RIIP

Indians flock to US... to buy Louis Vuitton handbags

2007-09-27T05:31:00.000-05:00

Okay, yawn, just another "shocking" story about globalization and the rise of Asia. But still... it is a bit startling, no?Vacationers head to US as rupee appreciates (LiveMint.com)The drop in the cost of travel has led to an increase in the traffic headed to the US

Subprime tsunami hits Japan's shores: Banks tighten RE credit and foreigners sell

2007-09-27T05:19:00.000-05:00

The following is from NikkeiNet. This is the first I have heard of foreign investors selling Japanese RE and I'm not aware of any specific examples. Appears to be a sort of global credit crunch.Subprime tsunami hits Japan's shores YASUO OTASenior staff writer The recent problems in the U.S. mortgage market have cast a pall over real

Hopes and prayers for the Burmese people

2007-09-25T19:48:00.000-05:00

CDOs: The Emperor has no underwear on

2007-09-25T19:36:00.000-05:00

Marvelous couple of paragraphs in last week's Economist piece on securitization:Steven Schwarcz, a professor at Duke University and writer on securitisation, has come across contracts which are so convoluted that it would be impractical for investors to try to understand them: they would have to spend more money hiring experts to deconstruct them than they could ever hope to earn in extra returns

Indian BPO industry suffering from cost pressures

2007-09-25T12:02:00.000-05:00

The following from India's Business Standard warns the easy growth is over for India's BPO industry:Rising costs, Re make IT chiefs nervousIT AT THE CROSSROADSIshita Russell / New Delhi September 25, 2007Raman Roy is the original poster boy of the Indian information technology industry. After working with GE Capital, he had set up Spectramind with help from private equity funds, and subsequently

ING has 28.7 bln euros of Alt-A mortgage exposure: This is not over yet by a long shot

2007-09-25T07:05:00.000-05:00

Wow, that's a lot. Time for write-downs!

Beijing Releases Pigs From Central Reserves: Pigs ask for directions

2007-09-24T07:15:00.000-05:00

A pig reserve? Really? Live pigs? Whaddya know...China Moves To Head OffSurge In Prices For Pork Beijing Releases PigsFrom Central ReservesAs Inflation Worsens By J.R. WUSeptember 24, 2007 BEIJING -- China has begun releasing pigs from its central reserves into the domestic market in a bid to head off surging pork prices that have helped boost inflation to 11-year highs. While the measure may

Dollar Should Hold Its Own Against Yen: Miracles DO come true!

2007-09-24T05:59:00.000-05:00

Another headline from the WSJ (see article below) that makes it sound as though the dollar is hanging on by a thread. Yes (they say) it is virtually worthless against the Euro but fear not - at least it will "hold it's own" against... the world's most pathetically weak currency, the Yen. What a relief to know the dollar isn't going to zero. Although I'm not sure I believe it because

Singapore Bank has $4 billion in sub-prime CDOs

2007-09-21T12:53:00.000-05:00

This is a bit odd to say the least. OCBC has $4 billion in CDOs backed partly by sub-prime and has been one of the bigger CDO issuers among Asian banks. So positive has this experience been that they are ready to begin issuing again...Singapore's Banks StageCautious Return to CDOs By PATRICIA KOWSMANNSeptember 21, 2007; Page C2 SINGAPORE -- With investors world-wide still recoiling from risk,

Who are these guys? Great list and description of the biggest CDO issuers

2007-09-20T09:43:00.000-05:00

From eFinancial News, a who's who of CDO issuers.

Managing decline? Japan under Yasuo Fukuda

2007-09-18T06:32:00.000-05:00

With the demise of the hapless Abe, Japan will now return to power a man who at first glance appears to be a classic old guard politician. Based on his public comments his primary concern (in addition to cleaning up the various messes created by Abe) are foreign policy - especially in terms of improving relations with other Asian nations even at the expense of ties with the US. In terms of

Benefits of investing in timber: low returns and no inflation protection

2007-09-13T08:53:00.000-05:00

Institutional investors continue to be fooled into thinking that high returns in the past for timber assets are somehow indicative of fundamental characteristics - when instead they are simply a function of lots of dollars flowing into a very small asset class. This article from FundFire describes increased interest from public pension funds based on a study from Merrill Lynch.The study says

Another housing problem contained: sub-prime mortgages cause muni bond downgrades

2007-09-12T05:54:00.000-05:00

Even in today's "anything is possible" world of chaos and hyper-correlation, you have to read it twice to really get it: ratings are being cut on $16 billion of municipal bonds because of the subprime disaster. The link? A muni insurer, Radian, also runs a mortgage insurance subsidiary. No bonus points for guessing what's happening to the CDOs insured by Radian. Radian insured munis are now

