China has at least 36 local governments with as much debt, on average, as Detroit

China has at least 36 local governments with as much debt, on average, as Detroit

By Jake Maxwell Watts @jmwatts_ 4 hours ago

China’s National Audit Office announced on Sunday that it is conducting a comprehensive review of all local government debt, which has long been considered a potential time bomb that threatens for China’s economy. But how bad is the debt really? An audit that took a sample of 36 local governments at the end of 2012 (15 provinces, their capital cities, the municipalities of Tianjin, Shanghai and Guangzhou, and one district from each municipal city) found that those authorities had taken on a total of 3.85 trillion yuan ($628 billion) in debt, up 12.9% from 2010. That works out to $17.4 billion each—just under the $18 billion in debt held by the US city of Detroit, which filed for bankruptcy earlier this month. Read more of this post

Small Stocks Are in Eye of the Index; Inclusion in Russell 2000 May Distort Some Stock Values

July 28, 2013, 6:46 p.m. ET

Small Stocks Are in Eye of the Index

Inclusion in Russell 2000 May Distort Some Stock Values

JUSTIN LAHART

The Russell 2000 is the benchmark for small-capitalization stocks. But some stocks in it aren’t that small. This may pose a problem for investors, even as the index has been hitting all-time highs. The argument for small stocks is clear. Research has consistently shown that over long stretches small-cap stocks beat their bigger brethren. A driver has been the fraction of fast-expanding small companies on their way to becoming large ones. Yet some of them may no longer be in the Russell 2000. Which stocks Russell designates as small cap counts. The iShares Russell 2000 ETF, IWM -0.40% the ninth largest of all exchange-traded funds, has about $25 billion under management. More than 400 mutual-fund portfolios, with over $370 billion under management, use the Russell 2000, or its subindexes, as benchmarks, said Morningstar. Read more of this post

Startups Take Off in South Korea; Successful Entrepreneurs Reinvesting in Fledgling Companies

Updated July 29, 2013, 12:07 a.m. ET

Startups Take Off in South Korea

Successful Entrepreneurs Reinvesting in Fledgling Companies

JAEYEON WOO

A package for expectant moms in their early pregnancy

SEOUL—When Paek Jin-joo was pregnant with her first baby, it was challenging for her to figure out what she needed to know and buy as an expectant mother. Spending hours looking up the Internet was too time consuming. “I thought to myself how convenient it would be if someone could offer tips and help shop for products necessary for pregnant women,” says the 35-year-old Ms. Paek, who was an office worker at an online education company in Seoul before setting up her own company, 10Box, in October last year. As the U.S. startup scene experiences a slowdown this year, South Korea is one place that is booming. The country is one of the most wired nations in the world with broadband penetration at over 100%. The number of Korean startups has nearly doubled to 28,193 in 2012 from just 15,401 in 2008, according to data from the Korean Venture Capital Association. Steady growth in the number of startups in South Korea in recent years is getting a fresh push from successful entrepreneurs reinvesting in fledgling companies, as well as commitment from the government to provide backing. But competition and scaling the business have been major challenges for some of the country’s startups. Read more of this post

China 3% Growth Risk Seen by Barclays Signals Likonomics Anxiety

China 3% Growth Risk Seen by Barclays Signals Likonomics Anxiety

A copper price collapse of more than 60 percent, zinc cut by up to a half and oil down to $70 a barrel. That’s the fate facing world commodity markets should China’s growth dip to 3 percent in the next three years — a scenario economists at Barclays Plc (BARC) are now examining.

They’re not the only ones building models based on a steep decline in growth in the world’s second-biggest economy. Nomura Holdings Inc. (8604) estimates a one-in-three chance of a sharp drop by the end of 2014, and Societe Generale SA sees a “non-negligible risk” of less than 6 percent growth this year and an outside chance of 3 percent average expansion for this half and next. Read more of this post

How Much Slowdown Can Beijing Tolerate? The notion of a bottom line for growth and stability is a myth. The truth is more complex

How Much Slowdown Can Beijing Tolerate?

