Asian consumers: the future engine of global growth

Workers across Asia are demanding big pay increases. (The Straits Times, Sept. 20, 2010) A massive strike in the Cambodian garment increase has followed worker rejection of a 20% pay increase; they are demanding +50%, from US$ 61/month to $93. Bangladesh’s three million garment workers have rejected an 80% increase and are striking for more. Independent trade unions are banned in Vietnam, but there have been 139 strikes so far this year. Similar stories are coming from India, China, and Indonesia.

Health insurance in California goes up double digits

The California Dept. of Insurance has approved increase in monthly premiums of 15% to 29%. Anthem Blue Cross’ request for a 39% increase is under review. The department attributes these increases to a number of factors, primarily the requirements of the federal health care bill. In addition to its increase, Blue Shield has announced that it is no longer guaranteeing its rates for a full year but will review them as required. http://insurancenewsnet.com/article.aspx?id=226528&type=newswires (A good health insurance plan for a young family of four is about $1500-$2000/month before the increases.)

22% unemployment rate in China?

China’s Ministry of Human Resources and Social Security has issued a white paper reporting that the unemployment level in China is not the 4.3% reported for urban unemployment but 22% if rural populations were included. This means that 220 million of China’s 1 billion workers are without jobs. This is the first time this has been reported and the data is probably being released to reinforce the government’s view that the currency should not be revalued upward that and restrictions on Chinese exports should not be imposed. (Straits Times, September 11, 2010)

More gold bangles in Bangladesh?

The IMF just announced that it has sold 10 metric tons of gold to the central bank of Bangladesh. This adds to the 212 metric tons sold to the central banks of India, Mauritius, and Sri Lanka in the past year. They seem to like gold in South Asia more than in Washington.

India: Long term stock market outlook

There has been considerable talk in recent days about the Goldman report predicting that emerging markets will total 55% of world stock market capitalization in 2030 compared with 31% today. The largest markets are then predicted to be China, the US, and India, in that order, with China growing from today’s $5 trillion to $41 trillion (n.b. all three markets are valued at about 100% of GDP presently.) This would be an impressive 8X increase. Even more interesting, however, is the position of India as 2030’s 3rd largest market in the forecast. Since India’s population will soon be the same as China’s, and China’s demographics are much less favorable (the workforce will begin declining in 2014,) it is reasonable to think that India will play a bit of catch up. In that case, if its market capitalization reaches $17 trillion in 2030 (my estimate, assuming GDP/capita is only 25% of China’s then compared to 50% today, which may be too conservative) then the increase will be 13X from today’s $1.3 trillion. Of course, twenty years is a long time, and long term investors should remember that life on earth may be destroyed by a giant meteor collision before then, depressing valuations.

Debottlenecking, Chinese style

After the crash of a Henan Airlines plane, Chinese authorities have stumbled on the fact that over 200 commercial pilots have falsified their licenses and other requirements. In response, they have launched a probe to see if this problem is widespread. There is a severe shortage of qualified pilots in China; therefore, creative solutions are to be expected. After all, what are the chances that the copilot will actually have to fly the plane? (The Straits Times, Sept. 7, 2010)

US housing: Not cheap enough?

According to the New York Times, 5% of new federally-insured mortgages made in 2009 at the depth of the crisis and to borrowers with higher credit scores on average than in recent years are already in default. http://www.nytimes.com/2010/09/06/business/economy/06housing.html