Roy Ho’s Blog

China finally accepted some foreign rescue teams to their earthquake rescue effort.  China now accepted Japan’s rescue team, Taiwan’s team.  These are the only 2 countries where experts have been allowed to aid the relief effort.  All other countries’ aids are material assistance.  UK, Poland, Russia, Saudi are among the donors list.  However, the name US has not been surfaced.  China also appealed, for the first time, for “earth-moving equipment” according shanghaiist.com.

Myanmar is having a hard time with the cyclone as well.  The death toll is also in the magnitude of tens of thousands.  Myanmar has not been accepting foreign rescue teams either, in fear of conspiracies.  Myanmar has strong ties with China especially because it has very little foreign trade.  Now that China is accepting foreign experts to assist, will Myanmar allow some foreign experts?  Can Myanmar allow the same countries that China accepted? 

Since China accepts foreign aid, one can donate to US Red Cross’ China earthquake dedicated fund (see below).  And Red Cross cannot even establish a dedicated fund for it.  Unicef has a dedicated fund (see below).

What if no aid was provided to Myanmar?  Is that what the Myanmar junta wants?  Myanmar junta may have gotten the wrong side of conspiracy.  It is the scenario of no-aid that they should fear.  The case of no-aid means no country wants to do Myanmar any favours; no country wants Myanmar to return any favours; no country sees any values of Myanmar.  The worse is all these countries want the populace to suffer enough to revolt, much like intent of any boycott, the Iraqi case prior to the Gulf War 2.  The worst is action is already taken, but Myanmar junta does not even know.  When foreign experts come, Myanmar can control the quantity of the experts, the nationalities of the experts, can control the area of exposure, can monitor their movements and can know what these foreign experts know.  There is nothing more available than knowing what your opponents know and do not know.   

If China can accept Taiwan’s experts, can Myanmar accept Thailand’s civilian experts of Buddhist religion?

Donation to US Red Cross:

China earthquake dedicated fund: american.redcross.org/site/PageServer?pagename=ntld_china_relief_fund_0508&s_subsrc=RCOProfile_China&s_src=F8DWA001

International general relief fund: american.redcross.org/site/Donation2?idb=0&df_id=1094&1094.donation=form1&s_src=F8EWG002&s_subsrc=Myanmar%20Cyclone

Donation to China Red Cross:

www.redcross.org.cn

Donation to Myanmar through US Unicef:

secure2.convio.net/unicef/site/Donation2?df_id=3381&3381.donation=form1&gclid=CPa506P2qJMCFRLoxgodmVqkng

Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday said that his panel on Thursday will consider a draft housing bill that would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages, and create a new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Under the legislation, lenders would, among other things, volunteer to substantially reduce the amount of the original mortgage note. In exchange, the FHA would insure a new loan at a 30-year fixed rate that the borrower could afford. The House last week passed a housing package with some similar measures.

This is not the version of Treasury Secretary Henry Paulson. 

This plan is more consumer-centric than that of Henry Paulson, although improvements can still be made.  For instance, the mortgage write-down has to be initiated by the lender in this version.  For that reason, the lenders have the strongest incentive to unload the riskiest mortgages first.  However, the riskiest mortgages may not be the neediest. 

This riskiness may be perceived as loan by asset.  The lender may also see that as mortgage payment by burrower’s income.  However, the most desperate burrowers usually would see the need as payment by income.

Burrower’s consent is not needed.  The house has to be owner occupied.  The gov’t will also own part of the house’s equity (proceed upon sale).

Bush has threatened veto this legislation.

The text can be found in the Banking panel of the Senate website.

CNN continues to report the newest death toll caused by China’s earthquake.  What stocks are affected by this earthquake?  This natural disaster in China is a lot closer to America than Myanmar’s simply because China is a lot more involved in the global economy.

More than 2 dozens of Chinese public traded companies can be found in the States either as stocks or as ADR.  The PetroChina (NYSE: PTR) is the first one to be affected because it has fields in Sichuan, the province where the quake occurred.  Those oil wells are now shut.  This company is the largest oil company in China.  Nippon Oil (TSE only) has a joint venture with PetroChina.  

China Telecom (NYSE: CHA) may get the worst hit since it has 10% of all land lines in the region.

Sinopec (NYSE: SNP), which is developing a field in Sichuan may see decrease in revenue.  Damage to this gas field is unknown.

China Life (NYSE: LFC) is also dropping since it is expected to have a lot more life insurance claims.  This life insurance company is the largest in China.  The selling pressure is short term since the life insurance penetration in that area is low.  In fact, the price has come back up after the initial drop.  This selling pressure only lasted for 1 day.