July 22, 2013

By Minxin PeiABOUT THE AUTHOR

The notion of a bottom line for growth and stability is a myth. The truth is more complex.

The once-mighty Chinese economy is now headed in one direction only – downward. GDP growth was 7.5 percent in the second quarter of this year, down slightly from 7.7 percent in the first quarter. In the last quarter of 2012, the Chinese economy grew 7.9 percent. The deceleration from 7.9 to 7.5 percent may seem relatively minor – only 0.4 percentage point in six months. However, when annualized, this figure means that the Chinese economy has lost about one-tenth of its growth momentum since last year. Read more of this post

China Plans Urgent Audit of Public Debt

July 28, 2013, 6:43 a.m. ET

China Plans Urgent Audit of Public Debt

Burgeoning Borrowing Adds to Stress on China’s Financial System

PAUL MOZUR and TOM ORLIK

BEIJING—China will conduct an urgent review of overall public debt, highlighting concerns about burgeoning official borrowing that are adding to stress in China’s financial system and limiting Beijing’s capacity to support flagging growth. In a one-line statement on Sunday, China’s National Audit Office said it would carry out an examination of total government debt, acting on the orders of the State Council, China’s cabinet. A separate article in the Communist Party mouthpiece People’s Daily said the order came Friday and that work would begin on the audit on Monday. The article, citing unnamed sources, said the Audit Office would temporarily suspend other projects to begin work on the audit, suggesting the urgency of the task. Read more of this post

End game in property wait; Hong Kong Monetary Authority announced 27 cases of negative equity involving residential mortgage loans, the first time that negative equity has reared its ugly head since June last year

End game in property wait
Mary Ma
Monday, July 29, 2013
The Hong Kong Monetary Authority announced that as at the end of June, there were 27 cases of negative equity involving residential mortgage loans. This is the first time that negative equity has reared its ugly head since June last year. It would be imprudent to say the resurgence of negative equity cases is alarming, as they mainly related to mortgages with unusually higher loan- to-value ratios. But it’s still a development that shouldn’t be ignored. Following the property market crash during the 2003 SARS outbreak, many homeowners were trapped in negative equity. Nobody wants to see that again. Now, everyone is asking the same question – have home prices peaked? Read more of this post

Peter Drake gave himself a $26 million loan before his $3 billion mortgage fund empire, LM Investments, collapsed in March.

LM fund gave loan to Drake

July 29, 2013

Michael West

Peter Drake gave himself a $26 million loan before his mortgage fund empire, LM Investments, collapsed in March.

Adding this to other loans, including a $16 million loan to a Hong Kong company controlled by the Kiwi-born businessman, and it appears that Drake owes LM at least $46 million and is headed for bankruptcy. Drake brought a defamation action against Fairfax Media and the author of this story before the collapse of his $3 billion fund empire. Read more of this post

Investors Are Lab Rabbits in Central Bank Experiments

Investors Are Lab Rabbits in Central Bank Experiments

The European Central Bank and Bank of England are emulating Ben S. Bernanke’s experiment in offering monetary-policy guidance to financial markets. Investors could well end up being the guinea pigs. Bond prices have fluctuated during the last three months, with the yield on the 10-year Treasury note swinging from 1.63 percent to 2.74 percent, the fastest jump since 2010, as the Federal Reserve chairman struggled to provide a clearer picture of when and why the central bank will reduce and then end its asset purchases.

“If this is science, then we’re the little white lab rabbits,” said Vincent Reinhart, chief U.S. economist for Morgan Stanley in New York, who served as the Fed’s chief monetary-policy strategist from 2001 to 2007. Read more of this post

The Benefit of Hindsight: New rules allow ETFs to market back-tested data, but the practice is mired in murky practices that don’t benefit most investors

SATURDAY, JULY 27, 2013

The Benefit of Hindsight

By SARAH MAX | MORE ARTICLES BY AUTHOR

New rules allow ETFs to market back-tested data, but the practice is mired in murky practices that don’t benefit most investors.

