Afternoon Readings
Some interesting columns worth killing a few trees for:
• If Hugo Chavez Is Selling Dollars, Maybe You Should Be Buying (Barron’s)
• AIG Said to Dismiss McKinsey as Benmosche Seeks to Cut Fees (Bloomberg) I have a thesis that McKinsey is the root of all evil . . .
• Moody’s secretive nature described to Congress (Reuters)
• Strategic Defaults: Leaving Affordable Mortgage May Become Winning Gambit (Bloomberg)
• Wall Street Wizardry Reworks Mortgages (WSJ)
• Volcker Says China’s Rise Highlights Relative U.S. Decline (Bloomberg)
• 47% will pay no federal income tax (CNN/Money)
• John Thain “defends himself” in Knowledge@Wharton
• Why Google Loses in China (Foreign Policy)
• Internet overtakes television to become biggest advertising sector in the UK (Guardian)
>
What are YOU reading?
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October 1st, 2009 at 4:03 pm
Another link
http://news.bbc.co.uk/2/hi/science/nature/8285180.stm
October 1st, 2009 at 4:04 pm
Making Bush Look Like a Piker
By Veronique de Rugy
http://www.american.com/archive/2009/september/making-bush-look-like-a-piker
October 1st, 2009 at 4:05 pm
GM Sales September sales down 45%
http://www.reuters.com/article/newsOne/idUSTRE59066D20091001
October 1st, 2009 at 4:17 pm
Thor – Like Leftback, you’re another negative Nancy.
http://www.boston.com/business/articles/2009/10/01/august_pending_home_sales_rise_to_2_12_year_high/
US Consumer Spending Jumps Most in 2 1/2 years:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSbaO.gu.aps
Just tryin to keep ya from gettin kicked in the Shorts
October 1st, 2009 at 4:18 pm
The people running our economy (it is not free market) have put us in a place where if the US currency rises, stocks fall. This is not a viable situation to be in. Furthermore, there are a record number of gold long contracts, aseven though physical demand has plunged. My conclusion is that gold is about to tank, implying the US dollar confounds everyone and rises. Stocks will fall hard…80% NYSE Bulls is insane in this environment.
October 1st, 2009 at 4:21 pm
“An ironclad rule dealing with the development of any new coercive technology is: If government enforcers get it, they will find (or make) an excuse to use it.
Thus there’s nothing welcome in the news, conveyed by New Scientist, that “[The] Pentagon’s efforts to develop a beam weapon that can deter an adversary by causing a burning sensation on their skin has taken a step forward with the development of a small, potentially hand-held, version. The weapon, which is claimed to cause no permanent harm, could also end up being used by police to control civilians.”
“Claimed to cause no permanent harm”? Sure — just like the reliably lethal Taser is a “non-lethal” weapon.
http://www.lewrockwell.com/blog/lewrw/archives/37908.html
to be clear, there’s no Joy in linking to such Truths. there is, though, Joy in thinking that We can grow up, enough, to challenge their development, and implementation, at what is, assuredly, Our Cost.
“A powerful hand-held weapon being developed by the Pentagon could end up in police hands, says a report in a UK science journal.
The Pentagon’s Joint Non-Lethal Weapons Directorate has been developing the Thermal Laser System since 2005, with the purpose of developing a weapon that could disperse crowds or incapacitate individuals by causing them to experience burning sensations in their skin.
According to NewScientist magazine, the weapon has evolved into a rifle-mounted instrument, and there are plans for a hand-held model that could be used by police forces…”
http://rawstory.com/2009/09/report-pentagons-burn-weapon-could-end-up-in-police-hands/
The again, maybe being FF is all We can ask for.. (?)
October 1st, 2009 at 4:33 pm
@ Steve Barry:
I can forsee your scenario except I can think of an even more confounding situation: dollar rises, market tanks, oil falls, but gold RISES. I’m not saying it’s likely, but the movement of gold isn’t quite rational if/when panic sets in.
HCF
October 1st, 2009 at 4:35 pm
GetALife: Regarding spending: CFC was a big component and of course BTS. It’s still good but realistically it’s not as exciting as it’s made out by the media. Regarding pending home sales: Well, we just saw today what happens when you take the stimulus (CFC incentive) away. Housing will follow suit when that credit is removed. Also, there’s a lot of dubious accounting in that report. Again, not bad news but not nearly as good as it’s spun.
October 1st, 2009 at 4:39 pm
getalife-
i think you need to get a clue-
current home sales are stealing sales from the future due to expiring tax incentives- end of story.
October 1st, 2009 at 4:39 pm
Strategic Defaults
http://www.bloomberg.com/apps/news?pid=20603037&sid=aEp.Jgd28LSU
October 1st, 2009 at 4:41 pm
> • 47% will pay no federal income tax (CNN/Money)
I’m quite outraged by that fact, actually… It’s so easy to say, “I want __________ program and it doesn’t matter, because the other 53% will pay for it!” I’m not saying that the poor and lower middle class should pay a lot in tax, but paying zero, but getting more than zero out of the system does have the effect of perverting some incentives…
HCF
October 1st, 2009 at 4:46 pm
HCF @ 4:33
I bought some GDX today @ $43. I think it’ll be significantly higher in six months.
October 1st, 2009 at 4:49 pm
SB:
We’ve seen this before. I’m not sure, but I’ll bet that gold contracts exceed the amount of physical gold available to those writing the contracts. What happens if the holders of those gold contracts want to take delivery?
Maybe the alchemists will just make more.
October 1st, 2009 at 4:50 pm
HCF @ 4:41
That explains much about why the health care debate is so polarizing.
October 1st, 2009 at 4:51 pm
@DL:
I’ve been long GLD/DGP/SLV against short crude oil… Hasn’t worked out so far, but since the gold and silver positions were much larger in size, it hasn’t been a disaster. I anticipate it being better going forward, since I’d be more surprised if oil breaks above $75, than if gold goes above $1100.
Good luck with the miners!
HCF
October 1st, 2009 at 4:54 pm
@Marcus:
I’m wondering if you know the stats on physical oil vs. oil contracts? If I’m not mistaken, it’s pretty normal for the “paper” commodity to exceed the physical commodity for most things, so I don’t think gold is an aberration. I can’t seem to find the stats, though, so I may well be wrong.
HCF
October 1st, 2009 at 4:55 pm
HarryWanger – Who are you and what have you done with the real Harry Wanger?
