Southeast Asia’s 2015 unity dream collides with reality; “This kind of exercise – highly ambitious, short time-lines – simply works to fracture the organization further.”

Southeast Asia’s 2015 unity dream collides with reality

Thu, Apr 25 2013

By Stuart Grudgings

BANDAR SERI BEGAWAN, Brunei (Reuters) – Southeast Asian nations have quietly begun to row back on a deadline of forming an “economic community” by 2015, confirming what many economists and diplomats have suspected for years as the diverse group hits tough obstacles to closer union.

Rather than referring to the end of 2015 as a firm goal, officials at this year’s first summit of leaders of the Association of Southeast Asian Nations (ASEAN), whose 10 members range from glitzy Singapore to impoverished Myanmar, prefer to call it a “milestone” to be built on in years ahead.

In so doing, they are bowing to the reality of slow progress and even some regression on politically sensitive goals, such as eliminating non-tariff barriers and lowering obstacles to the free flow of labor in the diverse region of 600 million people. Read more of this post

Milk Smugglers Top Heroin Courier Arrests in Hong Kong

Milk Smugglers Top Heroin Courier Arrests in Hong Kong

For border officials in Hong Kong, baby formula trumps heroin.

Since the former British colony on March 1 restricted outbound travelers to two 2-pound cans each, a syndicate has been cracked and more people have been arrested for smuggling milk powder than were detained all of last year for carrying heroin.

The reason? Mainland Chinese demand for the formula, fueled by distrust of locally made food after product- safety scandals that included the deaths of at least six babies due to tainted milk. The U.K. and New Zealand are among countries that restricted milk sales as bulk purchases of brands such as Danone (BN)’s Aptamil and Mead Johnson Nutrition Co. (MJN)’s Enfamil caused local shortages.

“Most of them only have one child, and the child is the most important thing in their life,” James Roy, a Shanghai- based analyst China Market Research Group, said of Chinese parents, most of whom are subject to the government’s one-child policy. “They want to be extra careful.”

The crackdown on milk buyers gives Danone (BN), Nestle SA (NESN), and Mead Johnson an opportunity increase their market share in China at the expense of domestic rivals such as China Mengiu Dairy Co. (2319) and Inner Mongolia Yili Industrial Group Co. (600887) Read more of this post

Calpers Tops $260 Billion as It Recoups $95 Billion Loss but still short $87 billion, or about 26 percent, of meeting its long-term commitments, and has had to ask the state and struggling cities to contribute more

Calpers Tops $260 Billion as It Recoups $95 Billion Loss

The California Public Employees’ Retirement System reached a market value of $260.8 billion in assets, surpassing the high set before the global financial crisis wiped out more than a third of its wealth.

The largest U.S. pension, with half of its money in equities, passed its pre-recession high of $260.6 billion on Oct. 31, 2007, according to a posting today on its website. The fund returned 13 percent in 2012, about the same gain as the Standard & Poor’s 500-stock index.

“The fund is stabilizing and the lessons we’ve applied from the past are paying off,” Chief Investment Officer Joe Dear said by e-mail. “But as remarkable as this number is, we are long-term investors and try to not get too excited when things are good or too discouraged when things are bad.”

Calpers isn’t alone in seeing gains. The 100 largest public pensions in the U.S. had $2.9 trillion in assets in the fourth quarter of 2007, according to U.S. Census Bureau data. That dropped to $2 trillion in 2009 and rebounded to almost $2.8 trillion as of Sept. 30. Even with its gains, the Sacramento-based pension is still short $87 billion, or about 26 percent, of meeting its long-term commitments, and has had to ask the state and struggling cities to contribute more. Read more of this post

Japan’s state-backed funds take risks, but what are the rewards? Possible risks to Japanese taxpayers were on full display last year when Elpida Memory failed only three years after it was saved with a 30 billion yen investment

Japan’s state-backed funds take risks, but what are the rewards?