PICC Property & Casualty (other-otc: PPCCF) may actually get a bigger hit than the life insurance companies.

Negative impact on HSBC will be minimal since this bank has very exposure to this geographic area.

Qingling Motors (OTC: QGLHF) will get negative impact.  This area has some exposure to auto factories and circuit design.  However, the foreign trade is not concentrated here. 

Huaxin Cement’s price is going up already, in anticipation of more infrastructure projects.  Huaxin is traded in Shanghai only.  Lafarge SA (OTC: LFRGY), of France, is the parent company of Huaxin.  Cement company Anhui Cement is other-otc: AHCHF.

Construction equipment companies that have a presence in China will do well.  Check Caterpillar’s (NYSE CAT) exposure in China or Hong Kong.  Its competitors are Deere, Gehl.  Astec builds road construction equipements and components (NASDAQ ASTE).  Check its exposure in China or Hong Kong.  A strong exposure will be a good sign.   

All medical supplies companies are going up in China and Hong Kong.

Foreign companies such as IBM, Intel, Wipro (NYSE: WIT) have sites here.  Japanese Toyota and Hitachit also have sites here. 

This earthquake will drive up inflation in China.  Given the tourism brought by Olympics, Chinese yuan is expected to appreciate until the end of the games.

If your desired company cannot be found in the States, find a proxy company in Hong Kong stock exchange, or ADR in the states.  If you are interested at funds, then get an Asian (or Far East) fund that has a heavier emphasis of infrastructure and medical supplies industries, a heavier emphasis in Hong Kong.  A lot of companies in China may get suspended if it has a big swing in price.  Hong Kong does not have such restriction.  This gives your mutual fund manager a greater flexibility.

The earthquake in China will certainly have a death toll of over 10,000.  This quake can be felt as far as Taiwan and Thailand.  UN aid relief agencies have very limited roles in China.  Most charities still rely on Hong Kong to work with Chinese goverments.  Of all agencies, UNICEF has the best working relationships with China. 

Is this a man made disaster?

The epic center is 600 km away from the Three Gorges Dam, the largest in the world.  It holds 9.5 cubic miles of water (Denver is a mile high).  That amount of water is approximately equal to 40 million metric ton.  With that much weight sitting on a quake zone, it is very likely to alter the movements of the plates.  And if the weight is acting against the geological movements, it can induce more earthquakes than normal. 

There is precedence: Koyna Dam in India, earthquake in 1967.

The area is not a major economic centre, not a hot tourism spot, not a major manufacturing site.  The immediate economic damage is well contained.  Shanghai index may get affected.  However, Hang Seng Index in Hong Kong is more reliable to measure the magnitude of the problem.

The reaction will be a much greater challenge to the government.  It will measure the maturity of emergency response team in China.  How is China’s FEMA doing?  How will the local financial system, at the county level, sustain the resources exchange?  How does China recover the transportation system?  It now seems the snow storms earlier this year were more like a preparation exercise for all the troubles China is now facing. 

Will China use this opportunity to divert more resources to Tibetan areas and score more points?  Will Dalai Lama be able to make a stronger case for his involvement / return to heal the wounds?

In the states, capitalism is blamed for the environmental crisis.  The opposite, i.e. communism, could be worse.  

Although McCain may not be as much of a moderate as you think he is, McCain is out of line from his Republican party than Obama can be from his Democrat party.  Although McCain’s platform may not be as environmentally friendly as Obama’s platform, McCain is trying harder to sell his environmental policies than Obama, see CNN.  It all means McCain is trying to define the stage the environment better: to choose his battle field to his advantage.  

Environmental crisis is more than oil.  Climate change is also driving the food cost.  The ethanol market is now driving food prices world wide.  It is also driving the agricultural land prices up as well.  Consequently, we are now having a farm bill that is trying to cut down on the farm subsidy.

This is the first time that a Republican President is saying the cut in farm subsidy is not enough.  And this insufficient in farm subsidy cut is the cited reason for veto.  

On the contrary, a Democrat constituency group would want to support a farm bill and may even want to decrease the cuts in order to lower food prices. 

McCain may not have been explicit about his position in farm subsidy.  However, a thorough environmental policy will eventually lead to that point: cut farm subsidy.  

Environmental crisis is eventually down to this point: efficiency on resources, i.e. economics.  Traditional tree huggers, the ones from 60’s, cannot tolerate the word “economics”.  However, this is what it will go down to.  And McCain will feel very comfortable if he will be able to define this issue.  