Global Recession: Japan is an anchor not a life preserver

2007-09-11T12:21:00.000-05:00

Japan's economy SHRANK in the April-June quarter by 0.3% (real GDP), an annualized 1.2% drop. Ten year JGBs fell to 1.5%, an 18 month low. Not exactly boom-time in Nippon. The odds of a global recession are one in five in my view, and growing. Yes, I know, I am a humble non-economist blogger whilst those dazzling prognosticators (brokerage analysts) are all in agreement that even if (oops,

More towels getting thrown: US Venture model is "broken" according to - well according to almost everyone it seems

2007-09-07T13:37:00.000-05:00

This from the PE Week Wire:Northwest Venture Associates will not raise another fund, according to the Seattle PI. NVA founder Tom Simpson channels Steve Dow, by saying that “the fund model is broken.”

Too good to be true: China says zero FX reserves invested in sub-prime

2007-09-05T13:50:00.000-05:00

Nice post from Brad Setser's Blog: China says it has invested in NO sub-prime related securities in it's trillion dollars of reserves. How likely is that? Not very.

Its only a matter of time: Money center banks slowly reveal off-balance sheet liabilities

2007-09-05T12:53:00.000-05:00

The WSJ reports that Citi has $77 billion in off-balance-sheet conduit "assets" (which, if not sufficient to cover conduit liabilities - i.e., commercial paper - Citi has obligation to fund) and in addition has $100 billion in affiliated SIV assets. JPM is reported to have $54 billion in conduits while SIV assets not disclosed yet (that I am aware of). Well well, these are no longer small

Another reason to expect a recession

2007-09-05T12:49:00.000-05:00

Housing Slump Strains Budgets Of States, Cities

Bad news for China growth PE: Beijing focused on improving credit to SMEs

2007-09-04T14:36:00.000-05:00

The dirty little secret of Chinese PE investing was the potential to invest in small and medium sized profitable and fast growing companies - more or less out of the spotlight of government regulators and bureaucrats - with no competition from either banks or large global PE funds! It's a brilliant opportunity but of course it will go away at some point. Both the large PE funds and banks will

Barclays Capital doubles down: injects $1.6 billion into SIV

2007-09-02T08:00:00.000-05:00

It's bad luck for a bank to find itself exposed to one or even two parts of the credit crisis cum subprime mess, but when its got cannon-ball sized holes all over its hull from every single shot fired - well, then we have to wonder whether these geniuses have a clue. According to the WSJ, Barclays announced on Friday it will inject $1.6 billion into a mutant creature called Cairn High Funding I

Too little too late (thank goodness): Bush sends FHA squirt gun to put out subprime inferno

2007-08-31T07:36:00.000-05:00

Don't get me wrong, I don't think there is much that the Feds SHOULD do. Just want to say to those poor souls who are grasping at whatever shreds of hope that appear (like a mirage) in the distance - this ain't gonna work.From the Journal's piece on Bush's "plan to rescue delinquent homeowners" (NOT):For now, the administration's primary vehicle to help homeowners will be the FHA, which doesn't

How to invest in China

2007-08-29T21:06:00.000-05:00

Please note that the topic of this post is not “What to buy in China” but “How to invest in China”. Many of the posts that I see on Seeking Alpha (China section) are about China ETFs. The ETFs seem to be of interest because they are a security which offers the buyer immediate “China exposure”. This is understandable. Any market that has tripled in 12 months as the Shanghai Stock Exchange A

Carlyle to critics: "We can spend as fast as anyone!"

2007-08-27T10:16:00.000-05:00

Critics (clients?) of Carlyle's uncertain efforts in Asia ex-Japan were informed by Carlyle that the firm had, contrary to what some may have thought, been ENORMOUSLY SUCCESSFUL at spending money.Carlyle defends its track record in Asia (FT)Carlyle Group, which has suffered high-profile setbacks in China, has issued a robust defence of its track record and predicted that private equity investment

Global Liquidity Continues to Fall; Public Pension Funds Reverse Decision to Allocate tens of billions to hedge funds

2007-08-27T09:32:00.000-05:00

Public pension funds are the mother load of new assets for hedge funds. With corporate defined benefit pension plan assets slowly dwindling away and what remains of corporate pensions going into to 401k plans which cannot invest in HFs, and with endowments and foundations already fully allocated for the most part, publics have been THE BIG opportunity for HFs. Especially for the $10 billion

India refuses to take its medicine; patience of MNCs apparently not unlimited

2007-08-24T12:51:00.000-05:00

Delhi scores own goalNovartis declares it will take its highly sought R&D dollars elsewhere after Indian court rejects patent application on cancer drug. This is unusual because most MNCs, after getting slapped around by Indian courts, government officials, or NGOs, meekly ask forgiveness and walk away with their MNC tails between their legs. Not Novartis CEO Vasella who responded with the

Will conduits sink banks? No. Will they (help) sink the economy? Yes.