Get a Life – What Ahab Said . It’s obvious you can’t see a connection between CFC and the rise in consumer spending. Can you also not see the similarities in the nose-dive auto sales took after CFC and the housing credit?
October 1st, 2009 at 4:58 pm
HCF:
From the article:
“When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24% this year, according to the Tax Policy Center’s estimates.”
____________
Those households are in the lower income brackets. It’s not like this segment of our population is flush w/cash in the first place.
Your indignation should be saved for the corporations (US and foreign) and top 1% of earners who effectively pay no taxes.
October 1st, 2009 at 5:01 pm
MA,
How do ‘Corporations’ pay Taxes?
October 1st, 2009 at 5:02 pm
MA @ 4:58
I think the top 1% pays about 40% of all federal income taxes. (That’s not to say, of course, that there aren’t any tax cheats among them).
October 1st, 2009 at 5:05 pm
MEH @ 5:01
Obama says they do. And that many of them are evil. (Especially integrated oil companies and health insurance companies).
October 1st, 2009 at 5:06 pm
HCF:
(sorry, man – this is to your second comment):
The supply of physical gold is a relatively sure thing, and relatively fixed (I also don’t think the miners have been holding back on supply in hopes of a better price). Oil and other commodities, not so much.
October 1st, 2009 at 5:09 pm
From the “So you still think government is the solution?” department:
http://www.epa.gov/nsr/fs20090930action.html
October 1st, 2009 at 5:13 pm
Exactly, MA. This is the biggest straw man out there. Ridiculous. Let’s now blame the under $50K crowd. Nothing like a little reverse class warfare to get the Sheeple warring with each other instead of the folks they should be targeting.
October 1st, 2009 at 5:16 pm
Chicago PMI Stirs Market; Distribution Raises Fairness Issue
http://online.wsj.com/article/BT-CO-20091001-709038.html
October 1st, 2009 at 5:16 pm
Mannwich,
With Bush, it was “red state” versus “blue state”. With Obama, it’s the “under 50K” versus the “over 50K”. Obama’s hoping to win big in the next election with the “under 50K” crowd.
October 1st, 2009 at 5:18 pm
@DL: I hear you but far too many in the under $50K crowd continue to vote against their own interests, so I doubt it will work.
October 1st, 2009 at 5:20 pm
MA says “Your indignation should be saved for the corporations . . .”
I was thinking the same thing. Fascinating how different people will take the same piece of information and see completely different stories from it. HCF would appear to believe that poor people are getting too much in services and not paying for it, you listed corporate taxes. I immediately thought that it was shocking that 47% of our population is now so poor that they don’t qualify to pay federal income tax.
October 1st, 2009 at 5:22 pm
@Thor: I thought the SAME thing. These folks pay taxes. They’re called payroll taxes. I’m sure many also pay sales tax, property tax and other assorted taxes, so let’s get real here and stop the reverse class warfare.
October 1st, 2009 at 5:25 pm
MEH to MA .. “How do ‘Corporations’ pay Taxes?”
thats a loaded question .. not sure they do .. because its passed on to consumers (if they can)(for the most part)
but I’ll say this .. when one does pay taxes – all its worlds customers pay taxes .. and that means more income than the line workers making widgets via payroll deduction & end of year 1040 kickback scheme
October 1st, 2009 at 5:27 pm
To me, it’s not how much we pay in taxes. It’s HOW wisely its SPENT. We can all argue that lately those dollars haven’t been spent wisely but on one boondoggle and/or war after another.
October 1st, 2009 at 5:27 pm
TEWKSBURY, MASS. — Raytheon Co. has developed a food safety pasteurization system that focuses concentrated energy in the form of heat produced by millimeter waves to the surface of food products. The company said the technology is particularly effective for ground meats and citrus.
“Since we patented the first microwave oven nearly 65 years ago, Raytheon has had a rich history of developing innovative solutions for our customers,” said Lee Silvestre, vice-president of mission innovation for Raytheon Integrated Defense Systems. “As our world food supply is becoming increasingly susceptible to contamination, it is important that we continue to develop healthier, more efficient methods to keep our food supply safe.”
In tests using multiple samples of meat pre-contaminated with three harmful bacteria, the company said the system killed all three in less than 16 seconds. Raytheon also said the system does not use ionizing radiation and may be incorporated into existing processing lines.
http://www.meatpoultry.com/news/daily_enews.asp?ArticleID=106316
imagine that, ‘Civilian’-spin-off
We might do well to wonder how ‘Civil’?, how ‘Safe’?
October 1st, 2009 at 5:28 pm
The unemployed pay no payroll taxes. It’s a free ride for them. Must be nice.
October 1st, 2009 at 5:30 pm
@MA: LOL. Point well taken. Life is good, baby.
October 1st, 2009 at 5:31 pm
Income tax paid is not the only (maybe not even the most important) measure of contribution to society. People working for minimum wage may add a lot of value by generating profits for a corporation. See also inane arguments about the burden illegal immigrants place on our society while conveniently ignoring the backbreaking work they do for less than minimum wage.
(Btw I am firmly in the 53% that sends boatloads of money to our beloved government every year.)
October 1st, 2009 at 5:31 pm
@ MEH:
Corporations pay taxes AFTER they have spent.
Individuals get taxed BEFORE they spend, and then after, and then again, and again…
Is that what you were looking for?
October 1st, 2009 at 5:34 pm
Mannwich Says:
October 1st, 2009 at 5:27 pm
Very good point.
The Military/Industrial complex (probably) sucks more dollars from the teat of the taxpayer than all of the other recipients of tax dollars put together.
October 1st, 2009 at 5:37 pm
I-Man,
that’ll work..
sounds like peep are, in view of the way they’re taxed, merely, Slaves owned by the State.
That must suck. or, not?
October 1st, 2009 at 5:39 pm
I-Man @ 5:31
Can you think of a tax on a corporation that isn’t ultimately borne by an individual (investor, employee or consumer)?
Of course, we all want to “soak” the CEO’s. But setting that issue aside, the fact is that raising taxes on corporations won’t generate “free” money. Even that left-winger Robert Reich supports the idea of cutting corporate taxes.
October 1st, 2009 at 5:40 pm
DL, is, more strictly speaking, exactly correct.
October 1st, 2009 at 5:46 pm
Does anyone seriously think prices on goods and services would fall even a penny if corporations were not taxed at all? That savings would never be passed on to the consumer, it would go straight to the bottom line and then into the pockets of their CEO’s.
