is thriving in Washington:
. . . About 13 percent of the more than 32,000 Hispanic-owned businesses in the Washington region are in professional areas such as technology, law, accounting, engineering and translation services. Some of the Latinos who run those companies say they operate in a bicultural society that extends from this region to Latin America, a world defined more by language, ethnicity and international connections than by geographic boundaries.
This same group is burgeoning here in Atlanta as well, and will continue to do so regardless of what the Georgia State Legislature or the U.S. Congress dishes out.
We believe this as much as we believe anything; we see them walk through the doors of our firm everyday.
Posted by John at 6:26 AM | Comments (0) | TrackBackSeek and Ye Shall Find: The FBI Targets Public Corruption Cases
The Christian Science Monitor reports:
Posted by John at 5:30 AM | Comments (0) | TrackBackOver the past two years, FBI investigations have led to corruption convictions for more than 1,000 government employees, according to bureau figures. Corruption indictments are up 40 percent. . . .
The FBI's latest strategic plan lists "combat public corruption on all levels" as the bureau's highest-ranking criminal priority, ahead of such things as fighting transnational crime organizations (read "the Mafia") and white-collar crime.
Over the past 18 months, some 200 agents have been added to the 400 already working on public corruption cases, according to FBI data.
This new emphasis is due to the fact that "public corruption is different than other crimes," said FBI director Robert Mueller in a May 11 speech in San Diego. "It does not just strike at the heart of good government - it can strike at the security of our communities and our nation."
Over Half of All Russian Deaths Due to Heart Disease
The CardioBlog reports on how serious the problem of heart disease has become in Russia:
Posted by John at 5:21 AM | Comments (0) | TrackBackThe population of Russia loses 700,000 people a year said President Vladimir Putin in a recent state of the nation address. 56.7 percent of these deaths are due to heart disease, and about 30 percent of those deaths strike men of working age. The mortality rate of these men is five times higher than in Europe.
In an already struggling economy, premature death from heart disease and diabetes is predicted to cost the Russian economy $300 billion by 2015, according to World Health Organization figures. According to Professor Leo Bokeria, the director of the Bakulev Center for Heart Surgery in Moscow, 80 percent of deaths could be prevented by an effective health care system.
Nationalization and Privatization in Zambia's Copper Industry
I recently sneered at the internal forecasts of dramatically increased production at Venezuela's national oil company. The Economist recently looked at Zambia's copper industry, once nationalized and now privatized, and how production levels have changed. You already know the rest of the story, don't you?:
Back in the 1970s Zambia was consistently producing more than 700,000 tonnes of copper a year. By 2000 this had plunged to just 249,100 tonnes—the least since the 1950s. Years of mismanagement by the state, crumbling infrastructure and falling prices had taken their toll. But in 2000 Zambia decided to privatise its mines and in 2002 the copper price finally began to revive. From a low of $1,319 per tonne on average in 2001, copper prices have recently touched $8,800.
Posted by John at 5:04 AM | Comments (0) | TrackBackSelling Zambia Consolidated Copper Mines (ZCCM), the state-owned copper monopoly, was hardly a smooth affair. It took four years of negotiations and false starts before the assets were finally privatised in 2000. But in 2002, less than two years after bagging the country's main copper mines, Anglo American (in a spectacularly ill-timed move) decided to pull out, after copper prices hit rock bottom. In November 2004 Vedanta Resources, an Indian company listed in London, stepped in and purchased Konkola Copper Mines (KCM), which remains the country's largest producer.
The new owners have undertaken massive investments to upgrade and expand existing mines and processing plants and to develop new ones. Vedanta has embarked on $800m-worth of investment in projects. These are expected to take about four years to complete. The biggest chunk is for the development of the $400m Konkola Deep Project, which should more than double KCM's ore production and expand the mine's life from 2012 until 2035. A new mine is being developed by Australia's Equinox Minerals in Lumwana in the far west of the copper belt. Canada's First Quantum Minerals started production at the Kansanshi mine last year, while a Chinese state-owned company has invested in the Chambishi mine.
Zambia's production of copper recovered to about 427,000 tonnes in 2004. Fuel shortages and labour disputes hampered production last year—but it should now rebound strongly. By 2008 the country could extract over 900,000 tonnes of copper a year—if it can ensure that energy supplies and infrastructure become more reliable.
Violent Crime in China
Attorneys Dan Harris and Steve Dickinson write the China Law Blog, a blog worth your attention if you are interested in business law in China. Dan recently analyzed violent crime statistics in China compared to the United States:
China had 554,000 cases of seriously violent crimes (never defined) last year, down 2.16 percent from 2004.
By way of comparison, there are typically around 16,000 murders in the United States and around 1.3 million violent crimes per year, out of a population of approximately 300 million. Therefore, if China's murder statistics are accurate, one is around four times more likely to be murdered in the United States than in China. If (and this is a big if) violent crime means the same thing in the two countries and if (and this too is a big if) China's statistics are as accurate as the United States, one is around sixteen times more likely to be the victim of a violent crime in the United States as in China.
Accurate? You tell me.
Dan makes the point that the system is set up to probably encourage under-reporting by local officials, as Beijing has mandated that the murder rate will drop in 2007. And there's little doubt that it will.