2007-08-24T08:16:00.000-05:00

Today's FT has an nice article on the conduit, ABCP situation, as it relates to banks. I especially like the opening about the large UK bank, HBOS:HBOS’s annual report for 2006 covers almost 200 pages. But the document does not carry a single reference to Grampian Funding, the vehicle the bank uses to help lower its financing costs. So investors could be forgiven for expressing some surprise on

Remember, its a GLOBAL property bust

2007-08-23T07:17:00.000-05:00

Spain looks worse than South Florida...

Bank of China Holds $9.7 Billion of Subprime Assets

2007-08-23T07:03:00.000-05:00

Now things are getting interesting! Bloomberg reports that BOC holds a whopping $10 billion in sub-prime MBS. This far exceeds amounts admitted to by any other global bank. Very little is know at this point about what types of securities are owned, are they CDOs and if so which tranches (presumably AAA). All that can be safely assumed at this point is that there will be losses and that they

India to cut off nose

2007-08-23T05:45:00.000-05:00

Ah the Indians. The range of emotions one feels when watching events unfold in the country range from great optimism and admiration to feelings of sadness at the staggering and entrenched poverty. But often what one feels is amazement at how the bitterness and suspicion, a legacy of India's colonial past, combines with a political realm overpopulated by neo-Fabian socialist-communist nutters

The US Slowdown and What does it mean for Asia? Part II

2007-08-22T19:21:00.000-05:00

Regular readers know I have for many months been of the view that the US economy is very likely to experience a slowdown if not outright recession as a result of the housing recession and the fact that the US consumer, prior to the housing meltdown, was in such a vulnerable state. Please don't talk to me about the low unemployment rate. Firstly it is lower than one might expect today not

US Manufacturing: Rumors of death greatly exaggerated

2007-08-20T09:30:00.000-05:00

According to the WSJ, many of the world's largest steel makers are adding capacity in the US. Yes, you heard that right. Contrary to the widely believed but largely unsupported view that the US manufacturing sector is doomed to oblivion, steelmakers are putting their money behind their view that the US is a great place to invest and produce.This latest wave of steel investment by both foreign

Commercial paper market: hidden time bomb?

2007-08-17T08:24:00.000-05:00

Like most of us, as I try to comprehend the latest facts about the sub-prime mess, I sort of rub my eyes and scratch my head like a country bumpkin just arrived in the big city who’s innocent, unsophisticated mind can hardly comprehend all the big lights, tall towers, and fast operators. The latest piece of the SPM (sub-prime mess) has me gaping wide mouthed in awe. “Golly Ma, never thought I’d

Bad for Chinese banks, good for China

2007-08-16T06:40:00.001-05:00

Financial system in China takes a big step forwardWhat's the mandarin word for disintermediation?This has been in the works for some time but is just now going into effect. Chinese companies can now issue corporate debt, hence will have cheaper and more flexible source of capital. (Regulations had permitted this in the past but the government entity in charge was hyper-risk averse and

The best laid plans... China H share discount WIDENS

2007-08-16T06:05:00.000-05:00

After the enactment of enhanced QDII in China which enabled PRC retail investors to buy H shares via domestic mutual funds, many China fund managers thought they spotted a sure bet. The 25% or more discount between H shares and A shares would narrow or close. Ah well, not yet! The new provisions came into effect June 30. Since then the CSI 300 (A shares) has outperformed the HK China

Infrastructure as an asset class - reason #9003 why it makes no sense

2007-08-15T16:00:00.000-05:00

Japanese banks, those savvy investors who over the years lead the world in creation of bad loans, are reported to have ambitions to significantly increase their international project finance lending. So they will be competing with the Goldman, Carlyle, and Macquarie infrastructure funds, along with the global infrastructure companies. I predict, over the next ten years, average returns after

Dawn of toy manufacturing in US

2007-08-15T06:33:00.000-05:00

Three stories today show - not surprisingly - that there is increased momentum to shift toy manufacturing for US consumers back to the US. Mattel's latest mammoth recall. Analysts assume that the 2nd and 3rd tier toy companies have just as big if not bigger problems and that the recalls will accelerate. Hey, where is Chuck Schumer? Chuck, what's taking you so long?Toy R Us "baby bibs"

EM as panecia for global markets - the clock is ticking

2007-08-12T13:12:00.000-05:00

Although the US is the center of recent financial market turbulence and potential economic distress, data points continue to accumulate which indicate that developing markets, far from being the answer for whatever may ail global markets, will - along with the US - be key factors contributing to the next economic and financial market downturn.Led by Goldman but now more or less consensus is the

You made your bed...