October 1st, 2009 at 5:53 pm
i can’t wait until we have the VAT- that will be pretty cool-
about time too- the French are such trend setters-
“Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954. Initially directed at large businesses, it was extended over time to include all business sectors. In France, it is the most important source of state finance, accounting for 52% of state revenues.”
i like that once it was 1st enacted it slowly enveloped all until it accounted for 52% of revenue
got to like that
October 1st, 2009 at 5:55 pm
Thor,
actually, I think the Shareholders might have something to say about that, to say nothing of the Corp.’s Bond-buyers and/or Bankers..
that Corp. (mis-)management has reached such a zenith, the enablers need to be understood..
October 1st, 2009 at 5:56 pm
@MA: Exactly, but “freedom ain’t free”, dontcha know? You betcha.
October 1st, 2009 at 5:58 pm
@Thor: I’m sure that health care executives would lower their premiums, if only they didn’t have to pay that pesky corporate tax.
October 1st, 2009 at 6:00 pm
Regarding Volcker’s comments, this is nothing new I suppose. CNBC Sucks will agree with me.
U.S will have a paltry GDP growth in the next decade or so. Growth will come from emerging economies as they will leave us behind.
October 1st, 2009 at 6:06 pm
mh, not sure that shareholders get much ‘profit’ from most corporations any more, as most don’t pay a dividend do they? most stock holders make their profits selling their stock to each other right? and bond holders might be interested but no so much, they will get interest based on risk of loss (which may or may not have any thing to do with the price of their offerings?). now bankers may be more interested. but only in the same way the bond holders are. but i think you are correct corporate management (or not) is the highest its ever been, but then they barely have to do more than keep the stock up, so that stock sales keep going, and they pretty much answer to nobody.
October 1st, 2009 at 6:06 pm
“Growth will come from emerging economies as they will leave us behind.”
of course- we have to give them a chance to rape and pillage the environment like we did-
it’s been a while since we had an actual river burning here in the USA-
“There have reportedly been at least thirteen fires on the Cuyahoga River, the first occurring in 1868.[12] The largest river fire in 1952 caused over $1 million in damage to boats and a riverfront office building.[13] Fires erupted on the river several more times before June 22, 1969, when a river fire captured the attention of Time magazine, which described the Cuyahoga as the river that “oozes rather than flows” and in which a person “does not drown but decays.”[14]” – Wiki
our Zenith in industrial might
October 1st, 2009 at 6:07 pm
@GetaLife: why don’t you just f*** off? You are on ignore from now on.
October 1st, 2009 at 6:08 pm
@call me ahab:
“rape and pillage” – That is the side effect from taking the “capitalism” drug.
October 1st, 2009 at 6:12 pm
@Thor
“GM Sales September sales down 45%”
Isn’t the same with Ford and Chrysler?
Chrysler fell 44% and Ford down 5%
Harry might consider that as “Greenshoots” though.
October 1st, 2009 at 6:17 pm
ahab,
and the Lake it flows into http://www.uswaternews.com/archives/arcquality/2lakeri9.html
http://www.publicaffairs.noaa.gov/releases2005/apr05/noaa05-r508.html
‘de-industrialization’ helped clean the Lake, Globalization gave it a different disease..
October 1st, 2009 at 6:20 pm
That is the side effect from taking the “capitalism” drug.
‘hattiedude,
far from ‘Capitalism’ being the vector, know that the USSR committed graver travesties to their Enviro..
it’s a problem of Command Economies and powerless/willfully ignorant Subjects, thereof..
October 1st, 2009 at 6:30 pm
This “we’re a nation of freeloaders, how will we ever survive?” is a ridiculous article.
Newsflash: most of the people who don’t pay federal any federal income tax are POOR. Ridiculously poor. Like, “we’re 40% of the people but collectively we earn less than 10% of the money” poor. Oh, and about HALF of those people scrounging for table scraps are still paying net federal taxes, because they’re paying payroll taxes. Are payroll taxes not taxes? Are they somehow NOT money out of a very, very small paycheck?
Oh, and I got all these stats from the study the writer of this article ostensibly read: http://taxpolicycenter.org/.
The higher income people not paying taxes are hopefully cripples and other wretches who need more money just to live. But sorry, I look at that 2% of households earning 1 million that don’t pay any federal taxes and I suspect a lot of them are freeloading loophole jerks. More than happy to see us crackdown on these guys, but I expect it will be met with cries of “no! We’re victimized rich people who already pay so much money on our taxes! There is barely enough left over for our maid service and driver! You need to go after the 45% of Americans who are dirty, dirty freeloaders who are not paying federal taxes as they greedily split a whopping ten percent of the money earned in this nation!”
The suggestion that the 40% of our nation’s people who are living off ten cents of every dollar earned need to pay more in taxes is as offensive as it is ludicrous.
Balance the budget on the backs of the 10% of the population that takes home HALF the cash! The I’m one of them! I should pay more! Heck, let’s take it from the 0.1% that split a whopping 7% of the money! They aren’t going to have to cancel cable, okay?
October 1st, 2009 at 6:31 pm
MEH says-
“know that the USSR committed graver travesties to their Enviro..”
good point- one need only look at the receding Aral sea-
re the burning Cuyahoga River in 1969- at that time- when driving with the family on a road trip-
all trash was thrown out the window after stopping for food and drinks- and each side of highways were littered with trash- everyone did it- and seat belts- please- never heard of such a thing- tell my kids that story and they can hardly believe it-
October 1st, 2009 at 6:34 pm
@theorajones: As Jello Biafra of the Dead Kennedy’s once elequently put it (tongue firmly in cheek): “Kill, kill, kill, the poor”.
October 1st, 2009 at 6:35 pm
agree with you “penn” dude.
But I care more about what is happening right now than what happened with USSR before the wall came down. Anyways, it doesn’t matter now as most countries (except NK & Venezeuela and few others) are moving to capitalism.
October 1st, 2009 at 6:35 pm
manhattanguy Says: “Growth will come from emerging economies as they will leave us behind.”
This may prove true eventually, but in the near term, the export-driven economies will likely suffer a great deal. It’s simply not possible for them to shift gears quickly enough to pick up the slack. Recall that going into the Great Depression, the US was running a large a trade surplus.