Just another example of why one should look closely and ask questions about reported statistics in China.
Posted by John at 4:51 AM | Comments (0) | TrackBackThe Terrorists Behind the London Bombings and Reducing Domestic Recruits
Steve Coll, writing in the New Yorker, notes that the British government's official report (pdf) on the London terrorist bombings of July 7, 2005 offers some important lessons on how and why suicide bombers can be recruited domestically in the West:
Posted by John at 4:41 AM | Comments (0) | TrackBackThe report concludes that there is no consistent profile that could be used to help identify who might be vulnerable to such radicalization, and yet the biographies do show in some detail how the making of an Al Qaeda-inspired suicide bomber is an idiosyncratic narrative of push and pull. Alienation from citizenship or family and a loss of faith in secular opportunity create a pool of potential volunteers; preachers, recruiters, and Al Qaeda leaders take it from there. The British parliament’s main intelligence-oversight committee, in a separate report, admits that Britain has failed to consider adequately how it might reduce the number of potential recruits: "We remain concerned that across the whole of the counter-terrorism community the development of the home-grown threat and the radicalisation of British citizens were not fully understood or applied to strategic thinking."
It seems obvious that citizenship, assimilation, religious tolerance—-the basic ideals of an open, plural society—-should play a prominent part in counterterrorism strategy, to at least complement the funds that governments pour so eagerly into concrete barriers, listening devices, and retina scanners. When President Bush promotes the spread of democracy abroad, he argues that the distractions of civic life offer a partial cure for terrorism. Yet he offers no comparable rhetoric, never mind a strategy, at home. The scant outreach to American Muslims that the Bush Administration undertakes, aside from occasional religious conferences and White House iftars, is left mainly to the F.B.I.
The results are predictably depressing: a startling number of America’s several million Muslim residents think that the United States is not safe for them. A poll conducted by Zogby International just before the last Presidential election, for example, showed that more than a third of American Muslims believe that the Administration is waging a war on Islam; a similar number believe that “American society overall is disrespectful and intolerant toward Muslims”; and more than half said that they knew someone who had suffered discrimination. It is fair to assume that these numbers understate the problem. If you were a media-literate Muslim immigrant, would you express your frustration to a pollster on the telephone?
British and European Muslims are more often poor, unemployed, and trapped in segregated housing than their American counterparts, but this hardly seems grounds for self-congratulation or complacency, particularly in this country’s current phase of fence-building and nationalism. The Bush Administration has failed to manage the connection between immigration policy and counterterrorism strategy; instead, the President is succumbing to immigrant-bashers. The nativists are ascendant in the Republican Party as final negotiations begin in Congress on a major immigration-reform bill that is rooted in a demagogic movement to strengthen border security (a worthy objective, but not one likely to be achieved by such craven symbolic gestures as the deployment of National Guard troops). It is not clear whether a new law will be passed this summer, or just how bad a bill it will be. Even if a compromise is reached that offers a reasonable path to citizenship for illegal immigrants who have long lived here, the price will almost certainly include an expansion of police powers and the re-categorizing of many immigration violations as felonies—a prescription for error and abuse. . .
Quote of the Day for Tuesday, May 30, 2006
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May 29, 2006
In Flanders Fields
In Flanders Fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.
We are the Dead.
Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.
Take up our quarrel with the foe:
To you from failing hands we throw
The torch, be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.
[by Canadian Lt. Colonel John McCrae, written in 1915 after the death of a friend and former student during World War I]
Posted by John at 10:39 AM | Comments (0) | TrackBack"Our People Die for This Country . . . We are Proud of It"
A decorated U.S. veteran of Hispanic descent talks to the Fort Worth Star-Telegram about the contributions and sacrifices of Hispanic veterans:
On Memorial Day morning, Texas will bury another young hero.
A crowd in an Edinburg church will gather for Benny Ramirez. At 21, he was killed Sunday by a roadside bomb in Iraq.
The crowd has been there before. Edinburg has given four lives for America in Iraq.
Ramirez is one of 67 Texans of Hispanic descent killed in Iraq, some from immigrant families who came to the U.S. hoping for citizenship.
Posted by John at 10:05 AM | Comments (0) | TrackBackYet elsewhere on Memorial Day, some politician will probably demand that America "stop the invasion" and send troops to protect America from people who look like Ramirez.
One veteran isn't afraid.
"The children of Mexican immigrants have a proud history of fighting to defend this country," said Tony Morales of Fort Worth.
He is the national commander of the Colorado-based American GI Forum, the primary national organization for Hispanic veterans and their families.
In a time when some American veterans join border-patrol militias, GI Forum strongly favors legal work permits for immigrants and opposes the U.S. House immigration bill as a "racial discrimination effort by those who fear change."
Complaints about an "invasion" are simply "a rallying cry for people who don't like Hispanics," Morales said. "They don't like Mexicanos, in particular."
If somebody says, "I'm only against illegal immigrants," Morales said, "that's just sugar-coating."
Often, the same complainers call anyone of Hispanic descent "illegals."
"I think deep down, they still have this racist attitude embedded in them," Morales said. "They don't want to accept somebody who might be different."
Morales, 66, served in France and Germany in the 1950s with the Air Force's 417th Tactical Fighter Squadron.
