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周小川:把握好多目标货币政策_手机新浪网 June 25, 2016

Posted by hslu in China, Economics, Global Affair.
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http://finance.sina.cn/china/gncj/2016-06-24/detail-ifxtmweh2510496.d.html?sinawapsharesource=newsapp&wm=3200&from=singlemessage&isappinstalled=0

Took me a while to read it over. It has been a difficult but nonetheless a very rewarding journey for Bank of China and Chinese people over the past quarter of a century.

The pace was fast. The change was dramatic. The process has been constantly questioned by the western media. After 25 years, the benefits definitely out weigh the costs and the work done by the Central Bank of China establishes a solid foundation for the next 25 years.

The game Yellen and FOMC play September 19, 2015

Posted by hslu in Economics.
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I bet that you don’t know this. I‘ll let you in on a big secret here.

After Yellen took over American’s top banker job from Bernanke, she came up with a new game for FOMC bankers to play when they meet in Washington DC every time they meet.

They play with dots. Seriously, they take turn to throw dart on a piece of paper and come up with the so-called “Dot Plot.”

Take a look what they came up with three months ago in June 2015.

Slide5

 

Last Wednesday and then Thursday, they, under the supreme leadership of Yellen, diligently played the same “dart” game again behind the heavily guarded metal doors of the Federal Reserve’s building near the Capitol. And here is what they came up with: more dots.

Slide4

My conclusion: these people, just like the rest of us mortals, have no idea of what U.S. economy will be like next quarter or, for that matter, any quarter of any given year. They are, shall I say, playing with dots in the dark.

But, do not for any nano second, underestimate the importance of these dots because the decision they come up with based on these dots will have huge influences on the bond markets, stock markets, currencies and commodity prices all over the world. Some countries may sink into recession. Some countries may see inflation out of control. Some countries will experience significant down-turn on their economies. Above all, many people in many countries will suffer, probably for a long time after Yellen and company wrap up their dot plots.

 

Lower skill level – Lower productivity July 24, 2014

Posted by hslu in China, Economics, Global Affair, Obama.
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This inevirtablly translates into slower growth in the United States. The data don’t lie and the trend is obvious.

image

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Source: The Economist

The reason: fewer smart people come to the U.S. to work.

Decades ago, many highly educated people from abroad came to the U.S. for advanced degrees. They then stayed here and worked for the U.S. in pursuit of their American Dreams.

Nowadays, their dreams are in China, Korea, Singapore, India, Russia, Brazil and a few other nations. The highly educated people still come to the U.S. for advanced degrees but they go back to their home countries because prospects are brighter there.

With Obama and Democrats encourage illegal immigrants come to and stay in the US, there are millions of less educated people from Mexico and central America countries flooding the border states. These people stayed here with little chance to get deported back to where they came from. They drain public resources and add considerable burden to American tax system. For years, they’ll take and they have little to contribute.

The result: slower growth for years to come and perpetual mediocrity; the hallmark of the Democratic Party.

Simple as that.

Do you need a PhD in Economics to figure this out?

Nope.

The top 1% have recovered, have you? September 13, 2013

Posted by hslu in Economics, stocks.
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What financial crisis? Didn’t you see the Dow Jones Industrial is only 1.8% from the all time high? Didn’t you hear that the real estate markets in NY and CA have been bid up to the highest level ever?

Yes, the recovery is for real for the top 1%: their stock investments have gone up to the pre financial crisis level; their real estate properties just sold for more than they have asked for; their businesses are booming and their salaries, bonuses and stock options have shot up through the roof. Yes, thank you very much, life has never been better for them.

Have your lives recovered from the ruins? Have your financial situations recovered from the damages done by the very same top 1%?

Probably not.

Have you noticed? September 2, 2011

Posted by hslu in Chinese Food, Economics, Restaurants, Small Business.
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A rush of new kabob restaurants has popped up all over the Northern Virginia in recent months.

As economy turned sour, more people took control of their own situation, either out of necessity (laid off from their jobs) or frustration, and open a business on their own or with their friends.

It is not limited in the kabob business at all: pizza stores, sandwich stores, Indian restaurants, wraps of all kinds and Latino restaurants too.

This put pressure on existing restaurants especially the Chinese restaurants because the Chinese restaurants are all operating under minimal margin for a long time.

With declining economy and persistent unemployment rates, I am afraid that a shake down may be coming before we know it.

I wish I will be proving wrong.

More Porks are coming! More Porks are coming! December 10, 2010

Posted by hslu in Uncategorized.
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The Democrats are doing their best to add more Porks to the tax deal in order to buy out those senators and congressmen who are not happy with Obama.

$800 billion?

No way.