October 1st, 2009 at 6:39 pm
Of course export driven economies will suffer in the mean time. No doubt about it. But guess what? China is increasing trade activities with other developing countries (e.g, Brazil) while reducing reliance on U.S. Both India & Brazil are already out of recession and humming along fine. In fact the only BRIC nation that will suffer is Russia.
October 1st, 2009 at 6:41 pm
@manhattan: Not sure I buy that. If we dip again, I think everyone goes in the shitter again for a while. There are many chapters to be played out in this mess.
October 1st, 2009 at 6:42 pm
and remember this guy- best PSA ever-
http://incolor.inebraska.com/tgannon/pubhtml/grfs/CryInd.jpg
although I think he was actually Lebanese
October 1st, 2009 at 6:44 pm
Welcome to Red October, The Fall in the Fall, Part Deux, The Second Worst W America has Ever Seen. . . Don’t say we didn’t warn ya!
http://www.ritholtz.com/blog/2009/07/you-call-these-good-earnings/#comment-196755
http://www.ritholtz.com/blog/2009/08/10-for-tuesday/#comment-203094
http://www.ritholtz.com/blog/2009/08/flatlining-since-940-am/#comment-205448
http://www.ritholtz.com/blog/2009/08/bad-bears-or-road-to-recovery/#comment-207726
http://www.ritholtz.com/blog/2009/08/saturday-linkfest/#comment-207989
http://www.ritholtz.com/blog/2009/08/wednesday-10-spot-2/#comment-209262
http://www.ritholtz.com/blog/2009/09/annotated-dow-update/#comment-217148
http://www.ritholtz.com/blog/2009/09/thursday-reading-2/#comment-218893
http://www.ritholtz.com/blog/2009/09/friday-reading-2/#comment-219427
maybe read those.
October 1st, 2009 at 6:44 pm
Ahab – I’ll take your seat belts story and rise you a “one for the road” lost saying. :-)
October 1st, 2009 at 6:49 pm
@Mannwich
I have a different opinion. I don’t believe U.S is the engine of the global economy anymore. I think we are witnessing a transfer of super power status from U.S to China. India is already back to 6-7% GDP growth. Private consumption in Brazil has gone up in first half of the year.
http://chinanewswrap.com/2009/06/08/soros-china-could-replace-us-as-engine-of-global-economy/
October 1st, 2009 at 6:52 pm
@manhattan: I believe that in time you will likely be correct, but this shift will likely take a longer time than many of us think. I think if we go down again, China and other emerging countries feel it too, but eventually they will probably come out of it stronger than us. I just think something this big will take longer than you do, but fundamentally we agree.
October 1st, 2009 at 6:54 pm
“I think we are witnessing a transfer of super power status from U.S to China. ”
manhattandude- i remember that line from the 80′s re Japan- didn’t pan out that way- sometimes things don’t happen as they may appear they will happen
October 1st, 2009 at 6:59 pm
I’m with Ahab here – India will never gain super power status. Not even close. The vast majority of their population is dirt poor, more than half of them are malnourished and they will, in the very near future, be running out of water. China will go the way of Japan, only they’ll never gain their standard of living before they stagnate.
October 1st, 2009 at 6:59 pm
China will be back to growing rice if all those factories close because the US doesn’t buy crap any more.
Use your brain.
October 1st, 2009 at 7:01 pm
also- i want to add-
China has a dictatorship- not a good form of government to have as your people start appreciating the modern world and its freedoms-
China is also quite insular- and has 1.2 billion people to control- not sure the ruling party wants to jeapordize its power by subjecting its self to any more scrutiny than necessary
October 1st, 2009 at 7:02 pm
Mannwich:
that was the best written Palin (Sarah, not Michael) impersonation I’ve ever read.
October 1st, 2009 at 7:02 pm
If the U.S. dips again and stops buying cheap goods from China, things will get bloody ugly over there in the PRC (literally) as their credit bubble pops.
October 1st, 2009 at 7:03 pm
Same denial when China was rising in the last decade. You really think they will make the same mistakes as Japan did. Try again.
October 1st, 2009 at 7:04 pm
@MA: ?? Color me confused. I’m offended to be mentioned in the same sentence with that nitwit. I assume you’re joking?
October 1st, 2009 at 7:04 pm
@manhattan: No, they’re likely to make different ones.
October 1st, 2009 at 7:07 pm
How’s this for a far out scenario – Chinese civil wars. There are quite a few provinces in the east (XinJiang and QuinHai), not to mention Tibet and Inner Mongolia who’s ethnic populations could cause quite a bit of unrest if the “Chinese Miracle” starts to falter.
October 1st, 2009 at 7:07 pm
“No, they’re likely to make different ones.”
That I am sure of.
But not until they will see their own growth peak. They are at where U.S was in late 19th century.
October 1st, 2009 at 7:08 pm
mannhattan-
first off- read my 7:01 post-
but secondlly- everyone always gets all caught up in “superpower”- a term Churchill used to describe the USA and USSR after WWII-
there need be no superpower at all- as was the case before WWII- with alliances and treaties used to help a country’s cause-
a superpower is an outlier- not the normal way of things
October 1st, 2009 at 7:09 pm
manhattan – I don’t think it’s a matter of making the same mistakes as Japan – I think it’s more a matter of their growth being tied to extremely low wages and an artificially cheap currency. The balancing act they are playing with regard to both is a scary one.
October 1st, 2009 at 7:11 pm
China has already made their mistakes – in buying crap US paper and now they are tied to us by a ball and chain.
Animal Farm is not going to be running the world any time soon, even if we are living in 1984.
It’s a house of cards over there, with real estate bubbles and businesses riddled with fraud and corruption.
Remember most of the country is still a feudal agrarian society, and their exploitation of labor fuels the cities.
October 1st, 2009 at 7:14 pm
@Ahab: Terminology doesn’t matter. But they will have a bigger economy than ours by 2020. Our cycle is over and it is for someone else to pick up the slack.
October 1st, 2009 at 7:18 pm
they will have a bigger economy than ours by 2020. – it’s easy to grow an economy at 10% a year when you start with almost nothing, it becomes much harder the larger and more complicated your economy become. I’m not sure we can safely assume their economy will grow at the same pace it has (even assuming the numbers they report are anywhere near factual) over the last 20 years.
“Our cycle is over and it is for someone else to pick up the slack” That’s a stretch I think, and has been prognosticated since the 30′s. I’ll believe it when I see it.
