Hemlock's Diary 5-11 October, 2008

Mon, 6 Oct The weekend’s auction at Sotheby’s suggests that grotesque and artless creations depicting hackneyed Chinese imagery are not, after all, worth millions and millions of dollars.  The gullible Westerners who collect photorealist portrayals of oriental babes in army fatigues and comic-style paintings of a grinning man have always struck me as a rich version of the simple-minded tourists who buy reproduction Cultural Revolution-era posters of Mao on Hollywood Road.  The artists who churn these works out, on the other hand, have my deep respect.  They are not quite as clever as the Australian genius who painted coloured dots and sold them for a fortune pretending he was an Aborigine, but close. OVER THE Foreign Correspondents Club’s finest chicken congee, I tackle delectable Administrative Officer Winky Ip about Hong Kong law enforcement agencies’ questionable habit of arresting people for doing impossible-to-ban things on the Internet.  The first time – when someone got two months in prison last July for uploading a few of Edison Chen’s tiresome scrawny-starlet-bimbo photos – could be put down to the fact that our police chiefs seem to be increasingly influenced by hyper-moralist born-again Christian wackos like Security Secretary Ambrose Lee.  But now people are being rounded up for posting rumours that banks are weak.  Whatever happened to freedom of speech? “Does freedom of speech entitle you to shout ‘fire’ in a crowded theatre?” replies the elegantly attired, recession-proof civil servant.  An essay question from high school.  I forget what I wrote.  “The answer,” she continues, “is ‘no’ of course.”  She then reminds me that lynch mobs of retail investors, encouraged by politicians, are gunning for banks that sold them the now-worthless Lehman-issued minibonds.  They want their HK$15 billion back.  There’s talk of the Civic Party organizing a class-action suit.  The banks don’t have the money – they were just intermediaries.  “Some of the smaller banks in this, like Dah Sing or Chong Hing, are totally…”  Winky shakes her head and a words-fail-me expression of fear comes over her face.  “We have to deter rumours.  Kill a chicken before the monkey.”  So our smaller banks are sound so long as no-one suggests they’re not.  Nothing cheers me up more than these breakfasts.

Wed, 8 Oct The 2001 9-11 terrorist attacks and 2003 SARS outbreak were perfect stock-buying opportunities – relatively brief periods of fear during which the cool-headed/soulless and heartless/money-crazed could look six to 12 months out and see markets jumping back to their feet.  During the meltdown of 2008, however, every day brings some horrific new twist.  Banks seeing their shares plunging dozens of percent plead to be nationalized, the US and UK governments are on the verge of lending directly to businesses, and Russia is bailing out Iceland, the former North Atlantic boom nation now rediscovering the delights of pickled whale meat.  Imagining the global repercussions is like peering into an abyss.  Some things are obviously undervalued, and to pass the time I am dripping little bits of money into a Korea index tracker. Unless the entire planet is doomed.  Taken together, the first two essays in the latest Far Eastern Economic Review – Time to Dump the Dollar Standard by Richard Duncan and Another Empire Bites the Dust by David Roche – suggest this is the End Time.  Loosely, the idea is a backlash against the Anglo-Saxon, free-market, post-Bretton Woods economic system that brought hundreds of millions of Asians out of poverty in recent decades.  The current credit crisis and crash lead to a depression.  Corporate profits and household wealth evaporate in Asia as well as the West.  The US follows Iceland into obscurity and irrelevance.  The world retreats into protectionism.  European-style state intervention and regulation win new respect.  People take to growing potatoes in their back yards and darning old socks, while demand for designer label and luxury goods disappears (which, as I look out of my office window at downtown Hong Kong, sounds distinctly appealing).  It is not only in economics that liberalism loses ground, and ogre-states like Russia and China go to war.  So much for that Korean index tracker, then.  I’ll be making kimchee.  But we need to put it all in perspective.  Can things really be so bad when White Rabbit – third only to gunpowder and printing as the Celestial Empire’s finest invention – is soon to be back on the shelves? Thurs, 9 Oct The mood on the Mid-Levels Escalator this morning is one of overjoyed relief at the news that Hong Kong’s new Legislative Council has been sworn in.  From little old ladies clutching their Lehman minibonds to tiny Filipino maids carrying obese children’s schoolbags, no-one doubts that with 60 well-rested or brand-new lawmakers to hold the Government to account, the economic crisis will soon be over.  The new legislative year gets off to a tantalizing start.  Is new President Tsang Yok-sing a member of the Communist Party?  (Is Cardinal Joseph Zen a Catholic?)  Who among the pro-Beijing members broke ranks and voted for radical Emily Lau to win chairmanship of the house finance committee?  (People who thought the rival candidate, Dr the Hon Philip Wong JP GBS, was too encumbered by his phony California Coast University PhD to take seriously.  Or too fond of a drink or two.  Or too pro-establishment to oppose officials’ attempts to chuck taxpayers’ money down the toilet.  The last, actually.)