How about $1.2 trillion after all the sweet heart deals and behind the door arm twisting buyouts.

No way to pay for it? No problem. We’ll just borrow them from the China, Japan and Germany.

We have the press, don’t we?

To save or to spend December 7, 2010

Posted by hslu in Congress, Economics, Obama, Politics.
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Assuming the tax cut deal struck between Obama and Republicans survive the objections from Democrats, what will you do with the extra money you are not sending to Uncle Sam?

Will you go out and spend them on something that will make you feel good? Or will you send it to the credit card company to pay down that debt you’ve accumulated over the holidays?

My bet is you will not spend it. Well, maybe a small portion to but juniors something.

Will it make a dent on the high unemployment rate?

No.

The extension of Bush tax cut will only prevent the economy sink even further. It wo’t bring too much of a relieve to the high unemployment figure.

Nonetheless, Obama will claim credit in January 2012 even if the economy stays in the shit hole at that time.

He’ll say that he cares about America’s middle class. He cares about the economy. He didn’t give it a damn to Democrats because they are damaged goods after the mid-term election.

Obama cares more about his re-election more than the future of the Democrat party even though he helped bring the party down to it’s knees.

Is Inflation Coming? May 30, 2009

Posted by hslu in Economics.
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Is Inflation coming?

Mr. Paul krugman published an Op-ed on NY Times on May 28, 2009 arguing that the Big Inflation Scare is not founded.

He reasons that banks are not lending and, in some cases, even return the money back to the Fed. He also suggests that Japan, facing similar difficulties in late 1990’s and early 2000’s purchased a tremendous amount of debt. But the consumer prices there fell instead!

I am not sure this is a legitimate comparison though. Japan is facing two very serious  problems: aging population and low birth rate which I believe are the primary reason, among others, responsible for falling consumer prices. Government spending has limited effect because Japanese, especially older Japanese, are savers instead of spenders. We know that savers do not grow economy. Spenders, such as American, do!

Japan’s economy is heavily dependent on export which has been under serious competition from countries such as China. As a result, its economy has not been able to grow like it did in the 1980’s. As economy stagnant or slowed down, consumer prices fell despite heavy government spending.

The economy of the United States is consumer-driven which accounts for roughly 70% of the GDP. Americans are accustomed to spending and, as a nation, our savings rate has been hovering around 0% for many years. The financial crisis has changed our spending habit and has raised our savings rate to about 4% in recent months. The reduction on consumer spending and tight lending practices have been largely responsible for the contraction of GDP since December 2007. Despite government spending which is inherently inefficient and wasteful, the recession will not end until housing market recovers, bank lending returns to normal and job market stabilizes. Government spending by itself will not end the recession, period.

In other words, credit will eventually start to flow to corporations and consumers. Otherwise the economy will not grow very fast. Without growth, the recession will not end. Lending will come back because banks will not sit on their reserves forever and investors will demand a better return. The consumer will return to spending once stock market recovers and housing market bottoming out. As we feel better for our future and our jobs, savings rate will decline again and consumer spending will pick up.

When that happens, the extra money supply that the Fed has been putting in the system will eventually lead to inflation. All we need now is time.

We will see in 2 years whether Mr. Krugman is right or wrong.

Personal Thoughts about Wise Investor Group Annual Seminar January 30, 2009

Posted by hslu in Economics.
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Summary of Wise Investor Group Annual Seminar

It was a cloudy morning when I arrived at the Marriott Fairview Park in Falls Church, Virginia around 11:15 on Sunday, January 24, 2009. I was 15 minutes away from the Wise Investor Group’s annual seminar on stock market. The Wise Investor Group, under the direction of Randy Beeman, has $1.4 billion of clients’ asset under management and they have since 1988 adopted a value-oriented philosophy in their investment of stocks and bonds. They also have a 2-hour radio talk show on Sunday from 9 to 11 AM on WMAL AM 630 station.

Maria and I have been attending this annual seminar for the past several years and I enjoyed it a lot. It provided a review of the major factors affecting the stock market in the year just past and a preview of what’s to come. It required a donation to the Orphan Foundation of America and a small lunch was provided for the attendees. On average, about 700 to 800 people att3ended the seminar and it ran for 3 hours including a 45 minute lunch.

