Gardeners---The case for patience this spring

Conditions require a little bit of self control

Planting in mushy soil is never a good idea – the soil compaction negates any early advantage.  Likewise soil temperature should be in the 50’s.

Unless you are a frog, the forecast is not sunny:

	High	Low	precip	Forecast	Avg. Hi	Avg. Lo
Fri 5/6/2016	56°	47°	0.47 in	Cool with rain at times	69°	46°
Sat 5/7/2016	62°	48°	0.15 in	Warmer with a stray shower	69°	47°
Sun 5/8/2016	65°	43°	0.01 in	A morning shower; clearing	70°	47°
Mon 5/9/2016	68°	50°	0.02 in	Increasing cloudiness	70°	47°
Tue 5/10/2016	71°	57°	0.9 in	Couple of thunderstorms	70°	48°
Wed 5/11/2016	72°	55°	0.05 in	A t-storm in the afternoon	70°	48°
Thu 5/12/2016	66°	48°	0.84 in	A shower and t-storm around	71°	48°
Fri 5/13/2016	72°	49°	0 in	A couple of showers possible	71°	49°
Sat 5/14/2016	72°	49°	0.29 in	Periods of rain	71°	49°
Sun 5/15/2016	76°	50°	0 in	A blend of sun and clouds	72°	49°
Mon 5/16/2016	72°	49°	0.64 in	Mostly cloudy	72°	50°
Tue 5/17/2016	80°	57°	0.08 in	Warmer with spotty showers	72°	50°
Wed 5/18/2016	78°	54°	0 in	Rather cloudy	72°	50°
Thu 5/19/2016	85°	59°	0.56 in	A thunderstorm possible	72°	51°
Fri 5/20/2016	76°	52°	0.87 in	A shower and t-storm around	73°	51°
Sat 5/21/2016	73°	52°	0.44 in	Couple of thunderstorms	73°	51°
Sun 5/22/2016	74°	52°	0 in	Episodes of sunshine	73°	52°
Mon 5/23/2016	75°	51°	0 in	Sunny	74°	52°

 

Greens and the cold weather crops are certainly OK to have in by now ( and thrive in this cool rain), but your warm weather squash and beans and of course tomatos demand better conditions.

We  have  a great deal of sympathy for those with GADD (gardening attention deficit disorder) so we offer some experimental ideas which do and do not work (depending upon who is telling the story):

• Cover the soil with dark cloth or black plastic and let the sun warm and dry the soil before planting – this is a lot of work and beware of slugs
• Try containers first and then transplant – a lot of work but should help.
• Try products like ‘wall o’ water’ that are specifically designed for earlybirds
• Buy plugs for some of your vegetables – expensive, but give an early crop

In our view it is best to wait (looks like until 17 May).  The essential element is ‘degree days’ and they get stronger and stronger as May rolls out.

 

The use of offshore accounts and secrecy for domestic relations

Without exaggeration, since the data are hard to find, there has been a consistent use of offshore entities to isolate and hide assets from family members on behalf of people of means.  Wealthy, and not yet wealthy individuals (mostly male) watched, back in the 20^th century, divorce after divorce decimate the financial empire they had assembled.  Then they observed occasional litigation between and among family members, including children or business partners, designed to attempt to seize their wealth with or without cause.

Again without exaggeration, a potential successful defensive investment tactic is to simply not let family members know what has been accumulated --  put it in an offshore unreported entity with its own legal jurisdiction and control.  Snide and cynical secrecy in perpetuity, but a product sold by advisors – and often.  Legality can be debated, but if it gives the client a good night’s sleep, it is worth the effort (and the fees).

 

Now, with all the revelation in the press, the benefactors of the ‘secret squirrel it away’ tactic have another problem.  If they have not created these entities or vehicles for illegal purposes, they can proudly reveal what is there and claim (legal) innocence.  However, in displaying their honesty they simultaneously reveal their assets to their potential litigants.  I predict silence as long as possible. They still will have to cover their assets.

Grand Game of Bargains – Complexity that defies reform

We climbed to the mountaintop to visit the all-knowing source of wisdom:

Bureaucracy is in need of reform, but our politics creates a system that will not be reformed

“The group in control of the government always receives a share of benefits,

and the coalition that forges a partnership with the government splits the remainder.”

                                                                                                                   Calomiris and Haber (2014)

 

Why can our companies . large and small, control costs but our governments cannot?