Thu, Apr 25 2013

By Junko Fujita and Chikako Mogi

TOKYO (Reuters) – As part of Japan’s economic revival plan, the new government has added $3.2 billion to the spending power of state-linked funds investing in Japanese companies, effectively acting as venture capitalists much to the chagrin of private equity firms.

Critics argue the government largesse – the state funds spending power has now gone up to some $34 billion – will crowd out private equity in a country that desperately needs risk-taking investors to revitalize a corporate sector struggling to maintain its global competitive edge. Read more of this post

Japans’s Scary Lesson on Slashing Interest Rates; Politicians, bankers, investors and businesspeople alike get addicted to free money all too easily and clamor for more

Japans’s Scary Lesson on Slashing Interest Rates

Christine Lagarde wants her staff at the International Monetary Fund to examine what might happen to the global economy when central banks begin to raise interest rates. She’s wasting their time.

If Japan has taught us anything, it’s that slashing rates to zero and beyond is a lot easier than returning them to normalcy. Japan is on its sixth central-bank governor since its bubble burst in 1990, and like his predecessors, Haruhiko Kuroda is doubling down on quantitative easing. Why? Politicians, bankers, investors and businesspeople alike get addicted to free money all too easily and clamor for more.

Once central banks start embracing assets such as corporate debt, commercial paper, mortgage-backed securities, exchange- traded funds, real-estate trusts and the like, monetary officials tend to get stuck. That’s especially so in nations carrying large, and growing, debt burdens. Read more of this post

Malaysian Chinese May Abandon Prime Minister Najib as Fear of Riots Repeat Ebbs

Malaysian Chinese May Abandon Najib as Fear of Riots Repeat Ebbs

Malaysian businessman Stanley Thai says he’s joining thousands of fellow ethnic Chinese citizens in abandoning support for Prime Minister Najib Razak and voting for the opposition for the first time in elections next month.

“Why are the Chinese against the government — it’s simple,” Thai, 53, owner of medical glove-maker Supermax Corp. (SUCB), said in an interview last month. “We don’t want our children to suffer what we suffered, deprived from education, from career opportunities, from business opportunities.”

Chinese, who make up about a quarter of Malaysia’s population, are growing intolerant of affirmative-action programs for Malays propagated by Najib’s alliance of parties, the most recent national poll indicates. Any mass defection by Chinese voters raises the risk of the ruling coalition’s first election loss since it was formed after 1969 race riots.

The violence of 1969 helped persuade many Chinese to back Barisan Nasional, which Najib has led since 2009, as they accepted racial preferences for Malays as the cost of peace. Thai said thinking changed when the government’s electoral take sank in 2008 with little sign of renewed social unrest. “Everyone said, ‘Wow, the time has come,’” he said. Read more of this post

Let a Billion Consumers Bloom; Subsidies to encourage consumption distort China’s economy

April 25, 2013, 12:24 p.m. ET

Let a Billion Consumers Bloom

Subsidies to encourage consumption distort China’s economy.

The 7.7% growth rate China clocked for the first three months of the year was lower than economists had expected, and now Beijing is looking to stimulate domestic consumption instead of its usual reliance on manufacturing exports and investment. Uh oh. This wouldn’t be the first time the government has gone down this route. In 2009 it rolled out a range of consumption subsidies, such as the Chinese version of “cash-for-clunkers,” to encourage new-car purchases, handouts for rural households that bought new appliances, and even a subsidy for new motorbikes. This was only part of the broader four trillion yuan ($647 billion) stimulus plan Beijing rammed through that year, but it led to some of the most positive headlines out of China’s economy, especially concerning sales of new cars.

