Just One Man's Opinion - 01 August 2005
by JMac
FOR YOU DAY TRADERS -
On July 12 I speculated that Washington would nix the purchase of UNOCAL by the Chinese oil Co. CNNOC and that T.Boone Pickens or Exxon/Mobil or BP might put in a bid. In a copyrighted story on Monday, The Wall Street Journal reported that the Chinese are about to withdraw their $67 a share offer in the face of growing political opposition. Chevron offered $63, but I think with oil at this level UNOCAL is worth at least $70. There may be another suitor out there who is willing to pay that, or more.
ANOTHER DOG DAY AFTERNOON - ANOTHER ESSAY
"THE CHINA SYNDROME"
The 19th century was the British century, the 20th the American, and the 21st will be the Chinese. In a few decades China's Gross Domestic Product (GDP) will exceed ours. The US will still lead in per capita GDP, but will be second, or perhaps third behind China and India in total GDP.
Many "pundits" are concerned with the military, political and economic ramifications of this sea change. Defense analysts assert that we should consider China to be our next adversary and we must prepare for the inevitable confrontation similiar to that we faced with the former Soviet Union following World War II. This, along with other factors makes many financial planners less than sanguine about long-term investment in China.
While I agree that China is now a major force on the world stage, that does not necessarily mean that we will be forced into another war, either hot or cold.
The are differences between this scenario and that which we faced with the USSR, or Germany or Japan in the 1940's. First communism in China is of different brand than that overseen by Stalin (who, in reality was not much of a Marxist-Leninist himself, but actually just a paranoid meglomaniac). Neither is it facsist in nature as it was in Germany or Japan. It is moderatly pragmatic and is both devolving and evolving. The "class struggle", essential to Marxist-Leninsim, is devolving as a new middle class is emerging. Free enterprise is evolving with the growth of an investor class.
The most important differance is the intellectual realization of self-interest. It is not in either country's interests to go to war over Taiwan or textile imports. It IS in both of our interests that our economies grow and prosper.The Chinese want to dominate the Straits of Taiwan, but even more they want to dominate the world markets. They want to purloin our technolgy, but their people want the latest GE appliances, Coca-Cola and Pampers. Hitler, the militarists in Japan and Stalin wanted more than markets and refrigerators, they wanted political hegemony. It is always possible that some irrational American president or Chinese premier would be willing to risk Armageddon to subdue the other, but rational self-interest (greed) should hold them in check.
It is here that unfettered investment by both countries in each other's economies may save mankind from the unthinkable. In 2002 direct investment in China exceeded that in the US for the first time since such statistics were kept. Virtually every company in the Dow 30 and hundreds of others have direct or indirest investments in China. Bank of America just took a 9% stake in the huge China Construction Bank. Meanwhile China is buying our treasury notes and bonds and is bidding for US oil companies and real estate. Idealogues and xenophobes on both sides of the Pacific will be restrained by the pragmatic instincts of thier respective investor classes. This is why I do not worry when China seeks to become an "owner" of American properties. It is far better to be swamped by Chinese yuans than Chinese ICBMs. Do I worry that we may go to war over Taiwan? Yes. Am I concerned about China's recent build-up of their strategic forces? Absolutley. However, China believes it cannot be safe until it has a countervailing deterrant to our superior military might. Would the US feel any differently? If the USSR had exploded the atomic bomb before we did, would we not have lived in similair fear and race to get our own? Remember the national "panic" when, in 1957, the Soviets launched Sputnik?
My point is that economic cross-pollination is the best chance to avoid mutually assured destruction. A prosperous China and India is a better guarantee of peaceful co-existance than the 7th Fleet cruising in the South China Sea.
Richard Nixon was definitely not my favorite president, but he was prescient enough to open the door to China in 1972. He understood three decades ago that isolating one-third of the world's peoples was no only dangerous, but bad business. The present day leadership in China was equally far-sighted when they realized that no matter that Mao and Lenin might roll over in their graves, the only way China could be come a true world power was to embrace market capitalism. Apparently, Adam Smith translates well in Chinese.