He is serving his second term as commander of the 145,000-member GI Forum, founded by a Corpus Christi doctor in 1948. The organization took up the cause of defending Hispanic veterans' rights in 1949, after a South Texas funeral home turned away the body of a Hispanic soldier.
Soldiers of Hispanic descent not only fought proudly in World War II, they fought heroically, earning 12 Medals of Honor -- more per capita than any other demographic group.
"History shows that we have always been there to fight for freedom," Morales said.
"Veterans should remember who has been fighting alongside them in World War I, World War II, Korea and Vietnam. Our people die for this country. We are proud of it." . . .
A Special Memorial Day Quote
More from American Heritage; a quote which captures the spirit of Memorial Day quite well: "A hero is someone who has given his or her life for something bigger than oneself." (Joseph Campbell)
Posted by John at 9:34 AM | Comments (0) | TrackBackA History of Memorial Day
Christine Gibson, former editor of American Heritage, explains how Memorial Day, which developed immediately after the Civil War, rather quickly became both an opportunity for reconciliation and for picnics and barbecues. Read her full essay; here's a tidbit:
Beginning in the 1870s, Federals and Rebels came together in Northern and Southern cemeteries for joint Memorial Day ceremonies. President Rutherford B. Hayes attended one such exercise in Tennessee in 1877, and members of one Richmond veterans’ organization traveled to observances in at least seven Northern cities in the 1880s and hosted delegations from four more. Financial leaders rejoiced as commerce between Northern and Southern states began to free up. As a former Confederate major announced at a Memorial Day ceremony in Chicago in 1895, "We invite you to invade us again, not this time with your bayonets, but with your business."
After a full century of sectional strife, however, reconciliation required some strenuous philosophical gymnastics. Southerners promoted the idea of the Lost Cause—-the Confederacy had been a noble experiment, defeated not by a lack of competence or morals but by a shortage of resources—-which allowed them to return to the Union on an equal footing with the North, emotionally at least. Politics, they held, not slavery, had started the war. Northerners, as a whole never particularly supportive of full equality for blacks, swallowed that line so the country could move on. The new, non-contentious Memorial Day depended upon a nationwide amnesia. On a day consecrated to remembering, most Americans chose to forget. . . .
Posted by John at 9:23 AM | Comments (0) | TrackBackThe same original impulse that made way for reconciliation—-the lessening of grief—-transformed Memorial Day from somber duty to carnival of national recreation. But when the public, no longer so acutely despondent over Civil War casualties, began to show less interest in Memorial Day ceremonies, local veterans’ chapters relied on an old standby to draw crowds. Richmond held its first Memorial Day parade in 1875, and Chicago followed suit three years later. Observers now celebrated the war itself, rather than the dead, through these parades, showing what the Chicago Tribune in 1893 called "the inbred delight the American citizen has for the pomp and circumstance of war."
By then, Chicago’s annual Memorial Day bicycle race drew more viewers than the cemetery services did. Five years earlier, President Grover Cleveland had gone fishing on Memorial Day rather than visit Civil War graves. Veterans excoriated him for it, but he was really just riding the cutting edge of a national trend. After Congress declared Memorial Day a federal holiday, in 1887, more and more Americans took the opportunity to enjoy the fine May weather with picnics and baseball games. The officers at GAR headquarters fumed. Decrying "indulgences in public sports, pastimes and all amusements on Memorial Day," they urged local posts to "let no idle merry-making mar its consecrated hours." . . .
China, Yesterday and Today
From Flickr:
Posted by John at 5:33 AM | Comments (0) | TrackBack
Embracing Capitalism in North Korea
How do you get much needed cash--and sensitive technology--if you're an isolated, Marxist state? If you're North Korea, you run a multinational conglomerate of legitimate, profit-making businesses.
North Korean capitalism is thriving - just not inside North Korea. Pyongyang has steadily established a string of legitimate and less legitimate front companies across East and Southeast Asia, aimed at earning the cash-strapped government badly needed hard currency. And, by all indications, business is booming.
Consider, for instance, Cafe Pyongyang, one of Vladivostok's most popular eateries. It is so popular, in fact, that there are plans to build a new restaurant in the shape of a North Korean peasant's hut, similar to the one where the late leader Kim Il-sung was born in 1912. Here, gracefully clothed North Korean women serve up traditional Korean fare, while patrons sing popular Korean tunes.
Similarly themed restaurants have popped up in Beijing and Shanghai in China, and Phnom Penh and Siem Reap inCambodia. But this by no means represents a North Korean business diaspora similar to the ethnic-Chinese community that now controls a large swath of Southeast Asia's economy. Rather, the Pyongyang government owns and operates all of the eateries - and their regional interests reach far beyond restaurants.
North Koreans are becoming skilled capitalists outside their own strict centrally controlled country. For instance, they own a 15-story, 160-room hotel, complete with a nightclub and a sauna, in the northeastern Chinese city of Shenyang. There, government entrepreneurs also run a North Korean-owned computer software company and an Internet service provider. Even more imaginatively, a company in Dandong, a Chinese city just across the Yalu River from North Korea, acquired the exclusive rights to sell North Korean medicines on the international market - including a brand called Cheongchun No 1, a home-made version of Viagra. . . .
(Thanks to Hit and Run for the pointer.)