That stimulus was less than it was cracked up to be. Consider the case of automobiles, in which roughly 6.4 billion yuan in government money subsidized the purchased of 459,000 new cars in 2010 alone. Some observers hailed this as a policy success. But subsequent events have shown that—like its American counterpart—the Chinese auto subsidy mainly stole consumption from the future by encouraging car buyers to shift forward purchases they would have made anyway. New car sales fell precipitously as soon as the subsidy program ended. Read more of this post

Are Israel’s banks using the people’s money to control the people? The issue is much more complex than haircuts and debt arrangements for tycoons

Are Israel’s banks using the people’s money to control the people?

The average Israeli’s anger toward the country’s banks is reasonable, but the issue is much more complex than haircuts and debt arrangements for tycoons.

By Guy Rolnik | Apr.25, 2013 | 1:56 PM |  2

Haircuts. Defaults. Debt arrangements. Write-offs.

The average Israeli now knows these terms as well as any banker. On radio and television, in Knesset speeches and on the beach – finance experts have been popping up and spouting argot overnight. Defaulting tycoons seem to be replacing the ultra-Orthodox as scapegoats for Israel’s social evils. Read more of this post

Brewers set out to take sake global; the ascent of Japanese whiskey

Brewers set out to take sake global

BY NORIKO KAWAMURA

APR 26, 2013

NAGOYA – Ambitious sake brewers have turned to foreign markets in an attempt to replicate wine’s global success.

Exports of sake, which is essentially a rice wine locally referred to as “nihonshu,” have been growing in recent years, and trade fairs and competition events have become common. The proponents, some of whom are motivated by an unquenchable ambition, feel ready to take it up a notch.

Banjo Jozo, a sake brewery in Nagoya, has for several years been cultivating foreign customers. It is now exporting the Kamoshibito Kuheiji brand to upscale establishments, including the Ritz Paris and a three-star restaurant. Read more of this post

Oil and Gas, Blondes and Over-Accessorized Brunettes, and Ruthless, Hard-Drinking Cowboys

Speeches by Richard W. Fisher
‘Oil and Gas, Blondes and Over-Accessorized Brunettes, and Ruthless, Hard-Drinking Cowboys’ (With Reference to Sheikh Zayed, Diana Natalicio, My Nephew Charles and President Peña Nieto)

Remarks at the University of Texas at El Paso Centennial Lecture
El Paso, TX · April 10, 2013 

I so appreciate being here at the University of Texas at El Paso (UTEP), my first outing since returning from a trip to the United Arab Emirates. The founder of the Emirates—a collection of former “Trucial States” along the lower coast of the Arabian Sea—was Sheikh Zayed bin Sultan Al Nahyan, a wise man who had no formal education but knew of its enormous value. He said, “Education is a lantern which lights the dark alleys of ignorance.”[1]

I mention this because I cannot think of an educator who embodies this practical dictum better than Diana Natalicio. President Natalicio is a bright, shining lantern in the world of education. Actually, that’s an understatement: She is a klieg light! We are blessed to have her lead UTEP and move Texas and the nation forward on the frontiers of higher education. I am tremendously honored to be introduced by her. Thank you, Diana.

I am going to depart from my usual format today and rely heavily on slides—slides that provide a factual basis for what is going to be a dose of “Texas brag.” With its branches in El Paso, San Antonio and Houston, the Federal Reserve Bank of Dallas—the Federal Reserve’s Eleventh District—covers about 27 million people over 360,000 square miles stretching from northern Louisiana to southern New Mexico. Over 96 percent of the economic output of the district comes from Texas. Read more of this post

The Gorilla and the Maginot Line; Janet Yellen likes metaphors. This is a common trait among central bankers, at least the ones who see value in trying to explain their work

APRIL 25, 2013, 12:41 PM

The Gorilla and the Maginot Line

By BINYAMIN APPELBAUM

Janet Yellen likes metaphors. This is a common trait among central bankers, at least the ones who see value in trying to explain their work.

In 2007, she compared problems in the housing market to a 600-pound gorilla lurking in the corner of the Federal Reserve’s meeting room.

In 2010, she described the state of financial regulation before the crisis as “a financial Maginot Line that we believed couldn’t be breached.”