October 1st, 2009 at 7:18 pm
Albert Edwards was highlighted by Paul and also at ZH today. He makes Rosenberg seem like a Pollyanna:
http://paul.kedrosky.com/archives/2009/10/albert_edwards.html
http://www.zerohedge.com/article/albert-edwards-upcoming-economic-abyss
October 1st, 2009 at 7:22 pm
@MA: Gotcha now. You betcha. Dontcha know? Forgot about that post. Have made too many today. Gotta run. Good night all.
October 1st, 2009 at 7:22 pm
@Thor
We are not talking growth rates, we are talking in absolutes (10T). Just to give an example, China already overtook U.S as number Uno in Automobile and Mobile markets. Again people continue to live in denial.
October 1st, 2009 at 7:22 pm
I’m thinking we should take BR’s lead and bash McKinsey for a while.
McKinsey’s fingerprints were all over the dot com implosion. Remember wingspanbank.com? That was a trainwreck, I believe it was an online-only bank started by Bank One. McKinsey idea.
I think it is still kind of interesting, even today, that the I-banks caught so little flak for bringing complete POS companies public. Buyer beware, I know……
But McKinsey got even less flak — and they were advising all kinds of companies on their Internet strategies, many of which turned out to be debacles.
And the VCs skated through everything completely. It is good to be a VC…..
October 1st, 2009 at 7:24 pm
I agree, Whammer, but be careful. Those are the U.S. of A’s “best & brightest”. You don’t want to be critical of them.
October 1st, 2009 at 7:25 pm
manhattanguy,
that’s a pretty bold claim about China. You could be right but I wouldn’t make that claim myself. I mean thats roughly a decade out, they do roughly 4 trillion in US dollars GDP currently and we are at roughly 14 trillion. That would be one hell of a swing in a decade and if the US is to fall that quick I’d think China would not in fact grow like that due to all our debt they hold. In fact, they’d be in deep if this goes down. I doubt a Chinese currency rise would put them near us b/c they don’t want a strong currency as a large net exporter. Even if we didn’t see credit deflation and limped along with very low GDP growth the emerging markets growth would have to be quite amazing given the severity of the global recession that is or isn’t over. In the outlier event that we do have a V shaped recovery (I assign a 0 chance to that personally) then I’d probably conclude no way China catches us by 2020.
October 1st, 2009 at 7:27 pm
Manhattan – we’ve gone through this all before and obviously we still have differing opinions, only time will tell eh? ;-)
October 1st, 2009 at 7:27 pm
@LB and Thor:
The truest happiness he said, lay in working hard and living fugally. Somehow it seemed as though the farm had grown richer without making the animals themselves any richer–except, of course, for the pigs and the dogs.
“Comrades!” cried an eager youthful voice, “attention, comrades! We have glorious news for you. We have won the battle for production! Returns now completed of the output of all classes of consumption goods show that the standard of living has risen by no less than twenty per cent over the past year.. . .”
“Under the spreading chesnut tree
I sold you and you sold me:
There lie they, and here lie we
Under the spreading Chestnut Tree.”
See: http://www.ritholtz.com/blog/2009/08/10-for-tuesday/#comment-203094
Welcome to Red October, The Second Worst W America has Ever Seen™
October 1st, 2009 at 7:30 pm
Wow. I go away for a few minutes and the conversation gets good. (Was it something I said?)
Anyway, re: India/China,
The old saying — “a rising tide lifts all boats” — does not hold if the analogy is given more scrutiny. For every rising tide in one place, there’s a lowering tide in another.
The tide is rising in Asia.
Globalization is the reason, and technology advances on all fronts (communications, travel, observation and analysis) was the vehicle that enabled it.
We’re left trying to reconcile cultural systems that evolved over millennia and a single economic system. The results haven’t been too good for us.
India’s cast system legitimizes (legally, traditionally, and for many, religiously) the existence of class stratification (socially, economically, and by privilege). While there might or might not be many perpetually trapped in the lower classes (and many destitute poor) the burgeoning, hard-working, well-educated, science-savvy, globally aware faction of the population is formidable. Within the past 5 years, India has beaten us at war games (admitted by the US military). They have made also major investments in their infrastructure and are developing a very strong footprint in the sciences. They also understand and advocate capitalism and democracy.
We seem to be heading in the other direction. I think we will have a difficult time matching them.
Our tide is receding.
October 1st, 2009 at 7:32 pm
DiggidyDan – Well hot Diggity DAMN! That was one hell of a call mister!
October 1st, 2009 at 7:32 pm
@ben22
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
China will beat Japan to take the No 2 spot within the next year. They are catching up quicker than people think.
October 1st, 2009 at 7:33 pm
@Thor
Right Thor :) No problem debating about this once in a while.
October 1st, 2009 at 7:49 pm
We’ll see; the debate is till out. never can predict a market with human psychology as it is. I just know what I think.
October 1st, 2009 at 7:54 pm
@mguy,
so to turn to investments, given your bullish outlook on China how do you play that or are you careful here since they have more than doubled off the lows? I prefer FXP but that’s just me.
October 1st, 2009 at 7:55 pm
BTW, anybody know if it is possible to short an ultralong etf such as UPRO? I want to take advantage of the decay factors inherent in leveraged etf’s by doing the opposite of what i think. I don’t think my broker will let me do so.
October 1st, 2009 at 7:57 pm
@ben22
agree with you on FXP, we might see a bounce here but it may not last very long.
October 1st, 2009 at 7:57 pm
Nobody (except Jim Rodgers) is moving from the US to China (and he’s not in “real” China!)
Private autos are a wasteful and hugely expensive form of transport and will probably recede in China – especially after the next oil shock (Israel bombs Iran and nobody in China can afford to drive their new Chery – Is “new Chery redundant?)
We’ve done everything possible to screw up our economic system, now it’s their turn!
October 1st, 2009 at 7:58 pm
i suspect that the world in 19 or more years will be really different. i think that we are in the great equalization of the worlds economies. in that the US standard of living will soon match the rest of the world (not the other way around). and the great exporters of today will struggle greatly because their biggest customer (US) is gone. and they won’t have any thing to replace it with. and based on our reduced standard of living, and incomes, we will be buying a lot less. which puts in China in a bind. their culture is not going to change and make them big time consumers. and they have some of the same issues that Japan has with an aging population (they just have a lot more people to begin with). plus they have the problem of what to do with their population when their export markets slow down or die off. can you say revolution or civil war? and India has different issues, they have some who are doing really well, but its not a very big slice of their population (which China has too). and so they have a very small group of consumers, with a large majority of those who are just trying to survive.
ain’t globalization grand?