2007-08-10T09:38:00.002-05:00

Bank of England Gov. Mervyn King this week said, "Interest rates aren't a policy instrument to protect unwise lenders from the consequences of their unwise decisions."...and now you'll have to lie in it.

You made your bed...

2007-08-10T09:38:00.001-05:00

How quaint

2007-08-03T08:18:00.000-05:00

This paragraph in the WSJ caught my eye. Everything old is new again...The fright among investors is forcing lenders to go back to more-conservative practices that were the norm before the housing boom of the first half of this decade. Many now are focusing on loans to borrowers who are willing to document their income, can make a down payment of at least 5% and have a history of paying bills on

Rising Chinese steel production - is the end in sight at long last?

2007-07-31T09:48:00.000-05:00

The following as reported in China Daily: 30 firms banned from bank loans for pollution violations (AP)Updated: 2007-07-30 14:45 China's environmental regulator said Monday it has put 30 companies on the first blacklist

Beijing Olympic Debacle?

2007-07-31T05:22:00.001-05:00

Excellent piece from Wired on the likelihood that the Beijing games are symbolic not of the rise of a great new power - but of environmental catastrophe. Visualize the media impact of athletes wearing face masks... Grim stuff.

The US slowdown – and what does it mean for Asia?

2007-07-29T14:50:00.000-05:00

I have been in the bear camp for some time regarding US growth and stock prices so last week was a little bit of vindication for me. My view was basically that housing is a big nasty broadbased shock to the economy which will take more than a year at least to play out AND that the tremendous amount of leverage in global asset markets – both explicit (LBOs) and embedded (CDOs, CDSs, etc.) mean

Give that man a gold star!

2007-07-27T14:09:00.000-05:00

Who says all the savviest institutional investors are at endowments and foundations? I'm beginning the think the reverse is possible given how much risk the large "sophisticated" E&Fs are taking (fully hedged, uncorrelated, alpha, whatever...). And a voice of wisdom has emanated from a public pension plan of all places. As reported in Fund Fire last week:Alternative assets may not be the

Cheap and deadly

2007-07-26T07:08:00.000-05:00

According to World Bank estimates, there are 600 deaths in auto accidents per day and another 45,000 injured. That works out to 219 thousand traffic fatalities per year and a whopping 16.4 million injuries! Although those numbers sound so high as to be slightly questionable, I've spent enough hours in Beijing traffic to believe that they can't be too far off. According to China Economic Review

Matsushita makes it go away

2007-07-25T08:56:00.000-05:00

Matsushita's partial sale of JVC is a perfect example of how Japan Inc. is still unable to execute genuine restructuring, instead taking tiny muddled steps which don't accomplish anything. CEOs look at these annoying problems (total lack of scale and competitiveness) and want to just make them go away. To make the contrast between what IS being done and what NEEDs to be done, in this case

Recommended allocation to US private equity: 0%

2007-07-20T14:46:00.000-05:00

If, that is, the poor misunderstood undercompensated babies make good on the following threat if carried interest is taxed as income, reported in PE Week Wire:Private equity investors – both VC and LBO pros – keep warning that they will pass on additional tax costs to their limited partners, via increases in management fees and carried interest percentagesHA! I say. Make my day. Given the

Run for your lives!!

2007-07-20T10:28:00.000-05:00

China is a global menace and will take over the world! No it won't it's going to collapse - and destroy the world! Panic! Over-react! Ahhhh!Okay, just kidding. These days, the world press seems intent on casting China in the role as either looming menace or teetering on the edge of collapse. Regular readers know what I think of all this ill-informed hogwash.Nonetheless... sometimes one just

Chinese government to back VCs

2007-07-18T14:21:00.000-05:00

It's a tiny amount of money but still interesting as an indication of how the government is thinking about investing and funding innovation. As reported in Xinhua:The Chinese government has set up a special fund of 100 million yuan (about 12.8 million U.S. dollars) to encourage venture capital companies to invest in technology-based small and medium-sized enterprises (SMEs).By "venture capital

Chinese cost advantage: going, going...

2007-07-17T14:45:00.000-05:00

This just in (from China Daily):Excluding inflationary factors, the wages of employees in China have seen an averaged annual growth of 12 percent in the past four years, the fastest growth since the country's reform and opening up in the late 1970s, according to figures from the China Association for Labor Studies.

Well, at least its not poisonous...

2007-07-13T08:52:00.000-05:00

Beijing baker caught filling his buns with cardboard...

