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Chinese President Xi Jinping said the global economy has entered a period of “profound readjustment” and recovery remains elusive

China President Xi Says Global Economic Recovery Remains Elusive

Chinese President Xi Jinping said the global economy has entered a period of “profound readjustment” and recovery remains elusive.

The international financial industry is fraught with risks and protectionism is on the rise, Xi said in a speech at the Boao Forum for Asia in the southern Chinese province of Hainan today. Countries are still facing difficulties in adjusting their economic structure and the global-governance mechanism needs improvement, he said. Read more of this post

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Local Chinese governments may have more than 20 trillion yuan ($3.2 trillion) of debt, double the official estimates, former Finance Minister said

China Local Debt May Top Estimates, Former Minister Says

Local Chinese governments may have more than 20 trillion yuan ($3.2 trillion) of debt, exceeding the official estimates, former Finance Minister Xiang Huaicheng said at the Boao Forum for Asia.

Xiang’s estimate for provincial and city government borrowings is almost double the 10.7 trillion-yuan figure that the National Audit Office gave for such debt in a 2011 report. The combined debt of China’s central and local governments may currently be more than 30 trillion yuan, said Xiang, who served as finance minister from 1998 to 2003.

“It seems the central government’s debt level is quite transparent, while local government debt isn’t, and therefore it’s not easy to get a clear picture,” Xiang said yesterday. He added that since he retired, he’s no longer “within the system” and that his comments on government debt are based on his own personal estimates.

China has sought to curtail borrowing by local governments because of concerns that banks will be saddled with bad debts. The nation’s central bank estimated in 2011 that local governments, which are barred from directly taking bank loans or selling debt, had set up more than 10,000 financing arms to fund the construction of roads, bridges and sewage plants. Read more of this post

In History Departments, It’s Up With Capitalism; The new work marries hardheaded economic analysis with the insights of social and cultural history, integrating the bosses’-eye view with that of the office drones — and consumers — who power the system

April 6, 2013

In History Departments, It’s Up With Capitalism

By JENNIFER SCHUESSLER

A specter is haunting university history departments: the specter of capitalism. After decades of “history from below,” focusing on women, minorities and other marginalized people seizing their destiny, a new generation of scholars is increasingly turning to what, strangely, risked becoming the most marginalized group of all: the bosses, bankers and brokers who run the economy. Even before the financial crisis, courses in “the history of capitalism” — as the new discipline bills itself — began proliferating on campuses, along with dissertations on once deeply unsexy topics like insurance, banking and regulation. The events of 2008 and their long aftermath have given urgency to the scholarly realization that it really is the economy, stupid.

The financial meltdown also created a serious market opportunity. Columbia University Press recently introduced a new “Studies in the History of U.S. Capitalism” book series (“This is not your father’s business history,” the proposal promised), and other top university presses have been snapping up dissertations on 19th-century insurance and early-20th-century stock speculation, with trade publishers and op-ed editors following close behind. The dominant question in American politics today, scholars say, is the relationship between democracy and the capitalist economy. “And to understand capitalism,” said Jonathan Levy, an assistant professor of history at Princeton University and the author of “Freaks of Fortune: The Emerging World of Capitalism and Risk in America,” “you’ve got to understand capitalists.” That doesn’t mean just looking in the executive suite and ledger books, scholars are quick to emphasize. The new work marries hardheaded economic analysis with the insights of social and cultural history, integrating the bosses’-eye view with that of the office drones — and consumers — who power the system. “I like to call it ‘history from below, all the way to the top,’ ” said Louis Hyman, an assistant professor of labor relations, law and history at Cornell and the author of “Debtor Nation: The History of America in Red Ink.”

Read more of this post

Big, Hot, Cheap, and Right: What America Can Learn from the Strange Genius of Texas

April 6, 2013

How Texas Became Texas and Why It Matters

By BRYAN BURROUGH

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AS a Texas-raised journalist, I can tell you two things with confidence about my native state. One, its economy has been humming nicely for years. Two, this appears to greatly offend a certain breed of Northern writer, several of whom have descended on the state in an attempt to rebut stories of a “Texas miracle.” Their reports, Erica Grieder writes, have contributed to “a widespread impression that Texas is corrupt, callous, racist, theocratic, stupid, belligerent, and most of all, dangerous.”

This is nothing new, as most any Texan will tell you. But Ms. Grieder, a onetime correspondent for The Economist who now works at Texas Monthly, and a Texan herself, has written a smart little book that counters much of this silliness, and explains why the Texas economy is thriving. It’s called “Big, Hot, Cheap and Right: What America Can Learn from the Strange Genius of Texas” (PublicAffairs, $26.99). The sad truth, alas, is that it’s probably a lot easier to understand the successes of Texas than it would be to duplicate them.

