Category: Economy

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Economy

Got to see a real manufacturing plant

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Lots of travel lately. After I got back from Chicago last Saturday evening, I was on the road again on Sunday afternoon. Destination: Florida. This Sunday I am going to travel back to Shanghai, and spend some time there.

Florida trip is a bit nostalgia one as I got to see a real manufacturing plant, a window/door manufacturer. I said nostalgia because my first job fresh out of college was a job in manufacturing plant in Shanghai. This week when I heard the noise from the factory floor and saw the machines and workers on the floor, it reminded me of those days. Of course these days one big news got all the media attention is the US car makers bailout. The US manufacturing sector has been shrinking for a quite while even before current recession, due to many reasons: globalization, rising labor cost, etc. After all, a factory job usually is not well-paid. On the other hand, the work usually involves sweat and hard work. This also reminds me when I was a little kid, my parents told us (me and my bros) to stay hard so that we can get away from being the agriculture work. Same thing has happened in the US, fewer and fewer people like to do the physical labor, more and more people want to make fast money. One reason for the boom and bust of financial/housing sectors in last decade.

But the manufacturing sector is and will be an important sector of modern economy, no matter how advanced the technology are. We got to live in a house, have refrigirator, AC, washing machine,…all of which take human’s hand to make, although a lot of the manufacturing processed have been automated by machines.

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Economy

Should we bailout the big 3 car makers?

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Obviously the big 3 auto makers came back to news with the Congressional hearing today. This big 3 Washington show started before the Thanksgiving with the “corporate jet gate”, in which the reporters and some congressmen questioned the 3 CEOs taking corporate jets to ask for money: it like one begs for money while wearing George Armani. But I think the media coverage and the US congress acted (reacted) too much on this show.

In my mind, this is not about politics, unions vs. the car company, mid-west (Detroit, or Michigan) vs. southern states. I am thinking saving big 3 (GM, Ford, Chrysler) is critical to the US economy and manufacturing. If the big 3 fails:

1) Midwest states, esp. Michigan will be hit big. Michigan is already in trouble with declining domestic car makers, the fall of one auto maker will devastated the state.

2) American will lose the icons such as Chevrolet Corvette or Ford Mustang. Don’t think that as a minor thing, as psychology does play a role in economy, consumer sentiment and the financial market.

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Economy

Both American and Chinese cut back on travel

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It’s travel time. Thanksgiving is traditionally the busiest travel seaon in the US. But due to weak economy, the holiday travel will slow down a bit (compared to same period last year). AAA Chicago estimated the trend in this thanksgiving. (source: marketWatch)

China
Slowdown in China: Ctrip (Nasdaq: CTRIP), the leading online travel consolidator in China, already reported Q over Q slowdown on its 3Q08 report. Note travel slowed quite dramatically after the Olympics.

Last but not least, I got this from my friend in Shanghai. IHT (International Herald Tribune) reported on car inventory at Long Beach, CA.

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China Economy

GM, China giant stimulus package

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My initial thought
China announced a giant $586 billion economy stimulus package a few days ago. My first response was not warm to it: I always think the Chinese goverment should invest in “Education and healthcare”. Infrustructure? Did not China already get really good infrustructures in the coastal areas including Beijing? China’s economy problem is more serious than US (on the surface it’s not), because it solely relied on foreign trade (export) for economy growth in last 30 years.

I can appreciate the goverment intention here is solving the “excess migrant labor workers”, and lack of middle class problems in China. They should act from tax policy, business regulations, etc. But I guess the Chinese goverment is for the business, by the business and of the business, just like the US gov.

My second thought

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Economy

Why American should stop bickering trade: I

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Ten years ago I did a bit research on the imbalance of China US trade, for a speech to be given in Public Speech class. The imbalance (US deficit, China surplus) grew significantly in last 10 years, with the American manufacturing jobs moving to China, this is again a hot topic in the election season. Politics aside, we ask the following question again.