 

The Game of Bargains thus is driven by the logic of politics, not the logic of economics. This view of the regulatory system constrains the possible scope for sustaining effective reforms. In a democracy persistent popular support is necessary, but “self-interested” groups will have strong vested interests in forming powerful coalitions to oppose reform and distract and misinform the voting public. Distract them with complexity.

 

Complexity dominates everything in our daily lives.  Why cannot things be simplified?

 

Reform efforts are further hampered by the fact that regulatory reform is complicated and the consequences of bad policies may not emerge for a number of  years. The dominant political coalition with a stake in the existing system may add further complexities to make it difficult for the majority of voters to understand what is  happening. This kind of opacity (whether purposeful or not) undoubtedly impedes reform efforts.

 

I cannot follow politics anymore – since I have concluded that it is a Game of Bargains.  Since the perpetrators continue to add complexity and opacity and the talking heads can day or do anything they wish. They have won.  The battle to be fought is not by my generation, who benefit from the Game of Bargains (since we do not pay for what we have). The younger generations should be fighting this battle, but self-absorption is the rule.

 

So let’s all read Kunstler, pull out old references to Hegel, and let Trump carry on.

Demystifying China Economics

Spent a bit of time in China this past year, so the telephone and email questions are coming in unexpected quantity.  Fortunately there are now many sources of quick and accurate expertise (see below), however there is a compelling reason to dispel rumors and folklore.  I will try.

No, the China economy is not in trouble.  With 5-7% growth and $3 trillion in reserves there are challenges that difficult to resolve, and issues often surfacing, but the economy is quite strong.

Yes, the data from China is not always transparent, but neither is ours. Increasingly sources of good data emerge so that at many levels we can actually see clear views .

No, the commodity and currency markets will not remain stable over the near term; but that is a multi factor phenominon only some of which involve China.

Yes there are bubbles in the China economy, remarkably similar to the US in 2007.  The bank balance sheets are hugely inflated with poor loans and the banks in China , like ours in 2008, must be recapitalized. The order of magnitude, compared to available reserves, makes the recapitalization feasible.  We cannot say, however, when and how fast this will occur.

No, the path to revaluation is not predictable, so although over the long term we can say that the Chinese currencies are overvalued compared to the dollar we cannot predict exact fluctuations in timing or order of magnitude.

Yes, all the ‘smart’ money has a long term short position on the Renminbi, but these are very long positions indeed.  Anyone advising on short term moves should be ignored.

No, the macro view is not the whole picture, for there are economic issues at the regional and local level that require serious expertise.  If you or your firm is working with China it is best to do your homework.

Many reports and webinars and television interviews are available, concise, and clear:

From S&P https://ccraprogram.wordpress.com/2016/01/14/china-and-the-global-economy-sps-outlook-for-us-europe-and-emerging-markets-live-webcast-and-qa-jan-15-830am-et/  (slides,too)  shows the basics

From Charlie Rose, the El-Erian interview is perfect on China http://www.charlierose.com/watch/60678030

From CNBC there was a short interview with Kyle Bass that is very poignant http://www.cnbc.com/2016/02/03/kyle-bass-china-banks-months-away-from-danger-territory.html

Uncut: Full interview with hedgie Kyle Bass

In general, hyperbole concerning China is usually just that.

China has no surprises

Spend a lot of time in China or working with Chinese businessmen and you are not shocked or even surprised at the volatility combined with hesitant interventions by authorities leading (of course) to more volatility.  Expect more or the same.

First I want to express admiration for a summary broadcast on 7 January on Charlie Rose http://www.charlierose.com/  where Gillian Tett (FT) and Henry McVey (KKR) provided a fast paced and comprehensive (with some humor) overview of the current situation. They were diplomatically reserved in their views.  I am not.

Chinese decision makers do what they do very well – focus enormous scale with blunt and clear results. The management of the industrial (probably bubbled) boom was both brilliant and very successful, but that era ended quite some time ago.  The shifting of a billion people from a totalitarian industrial regime to a mixed market economy will have many speed bumps along the way.  These speed bumps are compounding.

The global economy faces further and complicit volatility simultaneously.  The Chinese are ill prepared to deal with extreme volatility across currencies, commodities, economic growth, and above all trade. The markets in Asia ex Japan and Hong Kong are thin, leading to further volatility.  The old guard in PRD still believes they should ‘do something’.  The good news is that the governor of the PBOC, Zhou, is brilliant and reliable.  Personally I believe that in the long term the macro environment will be favorable.  Short term investment is a crap shoot.

Listen to the shouting bloviators with a deaf ear --  these are long term phenomena working their way through the global economy.  Perhaps some intervention in the political arena can help, but I doubt it.