Indian private sector urged to adopt affirmative action

2007-07-13T08:27:00.000-05:00

Leave it to the Indians to find a way to snatch defeat from the jaws of victory. Although their government is among the most dysfunctional, corrupt, and poorly performing on the planet, the Prime Minister (instead of doing something about this) is browbeating corporate India to adopt the same affirmative action programs for "scheduled castes" and "scheduled tribes" that have failed so

A bit late...?

2007-07-12T08:16:00.000-05:00

Headline in WSJ today:Antifreeze Agent BannedFrom Chinese Toothpaste

Take That! Japan Inc

2007-07-12T08:06:00.000-05:00

This one is going to be interesting. In the last year or so, it's looked liked the old guard Japanese management forces are winning the war against activist hedgies and others who believe that companies are owned and should be managed for the benefit of shareholders. But in a shot across the bow of NEC, Perry Capital shows that this war is far from over. As reported in NikkeiNet:Perry Capital

Good but not good

2007-07-08T08:11:00.000-05:00

A very important consideration when investing in almost any SOE is the ownership structure whereby the listed entity is controlled by an unlisted parent. The parent is 100% owned by the state and has significant operating assets in addition to those held by the listed entity. One of the peculiar aspects of the current popularity of Chinese stocks is the recent phenomenon of "asset injections".

Bye bye Abe?

2007-07-08T07:43:00.000-05:00

I'm still catching up after two weeks in China then one week on vacation in lovely Sea Isle New Jersey with family. Prime Minister Abe of Japan - who was doing relatively poorly when I last checked - now seems to be imploding. Elections for the upper house of the Diet are to be held the end of the month and the LDP will get it's butt kicked. What's going wrong for Abe? In addition to the most

China infrastructure: too much of a good thing?

2007-07-08T07:27:00.000-05:00

China announces plans to build a 67 miles highway on Mt. Everest. Uh, guys, you might want to chill out a little bit with the mindless road construction...

Food Safety in China: Yuck!

2007-06-28T06:56:00.000-05:00

This from today's WSJ as more and more awful facts emerge about food "processing" in China:Also Thursday, state media said Beijing police raided a village where live pigs were force-fed wastewater to boost their weight before slaughter, underscoring the country's chronic food safety problems. Plastic pipes had been forced down the pigs' throats and villagers had pumped each 220-pound pig with 44

Asset allocation: The future will be different

2007-06-28T06:22:00.000-05:00

For all those CIOs of pension funds and endowments who continued, over the last two years, to reup for large buyout funds like KKR, TPG, Bain, and Blackstone, you just might be on the verge of learning a lesson about capital markets: a period of recent excellent performance often presages a period of equally dismal performance.Witness the loose parts beginning to spin off of the mega-buyout

The beginning of the end of off-shoring?

2007-06-26T06:02:00.000-05:00

This piece in the FT based on research by a UK consultant questions the benefits of offshore call centers (er, centres, mate) in India. Its simple really. With rapidly rising costs and lower quality service (on average, assuming same levels of education and experience for on-shore alternative labor) offshoring is no longer obviously the right thing to do. It has been my view and continues to be

Disabled Chickens and other funnies from China

2007-06-23T17:45:00.000-05:00

Just returned from two weeks in China. Lots to report but first... some funny odds and ends from China Daily. Only when stuck in traffic in Beijing (which is most of the time) does one read China Daily cover to cover. But I was rewarded with these choice blurbs:Stock-crazy parents urged to pay attention to kids Some parents are so taken with the stock market that they seem to have

The School of Hard Knocks

2007-06-01T08:46:00.000-05:00

The following is from Bloomberg's review of China market today: Wang Qihong, 25, a former cosmetic company clerk who quit her job to become a full-time investor, said yesterday she would keep her money in Chinese stocks even after the government's latest cooling measure. She invested all her savings of 10,000 yuan ($1,300) in Harbin Shirble Electric-Heat Co., which supplies

Exciting news (no kidding!): SOEs to pay dividends

2007-05-31T08:45:00.000-05:00

Maybe doesn't sound like a big deal but it is. Starting later this year, Beijing is requiring SOEs to pay dividends to the state (the owner). Profits of SOEs for 11 months to November 2006 were about $90 billion. This year they are growing 15-20% or more. To be sure, China has a trillion dollars of foreign exchange reserves but they actually have a great need for additional local currency

Should US institutions invest in China Real Estate?