If McCain is able to define environmental crisis well, McCain will be able not only to fight Obama better than any Republican can, but also expand Republican base to a new territory and grab the traditionally Democrat constituency group over: intellectuals, and some religious left (both Christians and otherwise).  More importantly, McCain can do something other countries have not been successful: take the green voters to the right wing rather than letting left wing to hog them.  Better yet, eliminate the possibility of growth for the Green Party.  

Green parties are getting strong footholds everywhere around the world.  Germany had Green Party to be part of the ruling coalition.  Green parties in Canada are getting 10% of the world both federally and provincially.  The way to starve off your competitor is to offer products the buyers have been looking for.   

1)       the other two parties seldom address;

2)       draws an equal amount of voters from both sides.

Environmental crisis is such an issue.  The biggest loser from McCain’s aggressive environmentalism is to starve off the Greens and continue a 2 party system.  If McCain is successful, then he can make the game even by 2012.

The most difficult asset, in politics, to obtain is not policies or platforms.  In politics, policies and platforms are commodities.  Message is produced.  Brand is a product of time and money.  This difficult-to-obtain asset is the salesmen: politicians.  Obama is a great weapon for Democrats’ long term growth.  Can Obama contribute to this environmental debate? 

Humanitarian crisis stops at three too.  CNN reports North korea is having yet another famine.  North korea is now having famine as often as Japan is changing its prime minister.  By being a nuclear power, why isn’t this famine getting the attention from the US as Myanmar?  North korea is just as close to china as Myanmar.  Its strategic value should worth to the US than silence. 

The big difference is the position of South Korea.  Ever since 2008 election, the new South Korea government takes a non-negotiable position toward North Korea.  All peace efforts from the previous governments now go wasted.  Actions toward famine relief in North Korea will have less funding and less political traction.  With South Korea taking such a position, US will not be too interested at it either.  

Another famine in North Korea will give China more pressure on this humanitarian crisis.  Refugees from North Korea have been a major problem for about 10 years now.  Thus, China has become more active in ending this Korean peninsula civil war in the recent years.  

In fact, an existing Korean conflict serves Pentagon’s purposes.  An existing Korean conflict does not only justify US military bases in Korea, but also to an extent the bases in Japan as well, in its effort to contain China.  

However, the military base in Thailand cannot serve the purpose to Myanmar as Korean military to China.  Myanmar was the last life line China had during WW2.  The Burma Road supplied all China needed to sustain the war against Japan.  Once China can go through Myanmar, there is the open Indian Ocean.  Navy from Thailand can do very little to stop.  Korean bases can keep the China as if it were a land locked country.  Besides, Myanmar got oil and gas.

Furthermore, Japan also does not want to see a unified Korea, similar to Japan does not want to see a unified China.  A unified Korea will drive the Korean electorate’s attention from ending a civil war to tension against Japan.  

Since Bush continues to look for a legacy item, Bush may try to get something done with North Korea.  In fact BBC just reported North Korea handed over 18,000 pages of documents of its nuclear activities.  If aid to famine will produce any value to Bush, it may get worked out.

Nancy Pelosi (House Majority Leader) says the race should go on because of high turn out rate it is drawing in all the states.  Pressure has been on Clinton to quit as it would be divisive.  Pelosi is the first politician who acknowledges the positive benefit of a long race.  This is consistent with this blog’s philosophy (2008.04.07, 200804.23).  Why is Pelosi saying that? 

She is looking at the seats in the House of Representatives.  She wants to shake more Republican seats.  And she probably sees that the Democrats are now enlarging their base so great that they can eat into Republican base.  

Interestingly, what did Clinton say?  In the same CNN article, Clinton says it is a “civil rights” issue.  Therefore, if FL and MI will not get seated (however they will be seated), DNC, using Clinton’s idea, the civil rights of FL and MI have been violated.  Will Clinton defend their rights?  Does it mean Clinton will sue to get their rights re-installed?

This primary gets more twists and turns than Gore vs. Bush.  Want some more popcorn?

Boycotting the Beijing Olympics has become fashionable in Hollywood.  They want to make statement and be righteous.  How much difference does it make?  Can advocates have a greater influence on the outcome?  

A boycott should always be used as a last resort because once you boycott, you are no longer engaged to the issue.  You therefore lose all influence in the outcome.  If one has no influence in the first place, then a celebrity’s boycott probably is the best move since it makes to the media and the issue gets highlighted for 30 seconds in the TV box.

However, since the said celebrity has influence in the outcome in the first place, such a boycott is not a loss to Beijing anyway.  That makes the boycott more a media stunt than anything else.  