Posted by John at 4:38 AM
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Quote of the Day for Monday, May 29, 2006
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May 28, 2006
What is a Border?
Moisés Naím, the editor-in-chief of Foreign Policy magazine, asks, in today's globally connected world: what constitutes a border?:
Posted by John at 5:47 AM | Comments (0) | TrackBackA country's borders should not be confused with those familiar dotted lines drawn on some musty old map of nation-states. In an era of mass migration, globalization and instant communication, a map reflecting the world's true boundaries would be a crosscutting, high-tech and multidimensional affair.
Where is the real U.S. border, for example, when U.S. customs agents check containers in the port of Amsterdam? Where should national borders be marked when drug traffickers launder money through illegal financial transactions that crisscross the globe electronically, violating multiple jurisdictions? How would border checkpoints help record companies that discover pirated copies of their latest offering for sale in cyberspace -- long before the legitimate product even reaches stores? And when U.S. health officials fan out across Asia seeking to contain a disease outbreak, where do national lines truly lie?
Governments and citizens are used to thinking of a border as a real, physical place: a fence, a shoreline, a desert or a mountain pass. But while geography still matters, today's borders are being redefined and redrawn in unexpected ways. They are fluid, constantly remade by technology, new laws and institutions, and the realities of international commerce -- illicit as well as legitimate. They are also increasingly intangible, living in a virtual and electronic space.
In this world, the United States is adjacent not just to Mexico and Canada but also to China and Bolivia. Italy now borders on Nigeria, and France on Mali. . . .
Average Wages in China Up 14%
The People's Bank of China says that average wages rose 14% in China last year, driven particularly by increases in China's more developed eastern regions. Another signpost of a tight labor market.
Further, the PBOC also estimates that average wages in the country's coastal regions are 50% greater than in the inland regions.
Posted by John at 5:37 AM | Comments (0) | TrackBackChina's Trade Surplus an Illusion?
Standard Chartered Bank senior economist Stephen Green, based in Shanghai, writes that China's trade surplus may be largely an illusion. As much as two-thirds of China's $102 billion trade surplus in 2005 could actually be capital inflows (anticipating a higher yuan) as opposed to actual trade:
. . . Some mainland trading firms are doctoring the export and import invoices submitted to Chinese customs officials to get around capital controls and bring in more foreign hard currency than their trade transactions would justify. The economic incentive is clear enough: The Chinese yuan is widely expected to appreciate in the years ahead, and is an attractive investment for companies or speculators.
Why all the subterfuge? China's capital account restrictions make it difficult to bring U.S. dollars onshore and convert that money into yuan for domestic companies and ordinary Chinese people. But Chinese exporters and trading companies have a far easier time, due to the nature of their business. An exporter willing to exaggerate an invoice handed over to local authorities could bring far more hard currency into the country than warranted by the value of goods sold.
This "mis-invoicing" of trade was commonplace in the last decade, but back then it was a way of getting money out of China. Now we think it is being used to bring funds in, given the strong likelihood the yuan will appreciate in value relative to foreign currencies down the road. This again inflates the value of Chinese exports.
I'm not qualified to opine on Green's hypothesis, but you will find that his theory has some pretty detailed analytical underpinnings if you read his entire commentary.
Posted by John at 5:29 AM
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A Dying Mexico, A Rising "united states of Americas"
Richard Rodriguez has a challenging commentary in the Washington Post on the death of Mexico and the attendent rise of the "united states of Americas":
Posted by John at 5:14 AM | Comments (1) | TrackBackWhen I tell Mexicans I think their country is dying (as a vision and economic reality separate from the United States), they take my remark as an affront. They tell me Mexico will always be different from the United States.
But a recent poll taken twice (over several months) by the Pew Hispanic Center found that more than 40 percent of Mexicans would emigrate to the United States if given the opportunity. Twenty percent would be willing to emigrate illegally.
In the initial survey, 41 percent indicated they would leave Mexico if they had the means and chance. Three months later, the percentage rose to 46 percent. Included were people of the middle class: Around 35 percent of college graduates would emigrate from Mexico; 13 percent would be willing to enter the United States illegally.
A nation that cannot feed its young with dreams but cuts its milk with memory and sand is going to starve the future; it is going to die. The only place where people will continue to hold on to Mexico will be in the United States.
Because of the illegal immigrant, we are all entering the hemisphere. There are now too many Mexicans in "America" and too many "Americans" in Mexico for any of us to avoid the New World: the united states of Americas.
China's Labor Resources on "a Trend of Shrinkage"
The idea that China possesses an unlimited supply of cheap labor is increasingly be shown to be a myth. Consider this report from the Xinhua News Agency:
Despite government figures to indicate China still has a contingent of 150 million migrant workers awaiting to be transferred from rural to urban areas, signs have emerged to show that the country's labor resources are on a trend of shrinkage.
Although southern booming Guangdong Province has sucked up more than 19 million migrant workers, its annual labor shortfall remained at two million. Factories found it hard for them to employ migrant workers with low income any more.
Shortfall of labor power has emerged not only in coastal booming towns, but in inland cities. Central China's Henan Province, the country's most populous province, for instance, has gone all out to expand textile and clothing industries but the work forces in local textile and clothing mills was only 70 percent of what they had expected.