What might be copied, Ms. Grieder indicates, is the so-called Texas model — that is, a weak state government with few taxes and fewer regulations and services. It would be far harder to replicate the state’s civic DNA, which features traits that can be traced to its decade, beginning in 1836, as a stand-alone nation (independent, suspicious of Washington), the late-1800s cowboy era (self-reliant, fraternal) and the 20th-century introduction of oil and entrepreneurialism (pro-business, skeptical of government). Those values, Ms. Grieder says, created a populace ideal for economic growth: “pragmatic, fiscally conservative, socially moderate and slightly disengaged.” Read more of this post

Cartoon of the Day: The Difference Between Bankers and Pirates

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It’s harder than ever to run a truly actively managed fund. Here’s how four firms execute unique – and successful – strategies. “We want to know that there’s intellectual thought, that there’s a process for buying companies, as well as for selling them”

SATURDAY, APRIL 6, 2013

Earning Their Keep

By SARAH MAX | MORE ARTICLES BY AUTHOR

It’s harder than ever to run a truly actively managed fund. Here’s how four firms execute unique — and successful — strategies.

It’s not easy being an active fund manager these days. Market information that was once available to a privileged few now flows freely and quickly. Index funds and exchange-traded funds, meanwhile, make it possible to implement simple or sophisticated strategies cheaply and effectively.

And then there’s performance.

Last year, 66% of domestic equity managers underperformed relative to the Standard & Poor’s 1500 index, according to the S&P Dow Jones Indices SPIVA Scorecard. That’s a considerable improvement over 2011, when 84% of active managers lagged the benchmark, but it’s hardly vindication for stock-picking. Even managers dealing in the supposedly inefficient international markets have struggled to get an edge. Last year, just 56% of international funds and 54% of emerging-market funds managed to deliver that elusive, market-beating “alpha” they’re paid for. There have been consequences: Over the past five years, nearly 27% of actively managed domestic equity funds and 23% of international equity funds have merged or liquidated.

So what’s an active manager to do? Some end up as “closet indexers,” who charge too much for hugging the index. In 2011, only 11% of assets invested in actively managed large-company funds were in portfolios that deviated from their benchmark by more than 80%, according to Martijn Cremers, a Notre Dame professor who helped pioneer “active share,” a measure of how truly active an active manager is. However, “skilled managers are out there,” says Charlie Ruffel, managing partner at Kudu Advisors, a strategic advisory firm for asset managers. “The challenge is in identifying them.”

The standout managers tend to have standout firms behind them, equipping them with the research teams, technology, financial backing, and supportive culture needed to go above and beyond. Some favor more concentrated approaches, investing in a small number of their very best ideas. Others take pains to investigate or even involve themselves with the management of the companies they invest in. Some take creative approaches to data-crunching, creating new perspectives on the market, while others simply thrive in a culture of constantly questioning and defending their stock-picking and portfolio moves. “Up until five years ago, managers didn’t need to try so hard to stand out,” adds Ruffel. “We’re in a different place.” Experts, such as financial advisors and consultants who help institutions choose funds, are constantly evaluating managers, looking for a process that brings consistent outperformance. They’re also looking for lights and mirrors — actions that appear to be in the name of research but don’t add value. Too much activity, they say, can be a warning sign. For instance, a manager who spends a disproportionate amount of time or travel on a position that represents less than 5% of the portfolio “might be cause for concern,” says Jonathan Bergman, a managing director at TAG Associates in New York. In general, however, Bergman and his peers are reassured when they hear that management has gone to great lengths to gain extra insight into a holding. “We want to know that there’s intellectual thought, that there’s a process for buying companies, as well as for selling them,” he says. Read more of this post

WPP CEO Martin Sorrell has built an advertising and marketing-services colossus by snapping up famous agencies on both sides of the Atlantic. A fighter to the end

SATURDAY, APRIL 6, 2013

No Ordinary Ad Man

By JONATHAN BUCK  | MORE ARTICLES BY AUTHOR

WPP CEO Martin Sorrell has built an advertising and marketing-services colossus by snapping up famous agencies on both sides of the Atlantic. A fighter to the end.

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The advertising industry has long been known for colorful, larger-than-life characters. But few—past, present, or fictional (think Mad Men‘s Don Draper)—can compete with Martin Sorrell.

The head of London-based WPP, Sorrell is charming and feisty, puckish and ruthless, and seems to make money and enemies with equal dispatch. The legendary ad man David Ogilvy dismissed him as an “odious little jerk” when Sorrell sought to buy the U.S. advertising firm Ogilvy & Mather in 1989. But Sorrell, as usual, got the last laugh, winning both the company and an apology from Ogilvy, who went on to serve as WPP’s nonexecutive chairman for the next three years.

Sorrell, 68, has been called a bean counter, but then, his globe-spanning advertising and marketing-services conglomerate amounts to a huge hill of beans. Launched in 1985 with the friendly takeover of a British shopping-cart maker known as Wire & Plastic Products, WPP (ticker: WPP.U.K.) today employs 165,000 people in 110 countries, and operates under dozens of separate brands. It reported worldwide billings of more than $70 billion in 2012, and counts Google (GOOG) and News Corp. (NWSA), the owner of Barron’s, as its biggest customers. Read more of this post

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