If one wishes to have positive outcome, one should start with engagement.  If a celebrity brings humanitarian aid to a specific cause, say literacy in some remote area, this celebrity now has greater influence in the education in this geographic area.  The same positive influence on the issue cannot be achieved if the said celebrity starts with a boycott.  

If engagement is not available, boycott is still a worse off alternative to bring results.  A better option is to offer an alternative to others.  Instead of boycotting a company, provide a list of companies that are competitive to the target.  Boycotting without providing alternative is useless.  Be a solution provider. 

The same can be applied to any social movement.  Upset with Wal-Mart?  Instead of boycotting, invigorate downtown business areas.  Upset with urban sprawl?  Remove the economic incentives of the urban sprawling builders by changing the property tax structure (see my blog’s article on 2008.04.28).  

However, boycott is very cost effective for the promoter: no cost and yet 30 seconds of TV advertisement.  Boycott is the last resort not only because it is the least productive method to the issue but also narcissistic.

US has a military base nearby in Thailand.  And Thai has already been cleared by Myanmar governemtn to help.  All assistance can go through Thailand, similar to how aid was sent to Afganistan or Iran.  Why does US insist on direct aid to the Myanmar government? 

Every country wants to have a better relationship with another country.  Having a direct correspondence is just a good tactic to relationship building.  However, such direct correspondence was not on the table when Iran had an earthquake.  So, why Myanmar?

Disaster of this scale require multiple countries to help.  In fact, no amount of help will be enough for disaster of this scale.  China will provide a lot of assistance.  After all, this area affects all the transportation / infrastructure China has been building in Myanmar.

It is good for Pentagon’s strategists.  China has a strong military tie with Myanmar.  China can use the seaport of Myanmar freely.  The next stop for China will be thousands of miles away, days away by ship around Singapore in the island Hainan.  To the west, Parkistan is another ally.  US wants to increase its influence on Myanmar.  Having some first step relationship building exercise is important. 

Myanmar also has rich resources.  Oil field is only part of the story.  Myanmar has a lot of minority problems.  Areas near China (norter Myanmar) has always had multiple militas.  Areas near India is another conflict prone area for either Myanmar or India.  Britain used the northern Myanmar and parts of India adjacent to Myanmar as the spring board to Tibet back in 1800’s.  Making this country available for US to place a pawn somewhere, anywhere is important to Pentagon. 

China now has to face US bases from Japan, South Korea, Central Asia and Afganistan.  Nepal receives US training in its civil war against the Maoists.  UScan very well complete its enclosure on China.  

Obama needs approximately 80 super delegates.  How much will these 80 super delegates cost him? 

There are 280 uncommitted super delegates left. 217 pledged delegates are left for contest.  Obama needs 189 to win (Clinton needs 356). 

At this stage, the answer of electability is fairly clear.  Each candidate’s core constituency is known; their turn out rate is know.  Nothing can really get “negotiated” there.  You see what you buy.  Similarly for platform.  Other than a noble cause to vote for the winnable candidate, is there something a candidate can do for a super delegate just to get one additional vote?

It goes down to the question: what will convince a super delegate to vote for a candidate?  Electability?  Policy platform?  Popular vote count? Or something else?

All these above are very legitimate criteria.  However, some super delegates may have something more urgent on their hands: their own incumbency.  If a super delegate is in a tight race, his personal interest may be more at stake.  And Obama is not naïve about this: he has been fundraising for other candidates to gather favours.  The earliest senator endorsements are of this type. 

Other trades are typical political brokering: a promise of a specific legislation or pork barrel project.  What about fundraising support for a super delegate’s 2010 governor race?  Now, we are talking about money, real money for a politician.

Political Action Committees are the only ones that can accept political donations.  And they are owned by politicians.  The owner can forward the money to another PAC.  In fact, the surplus after campaigns belongs to the candidate.  They are structured very much like a personal account.  The point of this status is for the monitoring of Federal Election Committee.  

What did McCain do after he won over Huckabee?  Help pay off Giuliani’s campaign debt.  How?  Forward the money from his PAC!  Now, why did McCain do that?  Once Giuliani is out of the picture and since Giuliani and McCain share similar constituency, McCain wants to use Giuliani to help do fundraising.  And Giuliani was too busy with his own debt.  So, a favour was made, and a favour was returned.  

If the race gets another dramatic turn, the cost of super delegate will definitely rise since the Obama’s need of super delegate will increase.  However, if Obama can win the race all by him (through pledged delegate), then there is no need for Obama to get any more super delegate.  If not, no matter how much old politics he distains, he is still not immune to realities.