A latest survey from the Ministry of Labor and Social Security showed that in 2006, construction engineering and machine building enterprises in prosperous coastal areas are willing to pay workers at least 1,000 yuan (about 125 US dollars) per month, almost equal to the local monthly salary of college graduates. But these enterprises paid 600 yuan to workers every month three years ago.
Posted by John at 4:56 AM | Comments (0) | TrackBackHan Jun, director of the Research Center of Rural Economy under the Development Research Center of the State Council, said that 20 percent of the rural areas in China no longer have surplus labors at present.
Xinyang City of Henan Province had 3.5 million rural laborers, and 1.86 million of them, mostly young or middle-aged, had gone to work in major cities. And the city hired at least 30,000 workers to pick tea this year owing to intensive female labor outflow.
Cai Fang, a noted expert in the Chinese Academy of Social Sciences, acknowledged that although there will not be a shortfall of laborers in the absolute number of trades and industries in the years ahead, the scarcity of laborers will be felt in some areas and in some particular industries.
Quote of the Day for Sunday, May 28, 2006
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May 27, 2006
A Model of Business Grit: Keefe, Bruyette & Woods Prepares to Go Public
Keefe, Bruyette & Woods announced the firm will pursue an initial public offering. Founded over 40 years ago, the employee-owned bank and financial services firm will be publicly-owned for the first time.
KBW is a corporate model for preseverance and determination. A weak bank stock market and the indictment of the firm's president prevented an IPO in the late 1990s. In 2001, the company was in advanced discussions to be sold. Then, on September 11, 2001, the firm lost almost one-third of its employees and its World Trade Center headquarters in the 9/11 attacks.
There are no manuals or management courses in business school on how to rebuild a firm so devasted. Nothing can prepare anyone for what to do when, in a flash, your firm is ravaged and you are caught up in the grief of burying colleagues you've worked beside for years.
We often throw around terms like "admirable" with abandon, but the character and grit with which KBW's survivors rebuilt the firm is nothing if not admirable. How can you know ahead of time you have what it takes to rebuild after such a tragedy? Whatever it was, deep inside, this collection of individuals had what they needed to come back.
According to the Wall Street Journal, the firm grew from $150 million in revenue in 2001 to $300 million in revenue and $18 million in profit for 2005. In 2002, KBW was 26th in the "league tables" for investment banks; by last year the firm had risen to 16th.
The story is told in detail in the book Triumph Over Tragedy, by John Duffy. Duffy was the firm's co-Chief Executive Officer at the time of the tragedy, and became the firm's Chairman and CEO when his partner Joe Berry was one of the losses in the attacks. Duffy also lost his son, who also worked at the firm.
An IPO is a milestone for most companies, particularly for one which has been private and employee-owned for many years. In KBW's case, however, it's also a special tribute to those who contributed so much to the firm's growth and reputation, yet are senselessly and tragically unable to be here to witness this achievement.
Posted by John at 12:01 PM | Comments (0) | TrackBackThe Truth About Understanding a $12 Trillion Economy
From CBS MarketWatch:
The Federal Reserve can't afford to overreact to just one number, no matter how dramatic it may be, said Fed Gov. Randall Kroszner.
In remarks to reporters at a seminar on economic statistics, Kroszner said the Fed looks at the whole "mosaic" of economic numbers and anecdotes to get a reading on the economy before it decides where to set interest rate targets.
"One should never overreact to one particular number," he said.
As good as the U.S. economic statistics are, they are imperfect, he said. Because of the high level of uncertainty about productivity, inflation and growth, the Fed must remain flexible and open-minded, he said.
"We are not quite sure where the economy is going, or even where we are," Kroszner said.
Thanks to Fed Governor Kroszner for telling the unvarnished truth.
In medicine, we understand often understand the ailment itself much better than the cause or the cure. In an almost $12 trillion economy, why should one expect any different? It's not just that the statistics are imperfect, but our understanding of the complex interaction of all those various imperfect inputs is primitive, relatively speaking.
Yet we listen in awe when politicians claim their policies will lower gas prices, cure poverty, increase our economic well-being, or make the world better for our grandchildren.
(Thanks to Division of Labour for the pointer.)
Posted by John at 6:42 AM | Comments (0) | TrackBackQuote of the Day for Saturday, May 27, 2006
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May 26, 2006
The Biggest Misunderstanding U.S. Policymakers Have About the Asian Economies
In the latest Far Eastern Economic Review, Stanford economics and business professor James Howell had a strongly worded answer in an interview in which he was asked what aspect of the Asian economies was most misunderstood by U.S. policymakers:
Posted by John at 4:47 PM | Comments (0) | TrackBackI think I can find it in Mr. Bush’s State of the Union message. He called for an increased emphasis on R&D, and mentioned $50 billion a year. He said this was designed to combat Chinese and Indian technological pressure on the U.S. I don’t think I’ve ever heard a bigger non sequitur except from a seven year old. China and India are not major technological threats to the U.S. They might be in the distant future, but they are not now. What is essentially going on now is low-tech trade. If Mr. Bush wanted to help the U.S.—-as well as China and India—-he should encourage it. Because trade benefits all those who participate in it. Trade essentially increases the variety of goods, the cost of goods, and the quality of the goods in any country. Those three things combine to raise the incomes. So Sino-American trade, and Chinese exports, can raise incomes in both China and the U.S. American exports to China—-which are huge—-raise incomes on both sides of the Pacific. The other reason this is so ridiculous is because the biggest technological threats to the U.S. are from small European and Asian countries—-not from China or India.