2007-05-28T08:37:00.000-05:00

I have thought about this issue quite a bit in recent months - and though I am by no means an expert and haven't done substantial analysis on the markets yet - my preliminary answer is: not yet. Why? Well, keeping things simple, the reasons are as follows:1. Developement vs Investment - well, as anyone knows who's looked at China property, if you are really serious about investing in this area,

Sellout Taiwan

2007-05-24T08:50:00.000-05:00

Came across an interesting post in "Op-Ed by the Reporter" which promotes a view which I have expressed for sometime. US support for (and military defense of) Taiwan is an anachronism. The US public could care less and would never in a million years support serious military action against the Chinese in support of Taiwan. By the same token, a majority of Taiwanese seem to be willing to live

Madam Wu and Charlie Rangel

2007-05-24T08:31:00.000-05:00

Talk about culture shock. Bloomberg reports on Vice Premier Wu's visit to Capital Hill. One can only imagine the scene. Smart move by Paulson to subject the Chinese leaders to our illustrious legislators. We have to listen to these blowhards everday on the news, why shouldn't the Chinese get a taste of it too? Tomorrow she gets the treat of meeting with Senator Grassley of Iowa. Yes, in

Indian Pharma: go big or go home!

2007-05-23T08:04:00.000-05:00

The Chairman of Indian pharma co Wockhardt has a piece in the Economic Times on how Indian companies are buying their way to become global players. Hat tip to Venture Intelligence Blog.

China and Blackstone, what else

2007-05-22T06:03:00.000-05:00

What does it mean? Well... not a lot, actually. First, from Blackstone's perspective:- Helps them win deals in China? No I don't think so. I believe that Schwartzman has been (like so many before him) duped into thinking that cutting a deal with the Chinese means that they are now his buddies and he will be able to get all sorts of sweetheart deals from them. Wrong. He will have to stand in

Chinese Godzilla

2007-05-20T16:10:00.000-05:00

Yes I know, the correct cliche is "Chinese Dragon", but Godzilla seems more appropriate given the massive imbalances and asset bubbles that are growing - accelerating - in China with increasing risk for global markets and economies. The Shanghai and Shenzhen stock exchanges are the headline story for even the most casual US market watchers tuning into CNBC: Chinese stocks have increased by a

How it's supposed to work... A step forward for Japanese Mergers

2007-05-18T07:26:00.000-05:00

A little mini-saga in Japan shows that M&A are inching in the right direction. Last month, Hoya, a $14 billion market cap maker of optical glass for digital cameras made a bid for Pentax, a less than $1 billion dollar maker of digital camera lenses. The Pentax CEO accepted the bid and was chucked out for his 'betrayal'. In the good old days, that would have been the end of it but the times they

Wait, you mean good managers make a difference? Mon dieux!

2007-05-14T12:05:00.000-05:00

Wonderful post from DiligenceChina on the deadly combination of mediocre quality, lack of energy, and rising expense ($50k/year) of Chinese middle managers. He believes that the answer is to bet on the younger people with less/little experience but more drive and creativity. My view is that this issue is the reason that China will not - hold your breath - take over the world tomorrow. Ain't

Shocking News! Outsourcing not a panacea!!

2007-05-14T11:36:00.000-05:00

Venture Intelligence Blog has a nice bit about the debate over outsourcing. To me this is more data to confirm my bias (I admit) that outsourcing is the overhyped trend of this decade and that the pendulum is beginning to (or will soon be) swinging back the other direction as corporates begin to see much more clearly the cost of outsourcing and compare this to the (less than expected) benefit.

Another great (profitless) opportunity in China

2007-05-11T15:01:00.000-05:00

Engaging China has a nice review of the hotel building boom in China. Critical stat: occupany rates DECLINED seven percent last year. Yes, demand will grow like hell for years to come. But with supply growing like crazy too... well, let's just say that hotel rates have room to fall.

Untouchables knock out other low caste party with help of brahmins (huh?)

2007-05-11T14:40:00.000-05:00

Only in India, eh. Mayawati, the "Dalit Queen" and head of BSP party, won upset victory in Uttar Pradesh against arch rival and current Chief Minister, Mulayam Singh Yadav, head of Samajwadi Party. The BSP is traditional party of untouchables while Samajwadi is party of OBCs (other backward classes). The Samajwadi's have won the support of increasing numbers of Muslims and so the BSP responded

Shocking News! The world slowly improves...

2007-05-11T14:12:00.000-05:00

No there won't be a massive trade war between the US and China which results in global depression and no, the Democrats in the US congress will not kill all free trades deals and no,... lots of other silly doomsday predictions will not come true. As two stories (with small headlines) from today indicate. The first, from Nikkei, is that China is joining an international group attempting to

Indian Transportation Improves

2007-05-11T13:55:00.000-05:00

A Boeing 737 aircraft has been parked on the street in Mumbai for a week. Presumably it is waiting to refuel or pick up passengers. Who cares that Indian roads are so poor and so few when their air traffic system is so robust!

