Household Armies

My curiosity was piqued by Zenpundit’s post on the psychology of the Warlord, since a lot of my interest in China centers on the Republican period, otherwise known as the Warlord Era. That nomenclature is not without justification – at one point in 1936 the Warlord Chang  Hsüeh-liang  felt empowered enough to arrest Republican President Chiang Kai Shek and order him to stop fighting the Communists and focus on the Japanese what became known to history as the Xi’an Incident. As an aside to the recent comments on this site about the length of historical memory and the importance of the Glorious Revolution to our Founders and the Civil War to our grandfathers, Chang (or more properly Zhang: 張學良)  Hsüeh-liang remained under house arrest in Taiwan until 1990. He was freed upon the death of Chiang Kai-Shek’s son and successor, and died in Hawaii in 2001. This period is indeed still vivid in the living memories of Taiwan’s and China’s elites. And, as I will get to later in this post, Chang’s living memory included encounters with major actors in the Taiping Rebellion. 

Certainly some of my interest in this time period is personal – my father-in-law was a teenage GMD soldier of that era. However, the rest of my interest centers on the post-nation-state character of Warlord conflicts. It is not out of the realm of possibility that China could degenerate once again into regionalism in our lifetimes.

Read more

Post WW2 Occupation Slides

As of late I have been not only discouraged, but pissed off by the level of decorum on a lot of sites and blogs that I visit. It seems that people can’t make informed opinions about anything remotely related to politics, current events or anything even the slightest bit controversial without being greeted by swarms of ideologues, sycophants, and idiots.

Read more

Stocks in November

INVESTING BACKGROUND

I run three trust funds for my nephews and nieces that are old enough to understand the concept of saving, investing and stock selections that are documented at the site www.trustfundsforkids.com. I don’t mind directing people over there because there are no ads and it just describes what the funds are about, our selections, and our returns. Here is a post with more background on the topic.

RECENT EVENTS

For anyone who has been following the markets this year, it has been a roller coaster ride. The US stock indices were up for the year with some decent gains but have recently given up almost all of those gains and seem to be in a state of flux right now. High oil prices, the falling dollar, the credit freeze, housing woes, and finally massive write-offs in the financial sector have taken their toll.

Another important element that is coming to light is that profits for US companies are down significantly; per Barron’s the Q3 EPS for companies reporting are down 8.5% from the prior year – this is a big downturn, comparable to the quarters right before prior recessions (1989 and 2000). Without profit improvements, hiring and capital spending tend to fall in a bad spiral.

One term to keep in mind when investing is “negative covariance” – in layman’s terms this means that “bad things tend to occur at the same time”. Thus everything is fine, and then it’s not. For instance, the housing market goes down, liquidity evaporates, banks make huge write-downs, and then the companies that guarantee or eat these debt instruments struggle to understand the damage. These items were all related, and while models may value the probabilities of each individually, they all work together (in a bad way).

The stock markets recently went down about 10% – this is now officially a “correction”. No one knows if this is the start of a long swoon or a “buy on the dips” opportunity.

Read more