Wachovia Now Has 30,000 Customers Receiving Spanish Language Statements
Wachovia announced that 30,000 of its customers have signed up to receive Spanish language statements and statement inserts.
Given what a relatively small footprint the bank has currently in two of the nation's most populous states, California and Texas, and how recently the bank started this initiative, this growth strikes me as something worth crowing about in a press release.
Posted by John at 4:27 PM | Comments (0) | TrackBackChinese Investment Drives Growth in Italy
According to this report, Italy views Chinese investment as "the driving force" behind its economic growth. Approximately 30 different Chinese companies have established operations in Italy.
I'm sorry, but as anemic as Italy's economy is, it probably doesn't take much to be a "driving force" of their growth.
Posted by John at 4:10 PM | Comments (0) | TrackBackA Veteran Community Banker on the Competitive State of His Industry
John Eggemeyer tells the American Banker ($) that the wind is in the face of community bankers, not at their backs:
From his bird's eye view as a successful investor and merchant banker, Mr. Eggemeyer sees some disturbing trends in the industry.
A surge in raising and spending capital has caused competition "to be as intense as I've ever seen it, and that's not a good thing," he said. At many banks, pricing has become more irrational and underwriting standards more slack, he said.
Competition has also increased because of the number of start-ups today, and a flood of capital has spawned a generation of them financed like none were before, Mr. Eggemeyer said. "But there's just not enough opportunities for them all to be successful," and he expects most to sell.
Mr. Eggemeyer also expressed concern about an "overly aggressive" crackdown on banks that own large concentrations of commercial real estate loans. "They may overshoot the mark and really slow down economic activity."
Eggemeyer is not just a successful banker, but a very successful bank stock investor. (Yes, those are often two separate things.) His First Community Bancorp is but one of several successful banking companies he has either been a principal and/or investor in. When he speaks he's worth paying attention to.
Posted by John at 3:42 PM | Comments (0) | TrackBackQuote of the Day for Friday, May 26, 2006
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May 25, 2006
What Bolivia and Hercules, California Have in Common
Politicians call it "eminent domain" because it sounds so much better, but it's actually property seizure.
That's what the city council in Hercules, California has voted unanimously to do, taking 17 acres from Wal-Mart on the city's waterfront. The council objected to Wal-Mart's plans for a store on the site, citing another store plan approved by the city. The action comes after Wal-Mart attempted to tailor a store design to meet the city's aesthetic desires, and after the city attempted to purchase the property from Wal-Mart.
The San Francisco Chronicle story points out that some residents would prefer grocers such as Whole Foods, Trader Joe's or Andronico's. To use an example, why would Whole Foods (a store I happen to like myself) want to build on this site, assuming they could?
What happens in a few years, when a different City Council decides that Whole Foods is not "aesthetically pleasing" enough? (A phrase which can be applied to just about anything objectionable to those in power.) What happens when Whole Foods becomes less politically correct than some other grocery operator? The same thinking behind the seizure of Wal-Mart's land would find it justifiable to seize Whole Foods' property as well. One group's aesthestic preference is another group's whim.
It's not a big jump from Bolivia.
Posted by John at 7:16 AM | Comments (0) | TrackBackA Private "Cell" Watching Islamic Terrorist Activity
Rita Katz is an Iraqi Jew who was born in Basra in 1963. After Saddam Hussein came to power, her father, along with a number of other Jews, were rounded up and transported to Baghdad. He was eventually hanged in a public square in a "celebration" which featured belly dancers as entertainment. She was six years old.
Today Rita Katz runs the SITE Institute, a private organization in the U.S. with a handful of employees. SITE monitors Islamic terrorist activity, particularly online. Naturally, the intelligence bureaucrats alternately value her and are driven crazy by her activity. Her story, as told by the New Yorker, is a fascinating one:
Rita Katz is tiny and dark, with volatile brown eyes, and when she is nervous or excited she can’t sit still. She speaks in torrents, ten minutes at a stretch. Everybody who works in intelligence calls her Rita, even people who don’t know her well. She sometimes telephones people she hasn’t met—important people in the government—to tell them things that she thinks they ought to know. She keeps copies of letters from officials whose investigations into terrorism she has assisted. "You and your staff . . . were invaluable additions to the investigative team," the special agent in charge of the F.B.I.’s Salt Lake City Division wrote; the Assistant U.S. Attorney in Boise said, "You are a rare and extraordinary gem that has appeared too infrequently throughout the course of history." The letters come in handy, she told me, when she meets with skepticism or lack of interest; they are her establishment bona fides.
Katz, who was born in Iraq and speaks fluent Arabic, spends hours each day monitoring the password-protected online chat rooms in which Islamic terrorists discuss politics and trade tips: how to disperse botulinum toxin or transfer funds, which suicide vests work best. Occasionally, a chat-room member will announce that he is turning in his user name and password and going to Iraq to become a martyr, a shaheed. Several weeks later, his friends will post a report of the young man blowing himself up. Katz usually logs on at six in the morning. When she has guests for dinner, she leaves a laptop open on the kitchen counter, so she can check for updates. "It is completely addicting," she says. "You wake up thinking, I’ve been offline for seven hours, but the terrorists have been making plans." . . .