Here are some highlights:

1.               We are currently in a secular bear market and it started in March 2000 after the Internet and telecom bubbles. Here are market trends of a secular bear market:

a.      Declining P/E Ratio

b.     Rising Interest Rates

c.      Offset Earning Growth

d.     Volatile Markets

e.      Lower Absolute Returns

2.               There was no place to hide in 2008:

a.      Material                      -45%

b.     Utilities                       -32%

c.      Telecom                      -34%

d.     Staples                        -17%

e.      Discretionary              -35%

f.       Energy                         -36%

g.      Industrial                     -42%

h.      Health                          –24%

i.       Tech                            -43%

j.       Financial                     -56%

3.               Every major stock markets around the world also took a beating:

a.      S&P 500                      -36%

b.     Brazil                          -37%

c.      Euro                            -42%

d.     FTSE 100                    -29%

e.      CAC 40                       -38%

f.       DAX                            -42%

g.      Nikkei 225                  -44%

h.      Hang Seng                   -44%

4.               The United States has gone through several years’ decline in GDP (yoy GDP growth)

a.      2004                            3.6%

b.     2005                            3.1%

c.      2006                            2.9%

d.     2007                            2.2%

e.      2008                            0.52% (est.)

f.       2009                            -1.4% (est.)

5.               It appears that the global economy still has some down side risk. One good indicator of the global economy is the Baltic Dry Index. It tracks global dry good shipping rates around the global.

Notice a small uptrend in 2009. It is still too early to say the worst is over.

6.               The US unemployment rate will likely reach 9% or higher in 12 months:

7.               Housing crisis has not reached the bottom yet:

Here are two measures of housing affordability:

Decline from peak       Decline from today

Decline to reach stability to Historical Level to Historical Level

Relative to Trad. Appreciation                          -43%                           -24%

Relative to Household Income                            -33%                           -17%

Relative to Rents                                                  -32%                           -18%

Conclusion:           Still 15 – 25% decline from current level.

May need 9 to 12 months to reach equilibrium

8.               Is the end of recession in sight? Here is a good indicator to watch: The U.S. Continuing Unemployment Claims. It usually peaked within a month or two of the official end of recession.

a.      Here is the relationship of past recessions vs. official Continuing Claims:

b.     Cycle peak in Continuing Claims        Final Month of official US Recession

Nov 1970                                                        Nov. 1970

May 1975                                                        March 1975

June 1980                                                        July 1980

November 1982                                              November 1082

June 1991                                                        March 1981

November 2001                                              November 2001

9.               The recession of 2007 officially started in December 2007. When will this recession end?

Unemployment (SA)

Jan. 10, 2009 Jan. 3, 2009 Dec. 27, 2008 2007

4,607,000              4,510,000                    4,612,000                    2,682,000

Nov. 8, 2008 Nov. 1, 2008 Oct. 25, 2008 2007

4,012,000             3,903,000                    3,832,000                    2,580,000

source:                  http://www.dol.gov/opa/media/press/eta/ui/current.htm

http://ows.doleta.gov/press/2008/112008.asp

10.       Why is it important to know when recession ends? Because of the discounting mechanism of the stock market which precedes the economic trend by 6 to 9 months. At the end of the 1982 recession, the continuing claims reached to nearly 11 millions in November 1982.

11.       This secular bear market was the worst since 1932 bear market in depression:

Start of Bear Market                Duration, days                         Total Decline, %

3/8/1932                                              122                                          -54

10/11/2007                                          412                                          -53

3/10/1937                                            386                                          -49

1/19/1906                                            665                                          -49

9/3/1929                                              71                                            -48

11/3/1919                                            660                                          -47

4/17/1930                                            243                                          -46

6/17/1901                                            875                                          -46

1/11/1973                                            694                                          -45

7/3/1931                                              94                                            -44

9/30/1912                                            815                                          -44

12.       What’s in store for 2009?

1.               V-Shape recovery in economy and stock market.

a.      Government spending

b.     Huge cash position on the side line

c.      Low interest rate

2.               Deflation takes hold and economy continues to languish

a.      Stimulus plan not working

b.     Global recession worse then anticipated

c.      Consumer debt and corp. debt at huge level

d.     Credit crisis continuing spiral down

3.               Slow recovery in economy and market

a.      Stimulus spending stabilizing the labor market

b.     Low interest rate helps the housing market

c.      Corp earning improving slowly

d.     Confidence comes back in the financial markets

4.               Gold should be included in portfolio

a.      US Dollar decline – huge federal and trade deficits

b.     Relatively cheap compared to other markets – adjusted for inflation, gold is below the level seen in 1984

Potential problems around the World

  • Oil price required to balance federal budgets:

c.      Venezuela                                             $97

d.     Nigeria                                                   $71

e.      Iran                                                      $58

f.       Saudi Arabia                                       $62

g.      Russia                                                  $70

  • Oil demand will surprise oil supply. Oil Reserves by Region is a big concern:

h.      North America                                      200 billion barrels

i.       Central and South America                 100 billion

j.       Former USSR/Eastern Europe           80 billion

k.      Middle East                                            790 billion

l.       Africa                                                       100 billion

m.    Asia/Pacific                                              45 billion

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