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谢国忠

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麻省理工学院经济学博士

个性介绍: 1960年出生于上海,1983年毕业于上海同济大学路桥系,1987年获麻省理工学院土木工程学硕士,1990年获麻省理工学院经济学博士。同年加入世界银行,担任经济分析员。在世行的五年时间,谢国忠所参与的项目涉及拉美、南亚及东亚地区,并负责处理该银行于印尼的工商业发展项目,以及其他亚太地区国家的电讯及电力发展项目。1995年,加入新加坡的Macquarie Bank,担任企业财务部的联席董事。1997年加入摩根士丹利,任亚太区经济学家,2006年9月辞去该职务。

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谢国忠:扭曲的熊市  

2009-04-02 02:27:44|  分类: 言论 |  标签: |举报 |字号 订阅

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熊市的扭曲




Bear wrestling

The world's economies and markets could remain depressed for years, and hopes for a recovery rest with Beijing

Andy Xie
Updated on Mar 31, 2009

Stockmarkets have stormed back in the past month, up 20 to 30 per centacross the board. Businessmen who have been reporting plummetingearnings are beaming with confidence about the future - that is, youshould give them more money. Well, hold on to your cash; this is just adead-cat bounce. The world is in a protracted bear market that willlast at least throughout 2010 - and, with policymakers focused onstimulus rather than reform, it could last considerably longer. Sodon't join the chase. If you do, kiss your money goodbye first.

Cashis still king. There will be a time when the central banks'money-printing will make cash unsafe. Then, you'll want to swap cashinto assets like oil and gold. But, before inflation rears its uglyhead, cash is still safe. The time for switching will probably be inthe first half of 2010.

Plummeting stock, property andcommodity markets have cleaned out many wealthy people. But, thesmarter ones escaped early and are cash rich now. After hibernating formonths, they are itching for action. Unfortunately, the itchier oneswill probably part with their cash for good, too. There will be manybear-market bounces over the next two years. They will swallow thosewho escaped the bear's clutches before. Stock markets are cash grindersnow.

Most investors fondly remember stock markets as wealthfountains, in which buying opportunities always followed majordeclines. But such memories are opium that lure the unwary into traps.The past three decades have been the exception, not the norm, in stockmarket investing. Even Warren Buffett got lucky. The last bear marketin the US lasted for more than a decade. Japan's market is lower todaythan it was a quarter of a century ago. South Korea's is lower than itwas two decades ago. If you believe stock markets make money in thelong run, you need to live for a really long time.

America andEurope have entered the sort of structural bear market that grippedJapan and South Korea two decades ago, for two reasons. First, the needto reverse the past borrowing binge will keep economic growth weak, sothe pie won't expand significantly in the future. Second, there aremore pressing needs, for example, coping with an ageing society. When asociety abandons economic growth, is there any reason for favouringprofit?

America's bank bailout plan was the catalyst for thecurrent bounce. It wasn't significantly different from former USTreasury Secretary Henry Paulson's plan. The market's response wasdifferent because it had been in fear mode for so long that it wasready to interpret such action positively. But, the problem withstripping toxic assets from failing banks is their prices. The currentmarket prices are too low for the banks to survive. The plan tries toboost demand for toxic assets by offering buyers leverage of six timeswith government-guaranteed debt. As the debt cost for such a privateborrower is probably eight percentage points higher than thegovernment's, the subsidy for the equity tranche is nearly 50percentage points. By priming the upside for private investors, theTreasury hopes that demand for toxic assets will increase sufficientlyfor their prices to rise enough for banks to survive the stripping.

Thishope is probably in vain. In contrast to the stock market's reaction,the credit market has barely changed since the plan's announcement. Theprices for toxic assets may need to more than double for the banks tosurvive. The odds of this happening are quite low. The chances are thatthe Treasury will come back to nationalisation again.

TheFederal Reserve's plan to buy up to US$1.15 trillion of treasuries,credit card loans and mortgage-backed securities was another reason forthe market's optimism. Its main aim was to keep mortgage interest lowwhich would, in turn, stabilise the US housing market. But, printingmoney to keep interest rates low only works temporarily; it willeventually cause the US dollar to crash. Shouldn't investors demandhigher interest rates for holding dollar papers? It is working in theshort term, as investors focus on the impact of the Fed buying FannieMae and Freddie Mac's paper, and ignore its impact on the dollar.

TheUS is essentially counting on the treasury bubble to keep its economyalive. Because China, Japan and Saudi Arabia are locked in, adepreciating asset could sell at a high price. Like IT, property andcollateralised debt obligations before, this bubble will burst. Ibelieve that US asset prices will finally bottom out when the treasurybubble bursts, possibly in 2010.

Experience from the past twodecades has taught investors to rush in when a market seems to have hitthe bottom, as a V-shaped recovery has always followed. But you will bemaking a big mistake if you think it will happen this time: there willbe no V-shaped recovery; perhaps no recovery at all. Economies andmarkets may remain at the bottom for years. Possibly the only hope forthe next bull market is for China to pick up where the US left off. Ithas the size and growth potential to lead globalisation. But it mustchange its export/investment-led model and undertake three reforms:

lFloat the yuan, open the capital account and cut income tax to 25 percent. These actions will attract the rich and talented from all overthe world. Shanghai would surpass London and New York as a globalfinancial centre.

l Return the wealth to the people in theform of all government shares in state-owned enterprises. The initialimpact would increase household consumption by 500 billion yuan (HK$568billion). A good economy will tighten the labour market and push upwages, further boosting consumption.

l Designate 25metropolises as mega cities, with 30 million people each. These citiesshould be allowed to issue bonds to finance their development, so theycan keep property prices low, which would attract buyers. As migrantworkers build the cities, the government should start a mortgageprogramme to allow them to buy the properties they build.

Chinahas the potential to become a developed economy in two decades. Therecould be another bull market, but the catalyst will not be whatWashington is doing. Watch Beijing, instead.

Andy Xie is an independent economist.


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