Goldman's new stock market

2007-05-10T10:14:00.000-05:00

Reports that Oaktree Capital may issue shares in itself on a new exchange established by Goldman Sachs wherein the companies would not be truly public. This is really startling and potentially revolutionary news. Imagine a thriving market for asset management firms and a host of other firms which simply don't like public scrutiny and regulatory burdens - trading on an exchange that is simply

The massively overhyped threat of offshoring

2007-05-09T17:35:00.000-05:00

Nice bit from Bangalore Tiger at BusinessWeek on the rapidly shrinking cost advantage of off-shoring to India. I have always held the view that the threat of losing many or most US high tech or white collar service jobs to India was grossly overinflated. The fact that there is such a tremendous shortage of skilled workers in India that they are IMPORTING labor from Australia, Philippines, the

Leveraged Corn Fields?

2007-05-07T09:33:00.000-05:00

There's a good joke in here somewhere but I can't think of it. AP article on PE funds buying up farmland. In my opinion, the most important bit is the last paragraph: farmers are planting 15% more acres of corn in 2007 vs. last year. Easiest and cheapest capacity increase of any commodity. Next they'll be tearing down empty single family homes to plant more crops...

Kleiner Perkin's view of China VC

2007-05-07T05:33:00.000-05:00

The following interview with Ted Schlein of Kliener Perkins at a Wharton event in San Francisco about KPCB's move into China has some choice bits. Before Schlein spoke, Andrew Metrick of Wharton had a really interesting comment which in just a couple sentences makes it clear why VC in the US is truly a 'broken model'.Starting in the early 1980s, when the industry started to grow, we saw about

Dream is dying for YouTube's of China

2007-05-07T05:22:00.000-05:00

You knew it had to happen. There are something like 500 companies attempting to hit it big with on-line video sharing YouTube-ish businesses in China. In this piece from the CVCA, it seems that even the VCs are pessimistic.

A Bridge to Nowhere...

2007-05-04T06:17:00.000-05:00

Oops, sorry about that. Something about Infrastructure brings out bad metaphors (or is it an analogy?). BusinessWeek's article, "Roads to Riches" (see what I mean?) by Emily Thornton on the rise of infrastructure in the US as an asset class for institutional investors provides some interesting tidbits about how not to think about investments. Infrastructure can be thought of as essentially a

No to Russia, Yes to China

2007-05-03T18:54:00.000-05:00

It is my opinion that Russia has no place in a policy portfolio or strategic asset allocation. Most US institutional investors do not agree with me and have specific allocations to "Emerging Markets" which of course includes Russia. There are many reasons why I believe Asia should be a meaningful part of a policy portfolio and Russia should not, the most important of which is the fact that I do

New private/public equity fund structure in India

2007-05-03T08:48:00.000-05:00

As reported by the single best blog on all things relating to private equity and VC in India, VC Circle, Pulak Prasad's new fund, Nalanda has attracted the ex-head of PE for Bessemer. What is most interesting about this fund is it's structure. Prasad will invest in SME listed companies, but do so in the manner and mindset of a PE investor - i.e., a limited number of investments, large stakes, '

Prepare for the China stock market bubble to burst

2007-05-03T08:43:00.000-05:00

I don't know how or when - except it won't be longer than a few weeks at this rate. Local stock markets are up 75% year to date. You can be sure that as we speak, the authorities are debating the best way to do this. Unfortunately, there is no 'good way' to burst a stock market bubble. Several possibilities: capital gains tax, transaction tax, some kind of circuit breakers or daily stock

China VCs move in a herd

2007-05-03T05:54:00.000-05:00

After meeting with several China VCs and talking with two others we invest with, it seems that they have all reached the same conclusion: wireless value added services & internet is TOO CROWDED. Duh. So they've all gone off in different directions doing unique and creative things... NOT. Sorry, the truth is that they've all discovered (independently) two new less crowded sectors: healthcare/

Must Read on Indian Property Bust

2007-05-02T09:10:00.000-05:00

How bad will the Indian property market be? The Business Standard (India) has an interview with one of the more perceptive and experienced Indian developers, Gaurav Dalmia (hat tip to Venture Intelligence Blog).

Surge in Japanese buyouts will happen... someday?

2007-04-30T09:09:00.000-05:00

The case for investing in Japan buyouts seemed overwhelming to me early last year when we made our first commitment to a fund. It wasn't a 'slam dunk' that transaction volume would surge but, if it did, the sheer size of Japan Inc. made it an opportunity too big to ignore. The following piece from the WSJ surveys the landscape a year later as a new law comes into effect that will rachet up the

Why Human Rights Groups Are Irrelevant

2007-04-30T06:11:00.000-05:00

The Asian Centre for Human Rights complained about the murder charge against former PM Sheikh Hasina:Human rights groups, who have drawn attention to rising numbers of “disappearances” and incidents of torture since the declaration of the state of emergency, condemned the murder charges against Mrs Hasina. “This is nothing but an afterthought of the military-backed interim government to ensure

Are LBO firm's immoral?