Hindsight is 20/20. So it’s easy to see why investors might be kicking themselves for not investing in the PowerShares S&P 500 Low Volatility Portfolio (ticker: SPLV) in 2008. Over the past five years, the index this exchange-traded fund tracks has returned 11.7% a year — considerably better than the S&P 500’s 8.5%. There’s just one hitch: That index didn’t exist five years ago, and those returns are mostly hypothetical. Read more of this post

Hedge funds gripped by crisis of performance

July 28, 2013 12:33 pm

Hedge funds gripped by crisis of performance

By Dan McCrum in New York

Hedge funds have a performance problem. Since the turn of the decade, Wall Street’s master stock pickers have spectacularly failed to beat the market. The crisis of performance comes as the industry is under intense scrutiny over the source of past returns, with SAC Capital facing criminal insider trading charges that threaten to undermine the record of one of the world’s most successful hedge funds. The firm says it has done nothing wrong. While many hedge funds fared better than the stock market during the financial crisis, and rode the 2009 recovery back to health, they have been confounded by sometimes violent market moves over subsequent years. Read more of this post

Procter & Gamble: Time to freshen up; Investors are hoping that AG Lafley will unveil plans to reinvigorate the company

July 28, 2013 3:27 pm

Procter & Gamble: Time to freshen up

By Barney Jopson

Investors are hoping that AG Lafley will unveil plans to reinvigorate the company

Nick Mangold, a burly American footballer, eases his 6ft 4in frame into a barber’s chair and lets the Gillette whisker trimmer get to work on his bushy beard. The New York Jets star is in Greenwich Village as a celebrity spokesman for Procter & Gamble, which counts Gillette as one its many brands. But a clean cut is not on the cards. “I’m not a complete shave guy, as your eyes will attest,” he says. The Fusion ProGlide Styler, a $19.99 razor-cum-trimmer, helps ensure “the wife won’t kill me”, Mr Mangold explains, but his strawberry blonde beard still bears hints of the unruly haystack to which it was once likened. For P&G, beards are big business. But this pillar of corporate America is in need of more than a trim. With a market value of $223bn, it has long been the gold standard in inventing, packaging and advertising high-end products to clean hair, bodies, clothes and dishes. But the personal and household products group has reached a defining juncture in its 175-year history. In both developed and emerging economies, it faces consumer markets that are more cost-conscious, commoditised and volatile. Analysts, long in awe of its consistently high performance, are now asking: has the P&G playbook run its course? Read more of this post

Betting on start-ups can revive a tired presidency; Making things easier for risk-takers is a way to reach elusive economic goals

July 28, 2013 5:17 pm

Betting on start-ups can revive a tired presidency

By Edward Luce

Making things easier for risk-takers is a way to reach elusive economic goals

George W Bush was supposed to have said: “The problem with the French is they don’t have a word for entrepreneur.” Unfortunately he never said it (though he really should have). Today’s Washington is also ambivalent about the French word. In a bitterly gridlocked town, every politician still pays lip service to small businesses. Yet by turning a blind eye to the needs of struggling entrepreneurs, the town is conniving in their declining fortunes. President Barack Obama would help his embattled presidency and the US economy if he embraced the cause of America’s entrepreneurs. Read more of this post

Industrial giant GE is trying to do business in just-opened Myanmar, where they badly need the stuff it makes and sells. So why is this storied multinational struggling?

Why GE’s Myanmar Venture Has not been Easy

by Simon Montlake | Jul 29, 2013

The industrial giant is trying to do business in just-opened Myanmar, where they badly need the stuff it makes and sells. So why is this storied multinational struggling?

In the midday haze outside the Thingaha Hotel in Naypyidaw, the new capital of Myanmar, the national flag droops alongside the Stars and Stripes and General Electric’s corporate logo. Inside the Grand Ballroom the staff scurries with last preparations for a meticulously planned gala dinner. Heading up this coming-out party is Stuart Dean, a blue-eyed, rawboned American and GE’s chief for Southeast Asia. Read more of this post

H&M Aiming to Catch Zara With Delayed American Web Push

H&M Aiming to Catch Zara With Delayed American Web Push

Hennes & Mauritz AB (HMB) began selling cheap-chic clothes online in Sweden about the same time Google Inc. (GOOG) started crunching its first search results. Fifteen years later, H&M’s American fans are still waiting for Web shopping.