FOR YOU DAY TRADERS -
On July 12 I speculated that Washington would nix the purchase of UNOCAL by the Chinese oil Co. CNNOC and that T.Boone Pickens or Exxon/Mobil or BP might put in a bid. In a copyrighted story on Monday, The Wall Street Journal reported that the Chinese are about to withdraw their $67 a share offer in the face of growing political opposition. Chevron offered $63, but I think with oil at this level UNOCAL is worth at least $70. There may be another suitor out there who is willing to pay that, or more.
ANOTHER DOG DAY AFTERNOON - ANOTHER ESSAY
"THE CHINA SYNDROME"
The 19th century was the British century, the 20th the American, and the 21st will be the Chinese. In a few decades China's Gross Domestic Product (GDP) will exceed ours. The US will still lead in per capita GDP, but will be second, or perhaps third behind China and India in total GDP.
Many "pundits" are concerned with the military, political and economic ramifications of this sea change. Defense analysts assert that we should consider China to be our next adversary and we must prepare for the inevitable confrontation similiar to that we faced with the former Soviet Union following World War II. This, along with other factors makes many financial planners less than sanguine about long-term investment in China.
While I agree that China is now a major force on the world stage, that does not necessarily mean that we will be forced into another war, either hot or cold.
The are differences between this scenario and that which we faced with the USSR, or Germany or Japan in the 1940's. First communism in China is of different brand than that overseen by Stalin (who, in reality was not much of a Marxist-Leninist himself, but actually just a paranoid meglomaniac). Neither is it facsist in nature as it was in Germany or Japan. It is moderatly pragmatic and is both devolving and evolving. The "class struggle", essential to Marxist-Leninsim, is devolving as a new middle class is emerging. Free enterprise is evolving with the growth of an investor class.
The most important differance is the intellectual realization of self-interest. It is not in either country's interests to go to war over Taiwan or textile imports. It IS in both of our interests that our economies grow and prosper.The Chinese want to dominate the Straits of Taiwan, but even more they want to dominate the world markets. They want to purloin our technolgy, but their people want the latest GE appliances, Coca-Cola and Pampers. Hitler, the militarists in Japan and Stalin wanted more than markets and refrigerators, they wanted political hegemony. It is always possible that some irrational American president or Chinese premier would be willing to risk Armageddon to subdue the other, but rational self-interest (greed) should hold them in check.
It is here that unfettered investment by both countries in each other's economies may save mankind from the unthinkable. In 2002 direct investment in China exceeded that in the US for the first time since such statistics were kept. Virtually every company in the Dow 30 and hundreds of others have direct or indirest investments in China. Bank of America just took a 9% stake in the huge China Construction Bank. Meanwhile China is buying our treasury notes and bonds and is bidding for US oil companies and real estate. Idealogues and xenophobes on both sides of the Pacific will be restrained by the pragmatic instincts of thier respective investor classes. This is why I do not worry when China seeks to become an "owner" of American properties. It is far better to be swamped by Chinese yuans than Chinese ICBMs. Do I worry that we may go to war over Taiwan? Yes. Am I concerned about China's recent build-up of their strategic forces? Absolutley. However, China believes it cannot be safe until it has a countervailing deterrant to our superior military might. Would the US feel any differently? If the USSR had exploded the atomic bomb before we did, would we not have lived in similair fear and race to get our own? Remember the national "panic" when, in 1957, the Soviets launched Sputnik?
My point is that economic cross-pollination is the best chance to avoid mutually assured destruction. A prosperous China and India is a better guarantee of peaceful co-existance than the 7th Fleet cruising in the South China Sea.
Richard Nixon was definitely not my favorite president, but he was prescient enough to open the door to China in 1972. He understood three decades ago that isolating one-third of the world's peoples was no only dangerous, but bad business. The present day leadership in China was equally far-sighted when they realized that no matter that Mao and Lenin might roll over in their graves, the only way China could be come a true world power was to embrace market capitalism. Apparently, Adam Smith translates well in Chinese.
posted by TandaPundit at 3.8.05
0 Comments:
Post a Comment
<< Home