. . . some people involved in counterterrorism do not think that a private group with limited resources can do as good or as prudent a job as government agencies can. "Intelligence analysis is a set of skills that you learn, not just something that anyone can walk in off the street and pick up," Steven Aftergood, who monitors the intelligence community for the Federation of American Scientists, told me. Katz, however, pointed out that, for example, the professionals consistently missed signals about Al Qaeda before September 11, 2001, and said that she was simply filling a gap. (A 2004 audit showed that the F.B.I. alone had thousands of hours of untranslated intercepts.) Indeed, Katz has received outsourcing contracts from the government.
Before the September 11, 2001, attacks, the official counterterrorism agencies paid relatively little attention to the jihadis’ online presence. But in the past few years that has changed, in large measure because of changes in the way terror networks operate. "Nearly everything about Al Qaeda that matters is happening online right now," Peter Bergen, a journalist and terrorism expert, said. Some analysts believe that Al Qaeda today is a model of what is called "leaderless resistance": self-appointed cells operating with help and inspiration from materials that they find online. Traffic rose dramatically after Abu Musab al-Zarqawi, the head of Al Qaeda in Iraq, posted a video of the beheading of the American contractor Nicholas Berg.
"It’s not as if Al Qaeda were inventing this," Jessica Stern, a terrorism specialist who served on the National Security Council under President Clinton, said. What’s unique about Islamic terror and the Internet is that there is up-to-the-minute access to what terrorists are thinking. Rita Katz is, in a sense, the natural complement, the engineer of a leaderless counter-resistance to the terrorist groups. "Some people think that she’s a zealot," Stern said when I asked her about Katz, "but only a zealot would provide this kind of service." . . .
Katz has a testy relationship with the government, sometimes acting as a consultant and sometimes as an antagonist. About a year ago, a SITE staffer, under an alias, managed to join an exclusive jihadist message board that, among other things, served as a debarkation point for many would-be suicide bombers. For months, the staffer pretended to be one of the jihadis, joining in chats and watching as other members posted the chilling messages known as "wills," the final sign-offs before martyrdom. The staffer also passed along technical advice on how to keep the message board going. Eventually, he won the confidence of the site’s Webmasters, who were impressed with his computer skills, and he gained access to the true e-mail addresses of the members and other information about them. After monitoring the site for several more days, the staffer told Katz that one of the site’s members, a young Muslim man in a European country, had just posted a will. "It was obvious that he was planning to become a martyr very soon," Katz said.
Katz called officials in Washington, and was met with institutional resistance: "They said, 'Oh, Rita, I’m not sure you should even be communicating with them—you might be providing material support!' And they wanted to get approval from the Department of Justice to look at the e-mails. I said, 'Look, we have to do something.'" Katz then called an American counterterrorism official stationed in the young man’s country, and he, in turn, sent the jihadi’s e-mails to local investigators. Within twenty-four hours, they had him under surveillance, and a week later they arrested him. "In my opinion, they probably wouldn’t have had a clue if it hadn’t been for Rita," the official told me. This, Katz said, is what she always hopes to achieve: "It’s one case where everything just worked so well." . . .
Katz believes that America has so far understood the terrorist threat only in bastardized and insufficient terms. She believes that it is wrong to assert, as President Bush does, that terrorists are motivated by hatred for our freedoms rather than by our policies in the Middle East or those of their own governments. Though she herself is circumspect about the issue of Iraq, some members of her staff believe that the war is a distraction from the fight with radical Islamic terrorism. But Katz also believes that terrorists are more sophisticated and resilient than most Americans realize, that the war against radical Islam is likely to last for decades, and that the outcome is far from clear. Her project is, in large measure, to convince Americans of the seriousness of the threat by building a direct conduit to the terrorist mind. . . .
Katz has a very specific vision of the counterterrorism problem, which she shares with most of the other contractors and consultants who do what she does. They believe that the government has failed to appreciate the threat of Islamic extremism, and that its feel for counterterrorism is all wrong. As they see it, the best way to fight terrorists is to go at it not like G-men, with two-year assignments and query letters to the staff attorneys, but the way the terrorists do, with fury and the conviction that history will turn on the decisions you make—as an obsession and as a life style. Worrying about overestimating the threat is beside the point, because underestimating the threat is so much worse. . . .
Even this excerpt can't do this story justice; read it in full here.
Posted by John at 5:08 AM | Comments (0) | TrackBackQuote of the Day for Thursday, May 25, 2006
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May 24, 2006
U.S. Farmers Thankful for China's Appetite
U.S. farm exports to China rose 70% in the first quarter of this year. At $2.3 billion, China is second only to Canada among U.S. farm export markets globally.
(Source: PPI)
Posted by John at 5:44 AM | Comments (0) | TrackBackGeorge McGovern on "More" and "Too Much"
In a commentary published in the Los Angeles Times, George McGovern points out that in a very competitive global economy, the "more" unions have gotten in the habit of demanding is, to use his words, "'too much' in a global and far more competitive economy."
Yes, that George McGovern.