October 1st, 2009 at 8:07 pm
this does bring up the idea of where the G8 —-> G20 —-> G40? end up going?
October 1st, 2009 at 8:10 pm
DD-
2nd thor’s comment- quite the shaman
manhattandude-
never turns out like you think- not quite sure how old you are but in the 80′s all the talk was Japan- and it was incessant- they bought Rockefeller Center and other American properties- they were on the ascension and USA on the decline-
but- didn’t turn out that way-
not saying China will not become more economically powerful- but realize- that much of what they have done is by pegging their currency to the $ and by paying low wages- but more importantly-
they are not free- and when I was in China- many internet sites we take for granted- are blocked- that can not bode well for a country of 1.2 billion- for instance- no such thing as Tienanmen Sq massacre in China- blocked on the internet- no books- etc. -
another little tidbit- re insular nature of China – travel guides that indicate Taiwan as a separate country- not to be found in China-
that alone tells me that China is not ready for prime time
October 1st, 2009 at 8:13 pm
Marcus..
being from india…i have to disagree with your accolades for india.
USA is still the number one country in the world…and i dont see much of a difference in near future.
I have Austrlian permanent residency also, but i chose USA.
In india…the bigges hurdle is democracy combined with illiterate and unware population.
most politicians are career thugs….atleast 95%. if you are a decent man with good family you wont dare to go into politics unless you have blessings of some one big and you are willing to play with filth.
india improved because of Outsourcing of services by USA and some from europe(IT, Call center, Medical transcription etc..)
you will be surprised to know that even in this downturn work is still getting sent to india due to the low cost. most of the work is maintainenance and support hence not much room for reduction.
China has done much better in the last 20 years even though it was a communist country since the people in power in china were atleast interested in some nation building and they had some nationalism pride in them……no such thing in india….you get elected by hook or by crook and then need to make as much money as possible asap…because you may never win another election.
infrastructure has come to a breaking point….drinking water has become a issue, power outages are very common….two hour commute even for 10 miles is very common in most cities.(everyone bought car but government does not plans to improve infrastructure even at 20% of traffic growth)
USA has one big thorn in the path of its progress………..religion based politics has polarised the nation, IMO 35% want religion as basis for law making……and 35% want to oppose them , which means nobody pays attention to real issues …..which means lobbyist run the government which leads to current situation…
but i do have some hope….the future generation is getting smarter and in 10 years religion in politics should not matter much (once the religious right numbers go down below 20% politicians will not take stance to appease only them…..they will have to balance it).
October 1st, 2009 at 8:23 pm
China has an interesting challenge with their one child policy. Way more than half the Chinese live births since the policy was enacted have been male. Lots of unintended consequences there. I’m thinking domestic disturbances and wars or maybe imported wives from VietNam, Philippines, Indonesia and India…that won’t go down well with the Han. China has always been poor they’ll find a way to stay poor.
October 1st, 2009 at 8:23 pm
i am surprised why everyone has one track mind.
things like below
1)USD going down is bad for usa
2)inflation will be caused by too much printing
3)weimar republic and zimbabwe same as USA…..puleeeazee
4)reflation is impossible to acheive hence only way from here is down in a hurry.
5)dont even want to list the conservative/liberal idealogical bullshit..
i dont claim to know much….since my day job is programming. There are too many variables…i wish i can make a model where we plugin variables and see what happens. does anyone know of such models?(inflation deflation…currency exchange rates…wages….commodties etc being part of the model)
October 1st, 2009 at 8:25 pm
JC..
but is it no possible that male will accept other male as companions :) , that will also lead to reduction in population.
October 1st, 2009 at 8:33 pm
“China has always been poor they’ll find a way to stay poor.”
interesting statement there JC- some truth possibly- because the ruling party may not want an educated and world wise populace
October 1st, 2009 at 8:36 pm
“BTW, anybody know if it is possible to short an ultralong etf such as UPRO? ”
Diggidy Dan – Yep, it’s certainly possible. I’ve done it in the past. I’m sure it will depend on your broker and availability, but other than that it’s a good plan. Pretty soon nobody will want to be long the leveraged ETFs, instead shorting the opposite for the reason you point out.
October 1st, 2009 at 8:45 pm
I tried to do so last week with ZECCO, (only using them for the free trades) and the order was rejected. If anybody knows of a way to do this with a broker that charges low commission, please fill us in. I want to short the UltraLong instead of buying an UltraShort. (for obvious reasons previously mentioned)
If you take a look at the charts of these instruments, you’ll notice that the UltraShorts tend to have huge spikes, then drop off the face of the earth, and that’s not my style. If i can short an ultralong like SSO or UPRO I can take advantage of the long slide down and not have to worry day to day about when to GTFO!
October 1st, 2009 at 8:54 pm
DiggidyDan, you can buy puts on the leveraged ETFs.
October 1st, 2009 at 9:19 pm
Dan, the problem is that many online brokers, if not all, have banned the use of margin with leveraged and “nontraditional” (ahem, short) ETFs.
They claim to have done this to “protect investors”, but we can all draw our own conclusions about this. I think they dont want to have alot of people short… and furthermore dont want day trading punks like me trying to get rich with these things with the leverage, without paying them their due with respect to margin interest. If you dont carry them overnight, you dont pay. On the other hand, if you know how to trade well enough, in a volatile tape you can make serious bank just trading the intraday swings with these things. You can also lose your proverbial ass, but thats the way it goes.
You cant short something without using margin, so there you have it.
E117 is right tho- you can use options, but you cant margin those options, you have to pay cash.
The rule has definitely affected my trading plan, but thats the way it goes. Obviously, if you have the cash on hand to trade them from the long side its irrelevant.
October 1st, 2009 at 9:29 pm
I agree, but i don’t want to day trade or use margin. I want to take advantage of the long term decay of holding a leveraged etf by shorting (with cash, not on margin) a leveraged ultralong. The margin is in the etf’s book. I would buy with cash in my own account. I do not know if this is allowable. Maybe i have to just short a long etf for a longer term, but i do not think that would contain the same advantages of the decaying factor, as those are mostly confined to the leveraged etfs.
I am thinking it is a have your cake and eat it to deal. You can’t beat them at their game even though you know it is rigged, because they make the rules to prevent those that know from doing so. Kinda like counting cards at blackjack.