2007-04-29T17:05:00.000-05:00

I'm not sure myself but the Service Employees International Union (SEIU) believes that the mega-buyout firms like KKR and Carlyle are harming American workers and have gone public with a proposal intended to pressure the big funds to change their behavior. You can download a copy of the report here.Their report - somewhat to my surprise - is actually a pretty good, fair, summary of the industry,

Bought and sold by the party...

2007-04-27T12:50:00.000-05:00

Most recent issue of Far Eastern Economic Review has essay by Carsten Holtz (subscription required) which argues that China scholars, investment bank research analysts - well basically everyone who has any interaction with China - has become corrupted by the party. In order to maintain access or just because we're stupid, we all buy into the fiction that China's government is 'normal' instead of

Reminder: everything you read about China is wrong

2007-04-27T06:52:00.000-05:00

Thanks to Dev. Bank Research Bulletin for (once again) reminding us that the saving rate in China is high because of corps not households. Chinese households actually save less than Indians. And other old chestnuts like the low ROI. Who is it that doesn't know this anymore?http://www.bankresearch.org/economicpolicyblog/2006/12/return_to_capit.html

Indian PE... auction?

2007-04-27T06:38:00.000-05:00

Is the word "auction" and Indian PE starting to be used in conjunction more and more? VC Circle reports something of a food fight for Indian broker ShareKhan (get it? Share-Khan) with all the US heavyweights bidding for the business owned by the Morakhias family and GAP, Intel Cap, and HSBC PE. Must be two attractions: one, the Indian stock market with heavy and increasing retail presence and

Zell re Indian Property: Look out below!

2007-04-26T11:53:00.000-05:00

Funny piece from Reuters: Sam Zell's views on Indian property. My favorite is the guy who says it's 'very very scary' as he raises a $400 million property fund...Death knell sounding for India property boom?Wed Apr 25, 2007 9:06 AM BST By Dominic Whiting, Asia property correspondent MUMBAI (Reuters) - "The grave dancer", U.S. tycoon Samuel Zell, was in a mood to spoil a two-year-long party

Chinese individuals stampede into stocks

2007-04-26T11:28:00.000-05:00

End March Chinese mutual fund AUM equal $150B. This is an industry that did not exist five years ago and was tiny two years ago. End of 2006 AUM was $110B so Mrs. Wang bought $40 billion in stocks in Q4. Total Chinese household bank deposits equal $2.2 trillion. There are 90 million individual brokerage accounts open, increasing at 200 thousand per day.The Chinese authorities WILL clamp down

Rupee strength will also impact growth

2007-04-25T09:58:00.000-05:00

Forgot to mention: the Rupee has broken through 41, hence is almost 10% stronger against the dollar over the last year which will be painful for Indian exporters.

Indian demand responding to rate hikes?

2007-04-25T09:52:00.000-05:00

FT reports that large increase in morgage cost and other consumer finance is having an impact. This is not surprising - the question is whether rising incomes will dampen any slowdown or whether there is a personal credit bubble waiting to be burst. I continue to have confidence in the long term prospects of India but also remain wary of the short term. With valuations rich and rates rising,

Rates to continue to rise in India

2007-04-24T11:35:00.000-05:00

That is my read of the RBI's annual policy statement for FY08. The following is the gist:Overall Assessment · While there is evidence of structural changes underlying the recent Indian growth experience, there are also indications that the upsurge of demand pressures may contain a cyclical component. The structural changes include a step up in the investment rate supported by a sizeable

In Shanghai, if you forget someone's name, no problem

2007-04-24T11:26:00.000-05:00

Just call them Mr. Wang, Li, or Zhang and you'll have a one in five chance of being right. Article from Nikkei Net (of all places) says 85% of Chinese have one of the 100 most popular surnames.Wang Becomes Top Chinese Surname BEIJING (Kyodo)--The Chinese surname Wang has overtaken Li to become the most common surname in China, state-run Xinhua News Agency reported Tuesday,

New model for Japan PE?

2007-04-23T07:03:00.000-05:00

Last week two of the US PE titans who have been eagerly (desperately?) scouring Asia for buyout deals and assuming that Japan will be the one (and only?) market in Asia to offer big buyouts - did minority deals. For loss making businesses. With growth potential?TPG bought 14% of TOMY (toys) and Goldman bought 20% of Usen (cable & internet provider).From Bloomberg:TPG, TOMY to Form Capital,