He offers a reality check on Wal-Mart and other large U.S. companies:
It can be galling to hear companies argue that they have to cut wages and benefits for hourly workers — even as they reward top executives with millions of dollars in stock options. The chief executive of Wal-Mart earns $27 million a year, while the company's average worker takes home only about $10 an hour. But let's assume that the chief executive got 27 cents instead of $27 million, and that Wal-Mart distributed the savings to its hourly workers. They would each receive a bonus of less than $20. It's not executive pay that has created this new world.
I understand the attraction of asking business — the perceived "deep pockets" — to shoulder more of the responsibility for social welfare. But there are plenty of businesses that don't have deep pockets. And many large corporations operate with razor-thin profit margins as competitors, both foreign and domestic, strive to attract consumers by offering lower prices.
The current frenzy over Wal-Mart is instructive. Its size is unprecedented. Yet for all its billions in profit, it still amounts to less than four cents on the dollar. Raise the cost of employing people, and the company will eliminate jobs. Its business model only works on low prices, which require low labor costs. Whether that is fair or not is a debate for another time. It is instructive, however, that consumers continue to enjoy these low prices and that thousands of applicants continue to apply for those jobs.
Maryland recently passed a law aimed at requiring Wal-Mart to spend more on health insurance. This is an extremely flawed path to healthcare reform. We need universal coverage, not piecemeal legislation designed to punish companies because they operate differently than their competitors.
The fact is, demanding more from business based on sales or the number of employees is not always the best way to achieve a just result.
(Thanks to Don Luskin for the pointer.)
Posted by John at 5:30 AM | Comments (0) | TrackBackQuote of the Day for Wednesday, May 24, 2006
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May 23, 2006
Hong Kong's Pollution Near a 'Negative Tipping Point'
Foul air cost Hong Kong $300 million in medical bills and lost productivity last year, a 3.8% increase from 1995, the University of Hong Kong calculates. With more than one day in four now marred by poor visibility, the city soon may be counting the cost of lost talent and investment, said Jack Maisano, president of the American Chamber of Commerce in Hong Kong.
"We're close to a tipping point where the negative investment impact is going to be measurable," said Maisano, adding that the evidence is still anecdotal. "Everybody knows someone who is leaving or has left, or is intending to leave."
Posted by John at 5:15 AM | Comments (0) | TrackBackResidents aren't the only people affected by air quality, said Harry O'Neill, managing director in Hong Kong of Whitney Group, which specializes in recruiting financial services executives. Potential hires from overseas are turning down job offers in Hong Kong because of health fears, he said.
"We've brought in quite a few people this year, but it's definitely a major consideration and we certainly have rejections," said O'Neill, a resident of Hong Kong for 13 years. "It's not even that they want more money. People with young children seriously worry about living here."
Hong Kong's air contains almost three times more particles of soot and other pollutants than air in New York and Paris, and more than double the amount in London, according to the University of Hong Kong. In Los Angeles, the most polluted U.S. city, people breathe in 29% fewer such particles.
Residing in Hong Kong is worse than living at a Formula One race track, said Anthony Hedley, a doctor and professor of community medicine at the university. "We have the worst pollution of all the socio-economic developed cities of our type in the world," said Hedley, who has studied air pollution for 18 years.
China's Mobile Phone Users Exceed 416 Million
China's mobile phone users now exceed 416 million and is growing by three to four million users per month.
In the first four months of this year, over 132 billion text messages were sent by China's mobile phone users. (Source: China Daily)
These numbers fascinate me, particularly since one particular China story a friend told me once sticks in my mind. During a trip to China a couple of decades ago, the only phone available to hotel guests, he said, was a public phone in the lobby. Naturally, there was a long line, and after finishing a call you had to go to the back of the line and wait to make a second call.
Posted by John at 5:15 AM | Comments (0) | TrackBackThat Tremor You're Feeling is a Telecommunications Earthquake
Mike Landberg of the San Jose Mercury News explains what his communications choices during a vacation in France augurs for the rest of us:
I just returned from a three-week vacation in France, mostly in small Languedoc and Provence villages surrounded by miles and miles of grapevines.
Of course, I took my laptop. Both of the rustic houses where my family stayed, as well as a hotel in Paris where we stopped for two nights, had wireless Internet connections.
Before leaving, I bought a block of PC-to-phone minutes from Skype, the Internet phone service owned by San Jose-based eBay. From France, I could now call friends and family back in the United States for a scant 2 cents a minute after plugging a headset into the laptop.
Between the usual tourist excursions and gourmet meals, I made 2 hours and 15 minutes of calls. Total cost: slightly less than $4.
I'm telling this story for two reasons.
First, my behavior changed in a big way. On previous trips to Europe, I didn't call the United States; it was too expensive. This time, I talked whenever I wanted -- including one marathon 43-minute conversation with my in-laws in Florida.
Second, the French telecommunications network didn't get a centime from me. Skype pays a small fee to transfer calls from the Internet to phone networks near their destination, the United States in this case. But the once-lucrative business of selling overpriced international phone calls is evaporating.
My experience is one small example of a seismic shift in telecommunications. . .
The shift to Internet-based phone calls is happening quickly, as Landberg explains, and is terrible for the new AT&T and other sizeable telecomm