But this all pales next to the Standard’s report that three of Legco’s Liberal Party members are revolting.  This implies that the other three are not – an astounding revelation. Lest anyone fears that the new Legco might fail to make sure our economy is soon booming again, insightful media commentators are waiting to come to our rescue...

The Standard’s ‘Mary Ma’ takes local banks to task for not taking advantage of the Hong Kong Monetary Authority’s decision to cut its interest rate and throwing cheaper mortgages at everyone.  And yesterday, property guru Nicholas Brook in the South China Morning Post pleaded (obliquely) for the Government to cut land supply in order to prop up real estate prices.  In other words, keep living space as unaffordable as possible, and the Hong Kong economy will bounce back.  Contrive a shortage of housing, and everything will be wonderful.  Artificially expensive homes create prosperity.  Get the price tags on those concrete boxes up, and wealth will sprout from the ground. Fri, 10 Oct Global stock markets showed signs of bottoming out yesterday, with the S&P 500 falling a mere 3.9%, the Nikkei 225 a barely visible 0.5%, and the FTSE 100 just 1.2%, while our very own Hang Seng Index cheekily rose 3.3%.  It’s not the beginning of the end, but nor is it the end of the beginning.  It’s the transition between that bit when the traders they show on TV are too physically exhausted to do any more of the hand-flapping, mouth-frothing, eye-rolling panic act, and insightful but self-effacing individuals take note that (for example) Cathay Pacific is trading at 15% or so below net asset value – meaning that if the company ceased operations right now, just the aircraft would still be worth more than the shares. Except, sadly, for plucky little Iceland, which is still spiraling down the maelstrom (good Scandinavian word) into the freezing depths of economic demise – much to the inconvenience of the British, for some reason.  Perhaps it would be best if the UK just bought the whole place, volcanic bits and all, and absorbed it into Greater Shetland.  The Icelandic population is only 300,000, which would add just 0.5% to Britain’s headcount.  With the south of England in particular being so over-crowded, the new territory would offer some badly needed space.  I haven’t yet decided which categories of mainland Brit it would be most appropriate to relocate to the pitch-black wintry moonscape, with its heaving glaciers, its savage giant elk and its boiling, sulphurous waters violently spurting from the ground.  There are quite a few possibilities. Back in the Big Lychee, Financial Secretary John Tsang adopts his most Churchillian tone and urges the people of Hong Kong to come together to face the challenge of the unspeakable turmoil/catastrophe/apocalypse heading our way.

Divining the meaning of such enigmatic verbiage could keep professional oracles busy all month.  The words are probably best viewed as an appeal to the heavens by an arrogant but insecure, out-of-depth and panic-prone bureaucrat who has had his position handed him on a plate and now realizes that a true test of leadership is upon him.  “Please,” the prayer goes, “let everyone shut up, nod in agreement with everything I do, see that I know best and join me in my every pretence – notably that I am capable, determined and faultless.  And please make sure that the tycoons carry on making lots of money, while the middle class’s investments bounce back, and the working class don’t suffer any job losses, and we have lots of harmony, and partnership and cross-border integration and social unity for ever and ever, Amen.”  The full version can be heard whispered every morning in the Catholic Cathedral, when our dashing Chief Executive Donald Tsang drops in with his daily wish list.

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