Who is benifiting from the China US trade?
I noticed this post from my friend Wang Jianshuo’s blog. I haven’t read the book, but I have heard lots of media coverage on the US on this China trade (mostly negative comments), such as this one (book review, quoted from above) “(this is) essential reading for anyone concerned about how dangerous pet food and clothing manufactured in China make it into American stores…”

Essential? Really? I think for the first part, the author should go to China, visit some plants there, talk to Chinese people, before jump into such one-sided and biased conclusion. Being a Chinese professional who have studied, worked and still live in the US since 1997, I have seen many stuffs made in China, and I believe I have some authority on this matter.

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Economy

What recession?

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Maybe things are not as bad as it seems. This afternoon we visited West County mall to check out things. We have not been to the malls for quite a while.

Apple Store
At the Apple store, I saw a big crowd as usual. This made me wondering: what recession? Although I am happy with my 2nd gen iPod Nano (refurbished), and have no plan to buy iPhone, I am sure there are plenty of people checking out the MacBook, new iPod Nano etc.

Maybe all these recession and 1930 depression talk was to get Congress pass the $700 b rescue bill?

Warning: don’t jump into AAPL stock simply from my observation. You could get hurt badly and I could not help you. Also, I don’t think we can judge the soundness of economy just by going to one mall. We need more economy and market data: job, interest rate, stock market and most importantly the credit market.

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Economy Investing

Perspectives on Bailout and Credit default swap CDS

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Ron Paul had an interesting perspective on this topic.

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Economy

Most severe crisis since the great depression

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and here is President Bush has to say this morning (source: yahoo):

“We are working to reduce disruptions and minimize the impact of these financial market developments on the broader economy,” Bush said in the Rose Garden, choosing to address the market turmoil at the top of an appearance with visiting Ghanian President John Kufuor. “The policymakers will focus on the health of the financial system as a whole,” Bush said.

In the weekend, the No. 4 US invesetment bank Lehman Brothers went under, the No. 3. US investment bank Merrill Lynch was bought by Bank of America under recommendation by Fed (Bloomberg news). The goal was to make the buck stop at the Merrill. No one wants to see the No. 1 Goldman and No. 2 Morgan Stanley go under.

But they only got a temporary break. The focus now is on AIG and Washington Mutual. The problem for GS and MS, with BoA got Merrill, no company in the world has the resource to buy GS/MS without any goverment help. And the US goverment set a precedent they are not going to bail out anyone (Lehman, for example).

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Economy

The declining of world only super-power: I

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Today is a special day, the seven anniversary of 9-11. I still remember that morning, when I watch the morning TV as usual, I saw the smoke coming out of World Trader Center Tower, and wondering “what absent-minded pilot fly his/her plane into the tower”?

We all know what happened after that. The war against Talian in Afganistan, the war for “weapon of mass distruction” in Iraq. More importantly, the gas price went from around $1.50 (I still remember some gas stations price gauging in the evening of 9-11) to $3.50, the US federal deficit and trade deficit grew significantly, and last but not least, the housing and credit crisis in the last year. Since my interest is mainly in economy and finance, let me go there for a minute.

This week (last Sunday) marks another hard-working weekend for US treasury secratery Henry Paulson, because of the goverment take over of Fannie Mac and Freddie Mac. The two Goverment Sponsored Entities have $5 trillion of US mortgages, half of US mortage size. Interestingly, roughly $1.5 trillion of that $5 trillion was purchased by the foreign goverments: China, Korea, Japan and Russia etc. This is the direct reason for the US goverment take over, because the foreign goverment lost confidence on the Fannie and Freddie. On the surface, with the take over, now the mortgage has the full faith of US goverment, now things are goody and dandy again. But wait a minute, the US goverment itself has $10 trillion deficit, what if the US goverment fails to pay its own debt? Well, there are two ways out of it:

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Economy Fun

Who to blame for current financial crisis?

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Greenspan (regulators): for he kept interest rate too low (1%) for too long, during the recession after dot com bubble.

Bush (politicians): for his failed Iraq war which cost American tax payers more than 500 billions so far. He asked American “go shopping” after 911, in addition to buying a car or a house. Democrats are no better in this aspect: Fannie Mae and Freddie Mac have deep roots in Democrats leadship.


(Video by LATimes: anxious customers on day 2 of IndyMac Fed takeover)

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