William Gamble

Really Bad Banks in China, Continued

mna
Agreed. It is a matter of degree. Information has value. If there is an sufficient economic incentive to provide false, late, or incomplete information and insufficient legal disincentives, then people will provide false, late or incomplete information as Bernie Madoff proved.

The difference in China is not about prejudice. Information is questionable because of the size and growth of the state owned industries, which represents a conflict. Governments everywhere do not force themselves to tell the truth. Also if information is not protected, then the legal disincentives are reduced increasing the probability that the people who have the information will not provide it to the markets

Really Bad Banks in China, Continued

Markets are about one thing choice. To make a good choice you need information. To get timely, complete, and accurate information you need free speech.

Stephen Roach Makes the Case Against Ben Bernanke

What Roach doesn't get is that the "surplus" savers in Asia are there because of Asian countries regulatory environment encourages it and isn't about to change. Like all economists he just assumes that the legal infrastructure is the same everywhere and that every system looks at law the same way. It isn't and they don't. When the rules change, so does the game.

Yes in the same way that the US's regulatory environment is partially to blame for the melt down, Asian surplus savings is also partially to blame. They are all pieces of the same puzzle that have to be solved if we are going to return to sustainable economic growth. Roach does no favors by dismissing it. We also cannot absolve Bernancke for the regulatory failures that happened on his watch.

What Should Have Been Discussed During the SED Meetings

I am glad you had a chance to look at Japan’s Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance. May I point out that much of what is in that book is also an analysis of the Japanese legal system's failure to check the bureaucracy

China: A Look at the Real Estate Picture

Professor Pettis

May I recommend. Best book on origins of Japan's crisis

Japan's Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance (Hardcover)
by Akio Mikuni
Akio Mikuni (Author)

(Author), R. Taggart Murphy (Author), Michael H. Armacost (Author)

Weekend Reading

Mobius never met an emerging market he didn't like. Ah sales!

Why President Obama's Proposed Regulations Subsidize Bank Investment

You might want to research the Coase Theorum. The origin of the Judge's wisdom

Expect Markets to Have a W-Shaped Recovery

Nice analysis

China: Debt Is Up, Trade Is Down

Damn. You said it better than I did
See China Stimulus Package: Part I, Bank Loan on this site

China Stimulus Package: Part I, Bank Loans

Agreed. The difference is that in many countries there are independent agencies, newspapers, etc that have an incentive and sometimes legal duties to report the bad loans. In other countries these things do not exist, so it is difficult to determine the size of the problem

Chinese Economy Is Strong, Despite Media Claims

Newpapers’ incentive is determined by their owners. Usually that is to make a profit by providing accurate information. In many countries, newspapers can be sued for providing inaccurate information and so have a legal disincentive to print false statements. A Government’s incentive is determined by politicians. Usually that is to keep the politicians in power. To maintain power, politicians of every country will often not provide accurate information. Governments in almost every country cannot be sued for lying. Given the incentives and disincentives, I find it odd that you are willing to find the Chinese government more accurate than the Wall Street Journal. What reason would the Chinese or any politician have to tell the truth?

Emerging Market Toxic Assets: The IMF Questions Russia

The point is not about the IMF or Citibank. It is about information. The quality of information is a function from law and economics. Information in every country and every market has a high probability for being inaccurate because it has value. Why should it be given away? Why not provide misinformation?

Quantitative and fundamental analysis and all economic forecast by anyone is based on information, but there is little if any debate about its quality. The reality is that someone is lying to you. It is simply a matter of degree.

Emerging Market Toxic Assets: The IMF Questions Russia

I, of course, do not deny that there are some great returns in emerging markets. I also do not deny that information is imperfect everywhere. It is a matter of degree depending on the legal disincentives of the individual system.

What I am challenging is the concept that fundamental analysis has value in emerging markets. Since the information has a higher probability of inaccuracy, you need to change your strategy. I would suggest that investing in emerging markets is not about the 'story' of constant economic growth perpetrated by Goldman Sachs as in BRICs. Rather it the strategy should be similar to what George Soros calls "reflexivity". Of course you can buy RSX and hold it over ten years, but you will take an enormous amount of punishment with the reward.

If you have made money, good for you. You might take it off the table. See CItigroup's analysis on MarketWatch, just published.

China and Emerging Market Investing: Real Basis

expat in China

The function of contract law, unbiased representation and legal outcome success is limited.

Correct: This is because China and many other countries are what is called in game theory as a relationship based system. Most people feel it is part of culture. It is not. It exists everywhere and has for most of history. Two modern examples are eBay and the Mafia. (see Lawlessness and Economics, Dixit)

China and Emerging Market Investing: Real Basis

Sober Realist.

The best book on China's middle class would be Capitalism with Chinese Characteristics. Professor Huang does the best job of taking apart the Chinese economic model. Unlike many other authors, Rogers, Kynge etc. Professor Huang has actually dug deeply into the statistics and it is not about antidotes.

But the real questions is about stimulating consumer demand. An export policy (or any policy) is made up of numerous laws. Over time powerful groups develop vested interests in maintaining these laws. So it is very difficult to change them when circumstances change. Japan has a middle class, but low demand because they have been following the same policies (and party) for 60 years