We all know what happened next: The gorilla broke through the Maginot Line.

She is not the most colorful of the current crop of Fed officials. That honor surely belongs to Richard Fisher, president of the Federal Reserve Bank of Dallas, whose most recent speech was titled “Oil and Gas, Blondes and Over-Accessorized Brunettes, and Ruthless, Hard-Drinking Cowboys.” Read more of this post

Southern Europe’s Recession Threatens to Spread North

April 25, 2013

Southern Europe’s Recession Threatens to Spread North

By JACK EWING

An ominous sign in Spain, where the unemployment rate is a staggering 27.2 percent.

FRANKFURT — No company symbolizes German industrial might like Daimler, the giant maker of Mercedes-Benz autos and trucks. So when the company said this week that it, too, had finally been caught in the downdraft of the European economic crisis, it was an ominous sign for all of the Continent, if not the whole world.

German exporters like Daimler have been bastions of stability on a continent burdened with shaky banks, dysfunctional governments and legions of unemployed youth — not to mention the worst auto industry slump in two decades. But Daimler’s glum forecast for 2013 was the latest evidence that Germany, and other relatively healthy countries like Austria and Finland, risk falling into the recession that has long afflicted their southern neighbors. Read more of this post

Raymond Bickson’s Revival Plan for Taj Hotels

Raymond Bickson’s Revival Plan for Taj Hotels

by Cuckoo Paul | Apr 26, 2013

Raymond Bickson is trying to change the Taj hotels’ operating model, but first the chain will have to learn to get out of its comfort zone

Read more of this post

Is Timex Suffering the Early Stages of Disruption? Amateurs can now make watches. Consumers might not want to wear your brand.

Is Timex Suffering the Early Stages of Disruption?

by Grant McCracken  |  12:00 PM April 25, 2013

In the early days of an innovation, it’s hard to tell whether we are looking at the future or just another blip on the screen.

Take the case of the Hudson Watch Company (HWC). It just got its first round of funding. From Kickstarter. It raised $115,703 from 409 backers, and will now go into production.

At this stage, the enterprise is preposterously small. (No disrespect to HWC. It’s simply a matter of scale.) We can’t believe something this tiny can tell us anything about the future. This can’t be a staging area for disruptive change.

Well, not so fast. No one at Patek Philippe has cause for concern, to be sure. But someone at Timex may. HWC may be precisely a harbinger of disruptive change. Read more of this post

CHART OF THE DAY: Chinese Politicians

CHART OF THE DAY: Chinese Politicians Are Ridiculously Wealthy

Sam Ro | Apr. 25, 2013, 2:30 PM | 1,924 | 11

China has a major corruption problem.

“2013 will mark the most vigorous anti-corruption fight by the Chinese leadership in decades,” write the analysts at Deutsche Bank. This initiative is expected to be bad news for China’s liquor suppliers, watch-makers, and food-service industry workers.  But it’ll be a big win for investor confidence. In its new “Equity House View” report, Deutsche Bank includes this stunning chart showing how much more wealthy Chinese congressman are compared to American politicians. They cite it as a reason why so many are worried about corruption.

Chinese bond market authorities will suspend new account openings by non-bank financial institutions, the latest move in a growing crackdown on self-dealing in China’s fast-growing bond market

Friday April 26, 2013

China suspends new bond accounts

SHANGHAI: Chinese bond market authorities will suspend new account openings by non-bank financial institutions, the latest move in a growing crackdown on self-dealing in China’s fast-growing bond market, multiple sources told Reuters.

The move could effectively bar brokerages, fund companies, trusts, and possibly even banks from issuing new bond-based products to investors.

China’s main bond clearinghouse, the China Central Depository & Clearing Co Ltd, will suspend applications from trust plans, brokerages, and fund companies to establish special-purpose accounts they use to manage funds for bond-based wealth management products (WMPs), bond mutual funds, and other bond-based investment products. Read more of this post