Fwd: Re: Chinese currency activities

John,

>That would be RELATIVE transparency, but who can assess what the thinking
is of billions of
investors, and their actions? I love it when the news reports the "Dow was
down 36 points
today on profit-taking..." <

I agree with both points, RELATIVE transparency, yes, ill-informed
commentary yes as well. What that says to me is people are sufficiently
satisfied with RELATIVE transparency to invest in US markets.

>You are betting that Sarbanes Oxley will control fraud, and that the govt
can write rules that
make things more transparent. I bet not. If Enron broke the rules, how
come the SEC never
noticed? <

I am not betting on SO to control fraud. What it and other similar
legislation does is change the cost/benefit ration on fraud. Enron(and
plenty of others too) broke the rules because they had confidence that the
penalties would be worth the risk. To them the risk/reward ration was
"positive." This is no different than the most pure capitalist, free market
in the USA, street corner drug sales.

>One of the first things Sarbanes Oxley did was cause a rush to the exits by
CEOs and CFOs.
Plenty of talent quit the field rather than face the hastily drafted
Sarbanes Oxley. Were they
all criminals? Or did we lose incalculable management talent?<

SO did not cause a rush to the exits by CEOs and CFOs. The fear that they
would be held accountable for the misdeeds of their underlings was the
motive, if indeed there was such a loss. I would posit these officers left
because the risk/reward ratio went negative. If they left, where did they
go? If they left corporate America, I am betting they went into consulting
for corporate America where they council other CEO/CFOs on how to avoid
running afoul of SO and similar legislation. I am ABSOLUTELY sure they did
not go into import/export competing on design.

To quote that EXXON "poster child" for the virtue of corporate morality, Lee
Raymond... "In every aspect of life, including the economic dimension we are
always challenged to do the right thing. We have seen that in this country
in the last few years, particularly on Wall Street, with the rise of the old
human frailty of greed. This occurs when people serve their own needs to the
detriment of everyone else. To counter such trends, we must work to become
not just players or owners but also stewards of the free market system."
(Acton Institute in 2003). At the time of this statement he was making
(reportedly) $144,000 per day.

>AS to foreigners investing in USA, I don't know what the figures are, but I
do know USA
investing in foreign markets has grown tremendously. <

Foreigners invest in the US in many ways. Holding our debt is one, buying
corporations to get competent management is another and real estate is one
more.

> America's attraction for foreign capital can be readily discerned in the
streets of Washington, where a number of buildings have been sold to
foreigners in recent months. A group funded by Middle Eastern investors
recently bought 901 F St. NW for $56 million, German money was behind the
purchase of 2100 M St. NW for $95 million, and other foreign investors
bought a portfolio of properties, including 5225 Wisconsin Ave. NW, for a
sum in the $200 million range, according to Bill Collins of Cassidy &
Pinkard, a real estate services firm involved in some of the transactions. A
survey of global real estate investors last year showed that the United
States continues to rank as the No. 1 country for "stable and secure"
property investments, with Washington as foreign investors' top city.<
http://www.washingtonpost.com/wp-dyn/articles/A51650-2005Feb24.html There is
a dark side to this as explained in the article as well. >But the influx of
capital has an ominous flip side -- the ballooning U.S. trade deficit, which
soared 24 percent in 2004, to $617.7 billion. The dollars spent by Americans
on Japanese cars, Chinese televisions and other imported goods end up in the
hands of foreigners, who plow them into U.S. Treasury bonds and other
securities ... Therein lies a serious worry for many economists: As the
deficit mounts, so does America's overall indebtedness to foreigners, which
now totals about $3 trillion. That would be less troubling if the money
streaming in from overseas were helping to finance a boom in productive
assets such as factories and machinery.

But to the contrary, economic data show historic highs in the proportion of
U.S. spending on consumption and housing. Not only is the United States
piling up debt, it is doing so while consuming at record levels.<

You aught to enjoy this argument, given your far east experience:
(From USA Today) >Chinese companies such as Lenovo and Haier Group aren't
just buying U.S. company assets. Chinese companies are buying U.S. company
managers.<

>Put another way, Chinese companies don't have world-class management
capabilities. They will be short 75,000 top-shelf managers over the next 10
to 15 years, commercial intelligence firm Asia Pulse estimates. So as the
Chinese try to become international players, Chinese companies will
outsource management to the USA.< and >"The U.S. is the most competitive
marketplace in the world," says Larry Bossidy, management book author and
former Honeywell CEO. "As a consequence, you have to be good to be
successful in most markets in this country."<

Then > "That isn't to say there aren't good management teams elsewhere,"
Bossidy adds. "But we prepare people for the most difficult markets. It's
just in keeping that we'd export leadership to other parts of the globe.".<
http://www.usatoday.com/money/industries/technology/maney/2005-06-28-chinese-
training_x.htm

So, American managers driven out of the boardroom by SO and other
legislation have a new place to go.

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