October 1st, 2009 at 9:31 pm
Shit. . . I-man, filter got my last post replying to you for using the word Bl@ckJ@ck in it. watch out for it when it gets approved and let me know.
October 1st, 2009 at 9:33 pm
Wow. There is a major lack of understanding about China.
Their economy is $4 trillion in dollar terms. It is somewhere between $8 to $12 trillion in purchase power parity. Some day, perhaps sooner than later, their currency will revalue and t$8 – $12 trillion will become the dollar number as well.
China is growing 8%+, while we are hoping just to tread water.
China consumes many times more steel, cement, copper, etc. than the USA.
China builds and buys more autos, trucks etc.
China has 4X our population
China has a very hard working labor force, strong education ethic,
China is increasingly adding value to its economic output to the point where the “cheap labor” goods are now being outsourced to other Asian economies.
China’s government is pro-business and facilitates growth to a much greater extent than in the USA
China smartly raised the reserve requirements of its banks during the past boom cycle thus avoiding the financial troubles that our 30 – 1 & 40 – 1 institutions got into. This also allowed them to lower reserve requirements and increase loans today.
China is a net creditor nation – we are the debtor nation.
I could go on, but I think you get the drift. Many have yet to update their perceptions of China from the days of the little red book, or they think of China as a slave labor hotbed. No, it is a very big and very rapidly developing nation with very modern infrastructure and a very motivated labor force.
We on the other hand are a complacent, poorly educated (public schools are awful) unmotivated lot who have been living well beyond our means for three decades and who are still in the denial stage with respect to the global changes that are going on. i just hope the anger stage isn’t too severe once we realize we have become a second rate nation.
October 1st, 2009 at 9:40 pm
@bsneath
That’s what I have been trying to say to rest of the crowd :)
October 1st, 2009 at 9:41 pm
Also want to call out to some regulars for their thoughts on (IMO) this inflection point day. Anybody out there lurking like Ben, the Mistress of the Stick, AT, SB, or CV?
October 1st, 2009 at 9:52 pm
Willid – Brilliant, couldn’t have said it better myself.
Techy – AWESOME post, thank you for a very insiders view of India.
bsneath – sorry, but going to have to disagree on all of your points.
1. I’ll put this bluntly – any and all economic data coming out of china IS A LIE. China has absolutely NOTHING to gain from giving the world accurate numbers on their economy, especially now. If it were perceived that China were in far worse shape than they are telling us now, there would be complete panic both there and in the world economy. Their government, at this point, stays in power ONLY because of the “Chinese miracle” – all that new wealth, all those people out of poverty. You have to hand it to them, they figured this out very quickly after Tieneman Square. If things did not immediately and measurable for the Chinese citizen after 89 China would have very soon had a revolution on it’s hand. If nothing economically had changed in China their citizens would have been aware of the great strides Eastern Europe made after they abandoned communisim the citizenry would have become very restless. If this Chinese Miracle were to start fading there would be problems. So in short, they inflate all of their numbers. It is the most logical thing for them to do. They want the world to think they’re fine so they will continue to use them as a manufacturing base, and the world wants to believe China is fine because things for us AREN’T fine, and if we don’t have the illusion that China is going to pull us out of this mess then imagine then things become far more bleak than we thought.
October 1st, 2009 at 9:55 pm
bsneath
“China consumes many times more steel, cement, copper, etc. than the USA.”
and?
“China has 4X our population”
and?
“China builds and buys more autos, trucks etc”
and? they do have 1.2 billion people right?
“China is increasingly adding value to its economic output to the point where the “cheap labor” goods are now being outsourced to other Asian economies.”
and that’s different from us how?
“China’s government is pro-business and facilitates growth to a much greater extent than in the USA”
and they have a totalitarian government that pegs the yuan to the $ and ensures low wages- that they are totalitarian is a huge negative in my book on their future prospects
good luck man- China’s pretty cool- tramped around there for a month or so- go check it out if you haven’t already-
but i wouldn’t want to live there
October 1st, 2009 at 10:02 pm
Hang Seng set to open down 3%, this could get interesting if they get one of their freefall days over there.
Today was fun, but tomorrow is the real inflection point. There’s a lot of shorts that didnt cover today I suspect. I’m looking to cover if we get another freefall tomorrow… or am I? 87 was on a Monday, right?
Just sayin.
October 1st, 2009 at 10:04 pm
BSNEATH – In response to some of your statements.
“China is growing 8% – Says who? (see above)
Are you suggesting that the Chinese economy will continue to grow at 8% indefinitely?
“China consumes many times more steel, cement, copper, etc. than the USA.”
China has been hoarding commodities all year – If you follow China you know this.
“China builds and buys more autos, trucks etc.”
See above posts re: oil, and pollution
Bsneath – many of us who are bears on China are not living in the Little Red Book past – we are very much living NOW. You appear to be either about 10 years out of date, or are obtaining most of the information you know on China from from MSM sources.
“China has a very hard working labor force, strong education ethic,”
China has a very CHEAP labor force as their main advantage.
“China is increasingly adding value to its economic output t”
Could you be more specific? Are the jobs moving from china to southeast asia being replaced? If so with what?
“China’s government is pro-business ”
Chinas government is CORRUPT, and it is an authoritarian dictatorship. Their government runs their entire economy – forcing banks to make loans, building MORE factories at a time when world demand for their exports is dropping.
“China has 4X our population”
And you consider this as an advantage? Look at the demographics of that population, it’s distribution about the country, religious differences, it’s ethnic make-up – etc
October 1st, 2009 at 10:05 pm
AHAB! GET OUT OF MY HEAD!!!! :-)
October 1st, 2009 at 10:10 pm
that’s funny shit thor-
we basically said almost identical things on two different posts- line by line-
wild!
October 1st, 2009 at 10:23 pm
Can the Chinese currency be forced to rise to the point that it balances out the debt they carry in dollars?
October 1st, 2009 at 10:23 pm
NIKKEI looks robust tonight. As Borat opined…..”NOT”!
October 1st, 2009 at 10:29 pm
Tomorrow should be an interesting day. Which of course means it will probably be a very boring day. . . .
October 1st, 2009 at 10:42 pm
Thor, I can only provide you with facts. I cannot open your mind.