If the hype is to be believed this time around — the Stockholm-based retailer has postponed twice before — in August H&M will enter the world’s biggest online apparel market, allowing American shoppers to click to buy $12.95 zebra-striped ballet flats and $59.95 trenchcoats. Read more of this post

Recall in Japan Blemishes Skin-Whitening Industry; Booming Business in Asia Is Shaken After Women Using Kao’s Kanebo Products Develop Splotches

July 28, 2013, 2:25 p.m. ET

Recall in Japan Blemishes Skin-Whitening Industry

Booming Business in Asia Is Shaken After Women Using Kanebo Products Develop Splotches

MAYUMI NEGISHI

TOKYO—Under the glare of the sun, 27-year-old Ria Ko holds a parasol, wears long gloves and applies a new layer of SPF 50 sunscreen every couple of hours. Her pale complexion is hard won—acquired through a decade of effort to stay clear of the sun—and each freckle that appears causes her a moment of distress. From Tokyo to Mumbai to Shanghai, the skin-whitening industry is booming and projected to grow into a $20 billion business globally by 2018, according to Global Industry Analysts. In Asia, a fair complexion is synonymous with beauty, higher social position and wealth. Companies are scrambling to develop the next hot product in a culture that for centuries has identified light skin as a status symbol—because it proved that a woman was exempt from field work. But the industry has been shaken after Japan’s second-biggest cosmetics company, Kanebo Cosmetics Inc. said last week that it has confirmed the appearance of white stains—some bigger than 2 inches in diameter—on the faces, necks, and hands of thousands of women who had used its skin-lightening products. Read more of this post

Chinese Search for Infant Formula Goes Global; The Baby Formula Barometer

July 25, 2013

Chinese Search for Infant Formula Goes Global

By EDWARD WONG

At the Sheung Shui station in Hong Kong, near the Chinese border, the trade in baby milk powder is heavy

HONG KONG — The group of 40 mainland Chinese tourists made all the requisite shopping purchases on a recent trip to Europe: silk scarves, Swiss watches, Louis Vuitton handbags. And baby milk powder, of course. Loads of it. Rushing shelves at a supermarket in Germany, Chinese shoppers stuffed a half-dozen large cans into bags, one of the tourists said. “One woman told me, ‘If it was easier to carry, we would buy more; it’s good and cheap here,’ ” recalled the tourist, Zhang Yuhua, 60, who bought two cans. Chinese are buying up infant milk powder everywhere they can get it, outside of China. And that has led to shortages in at least a half-dozen countries, from the Netherlands to New Zealand. The lack of supply is a reminder of how the consumption patterns of Chinese — and their rising food and environmental safety concerns — can have far-reaching impacts on critical daily goods around the world. Read more of this post

80% Of US Adults Are Near Poverty, Rely On Welfare, Or Are Unemployed

80% Of US Adults Are Near Poverty, Rely On Welfare, Or Are Unemployed

Tyler Durden on 07/28/2013 16:47 -0400

Despite consumer confidence at a six-year high, the latest AP survey of the real America shows a stunning four out of five U.S. adults struggle with joblessness, are near poverty, or rely on welfare for at least parts of their lives amid signs of deteriorating economic security and an elusive American dream. Hardship is particularly on the rise among whites, based on several measures. Pessimism among whites about their families’ economic futures has climbed to the highest point since at least 1987. “Poverty is no longer an issue of ‘them’, it’s an issue of ‘us’,” as ‘the invisible poor’ – lower income whites – are generally dispersed in suburbs (Appalachia, the industrial Midwest, and across America’s heartland, from Missouri, Arkansas and Oklahoma up through the Great Plains) where more than 60% of the poor are white. More than 19 million whites fall below the poverty line of $23,021 for a family of four – accounting for more than 41% of the nation’s destitute – nearly double the number of poor blacks and as one survey respondent noted “I think it’s going to get worse.” Read more of this post