December 21, 2009

Global Market Comments
December 21, 2009


1) Those of you counting on getting your old job back on the assembly line in Detroit better look at the eight year jobs forecast published today by the Bureau of Labor Statistics. The table shows that 4.19 million jobs will be gained in the US in professional and business services, followed by 4 million health care and social assistance jobs, while 1.2 million will be lost in manufacturing. This is great news for website designers, Internet entrepreneurs, and registered nurses in California, but grim tidings for traditional metal bashers in the rust belt manufacturing states like Michigan, Indiana, and Ohio. The real challenge for we aged advise givers is that probably half of these new service jobs don't even exist yet, and if they can be described, it is only in a science fiction novel. After all, who heard of a webmaster 40 years ago? Where are these jobs going? You guessed it, China, and other lower waged, upstream manufacturing countries like Vietnam, where the Middle Kingdom is increasingly doing its own offshoring. These forecasts assume that Americans can continue to claw their way up the value chain in the global economy, and not get stuck along the way, as Japan has been since the nineties. China can have all the $20 a day jobs it wants. But if China is able to move up the value chain faster than it has, as it clearly aspires to do, then America is in for even harder times. I'll be hoping for the best, but preparing for the worst. Keep taking those Mandarin lessons, with some Vietnamese thrown in for good measure.

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2) The New York Times did an excellent update on China's incredibly ambitious nuclear program last week (click here for the full story). The Middle Kingdom currently has 11 operational plants generating 11 gigawatts accounting for 2.3% of the country's power. It plans to add ten a year for the next decade, taking them up to 70 Gigawatts by 2020, and a staggering 400 gigawatts by 2050. That's nearly the total power generated in China today. This will also make China the world's largest consumer of yellow cake (U3H8) for fuel. Canadian, American, and Australian uranium miners please take note. The goal is to sate the country's insatiable demand for more electricity, as well as making a major dent in new greenhouse gases contributing to global warming. The China Guangdong Nuclear Power Group in the Southern part of the country is using imported French designs with proven track records. But the China National Nuclear Corporation in the North is using riskier Russian designs, and its president was recently arrested on corruption charges (see below). One wonders if these plants will perform as badly as the country's poorly constructed school buildings when an earthquake hits. As nuclear plants are sited next to major cities, an accident could make Chernobyl look like a cake walk.

ChinaNuclear.jpg picture by madhedge Yellowcake.jpg picture by madhedge

3) Why don't we try Chinese style securities regulation? Former stock trader, Yang Yanming, was executed by lethal injection last week for embezzling $9.52 million from Galaxy Securities during 1997 to 2003. The move was part of a broader effort by the Mandarins in Beijing to crack down on rampant corruption in the securities industry. Yanming never revealed where the money went, according to the Beijing Evenings News, one of my daily reads. SEC take note. If we adopted similar enforcement measures here in the US, we'd save the $65,000 a year it costs to lock up miscreants like Bernie Madoff in high security facilities. With both state and federal prosecutors now on a holy war against the securities and real estate industries, the combined savings could be huge. Some $80 billion will be spent incarcerating America's 3 million prisoners this year. Still, the more people they execute in the Middle Kingdom, about 10,000 this year, the more they remain the same. Great for the human organ business, but not so good for white collar crime prevention.

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'If you don't believe in global warming, fine, that's between you and your beach house,' said Tom Friedman, a columnist for the New York Times.

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