You don’t need to debate me here. Just read more about the country and I suspect you will be surprised with what you learn.
http://www.bloomberg.com/apps/news?pid=20601089&sid=aFHAbQp7Scx4
October 1st, 2009 at 10:45 pm
Oy, I love peeps who are bullish on China solely because they are bearish on the US.
“China is growing 8%+, while we are hoping just to tread water.”
Chinese got 8% this year through a STIMULUS PACKAGE and government ordered lending. Exports are dragging down GDP. If you believe in a deleveraging US consumer, then you must also believe that their export sector will not go back to its former glory, not without fucking over the other Asian exporters (who I expect to get eventually pissed off at China for its currency shenanigans).
“China has 4X our population”
4x the problems, 4x the amount of decent paying jobs to create.
“China is increasingly adding value to its economic output to the point where the “cheap labor” goods are now being outsourced to other Asian economies.”
You forgot to mention that those other Asian economies aren’t going to appreciate China butting into their high-value export sectors. Also, I’m skeptical of the Chinese ability to make high-quality goods. Trading quality for a lower price only goes so far.
“China smartly raised the reserve requirements of its banks during the past boom cycle thus avoiding the financial troubles that our 30 – 1 & 40 – 1 institutions got into. This also allowed them to lower reserve requirements and increase loans today.”
And now, they have to rein in lending for fear of overspeculation in the real estate market and NPL problems. The SSE Composite just loved hearing that in August.
“China is a net creditor nation – we are the debtor nation.”
I assume you mean in “trade surpluses” when you mean net creditor. As Ahab noted, they achieved that through pegging the yuan to the $ and building up massive foreign currency reserves. Those reserves shouldn’t be there and are a sign of economic unbalance. In a free market, the yuan would have appreciated as dollars flowed into China. Instead, they recycled them into Treasuries, Agencies, and the occasional zombie bank like Morgan Stanley. They did this to build up their export sector to an unnatural and unsustainable degree. Praising this arrangement is equivalent to praising our current entitlement setup. Both are unsustainable.
October 1st, 2009 at 10:49 pm
An explanation of the economic problems China faces in the next 2 years.
http://www.fullermoney.com/content/2009-09-22/China_s_Investment_Boom_the_Great.pdf
October 1st, 2009 at 11:02 pm
First, whatever Hugo Chavez does, I don’t give a toss.
But…who are you DiggidyDan?
No offense, you seem to be flying over the crowd here, quite awesome.
Good on you mate.
And thanks again.
October 1st, 2009 at 11:04 pm
Thor & ahab’s suggested reading list. (cut and pasted relevant articles from Google News.
http://www.channelnewsasia.com/stories/economicnews/view/1008617/1/.html
http://www.finfacts.ie/irishfinancenews/article_1018020.shtml
http://www.ainonline.com/news/single-news-page/article/chinas-comac-makes-splash-at-asian-aerospace/
http://sanjose.bizjournals.com/sanjose/stories/2009/09/28/daily43.html
http://www.dailyfinance.com/2009/10/01/blown-away-china-is-set-to-become-worlds-biggest-windpower/
http://www.voanews.com/english/2009-09-29-voa32.cfm
http://www.guardian.co.uk/technology/2009/sep/30/icann-agreement-us
http://www.reuters.com/article/technologyNews/idUSTRE58M4FL20090923
http://www.tmcnet.com/usubmit/2009/09/27/4392536.htm
http://thegovmonitor.com/world_news/asia/china-rising-to-new-heights-in-modern-age-of-growth-and-prosperity-7215.html
October 1st, 2009 at 11:20 pm
lucky guess. hubris comes before the fall.
October 1st, 2009 at 11:25 pm
I’d like to clarify something. I am in no way in favor of the US remaining the worlds only superpower. I think this country (as well as the world) worked a lot better when there was more than one dominant power on the globe. I also have nothing invested in the US being the largest economy, I don’t think the Swiss or the Canadian people mind one bit that they are not the largest economies in the world, standard of living is by far more important. It would be good for the US if we could share the responsibility we have chosen for ourselves with another large power, I’m just not seeing this coming from either India or China. That’s not a good thing imho, we need an equal player on the world stage, the more the better.
October 1st, 2009 at 11:30 pm
bsneath – I have spent the better part of the last five years reading as much as I can on China. The company I work for manufactures quite a bit of product there and my coworkers spend a great deal of time traveling to these factories in different parts of China throughout the year. That you would even use a forecast from the IMF (of all organizations!) as an example in this debate shows how very shallow your education on this subject has been.
October 1st, 2009 at 11:31 pm
http://www.ted.com (non-profit, promoting interesting ideas). Not stock-market related, but fascinating stuff nevertheless. Thinking about it – the excitement of trading SPY’s from 103.44 to 103.65 looks infinitely small compared to the ideas floated there…
October 1st, 2009 at 11:34 pm
Emanuel says – Oy, I love peeps who are bullish on China solely because they are bearish on the US.
That’s really what this boils down to here isn’t it? That’s why I clarified my point, I don’t want anyone to get the impression I’m bullish on the US. We’re f***d. Hell, this is just getting STARTED.
October 2nd, 2009 at 12:19 am
There must be some liberal, anti-global, anti-trade agenda going on here that I am not wired into. Thor, your arrogant response on the IMF merely indicates to me that you are an idiot.
I’ll let you morans scratch each others balls on this board and I’ll move on in search of intelligent life.
see ya
October 2nd, 2009 at 12:26 am
Love it!
October 2nd, 2009 at 12:46 am
Thor, he didn’t even try to refute my link. :(
October 2nd, 2009 at 12:50 am
emanuel – Of course he didn’t. I’m devouring it though – thank you!
October 2nd, 2009 at 9:16 am
Re: China
JC mentioned it, but I don’t think it’s gotten through. China may do well in the intermediate term but it has HUGE hurdles in the short and long term. Short term’s been covered, their export customer is struggling. Long term they are a demographic time bomb waiting to happen due to the one child policy. There are going to be around 150 million men in China that will not be able to find wives. That’s half the population of the US. How do you deal with a problem like that. Men who aren’t getting any are very likely to be restless and likely to cause social strife and revolt. The really only 3 ways to handle that situation from a command and control perspective, legalize prostitution (not likely), openly accept homosexuality (even more unlikely) and war.
This does not even cover the other problem with the one child policy, declining population, which, if you believe that demography is destiny, they will start looking more and more like Japan.
Long term China scares the crap out of me. I think India or Brazil has a better shot at taking a leadership role.