By MARK HULBERT from NYtime.com on Feb24, 2008. If how and how much the companies raise the capital tells us there is less severe downside risk in the U.S.market than there was after Internet bubble burst in 2001, the long list of companies appearing in the IPO pipeline for china market may also try to give us some serious alerts.

The indicator in question focuses on corporate money-raising. Considerable research has shown that when companies turn aggressively to the equity market for their financing needs, through new issues or secondary offerings, it is a sign that the stock market is overvalued. Though there is no easy way to interpret the data, current trends in corporate finance appear no worse than neutral for the stock market’s intermediate-term prospects. And the data may actually be painting a bullish picture.

Owen A. Lamont, a former finance professor at Yale and now a fellow at its International Center for Finance, has studied shifts in companies’ use of the equity market to raise money. He has constructed a gauge, which some have called the new-list indicator, based on the percentage of all publicly traded shares that began trading in the trailing 36 months. This proportion increases as new companies go public or already-public companies issue more shares, and decreases as companies engage in stock repurchases or mergers and acquisitions.

Professor Lamont, who is also a portfolio manager at DKR Capital, a hedge fund in Stamford, Conn., has calculated the new-list percentage back to 1929. Its all-time high was nearly 15 percent, at the beginning of the Depression. Its second-highest level, almost 11 percent, was in March 2000, just before the Internet bubble burst. (He published these results in 2002 in an academic working paper.)

Where does the new-list percentage stand now? In an interview, Professor Lamont said it was at 5.1 percent, or right in line with its long-term average. When the market hit its high in October, he said, his indicator stood at just 5.6 percent. That was only marginally higher than where it finished the year, and about half its level at the market top in March 2000. By this measure of speculative activity, the current market is markedly less overheated than it was before the bursting of the Internet bubble.

A RELATED and even more encouraging indicator focuses on the relative proportion of new corporate cash that comes from equity as opposed to debt. Researchers have found that in past periods when stocks were overvalued, companies greatly preferred equity over debt. The opposite tended to be the case when stocks were undervalued.

Two researchers who have studied these patterns are Malcolm P. Baker, a finance professor at Harvard Business School, and Jeffrey Wurgler, a finance professor at New York University. For each year from 1927 through 1996, the professors calculated the share of total capital raised by publicly traded corporations that came from issuing stock — what they call the equity share.

Over the 12 months after the quartile of years with the lowest equity shares (when this proportion was no higher than 14 percent) the stock market returned an average of 14 percent, according to the professors. In contrast, the market had an average net loss of 6 percent following the quartile of years with the highest equity shares (when this proportion was no lower than 27 percent). Their results were published in the October 2000 issue of the Journal of Finance.

Where does the equity share stand now? In an e-mail message, Professor Wurgler said it was 6.1 percent for 2007 through September, the latest date for which data are available. Because this puts the current market solidly in the quartile of past years that were followed by above-average returns, he says the data are sending “a bullish stock market signal.”

In separate interviews, he and Professor Baker hastened to add that this bullish signal by no means justifies throwing caution to the wind. They pointed out that companies have had far easier access to cheap debt financing in recent years than they did in earlier decades. As a result, they argued, the current low equity share may not be strictly comparable with similarly low previous readings — and thus may not be as bullish as it otherwise would appear.

But judging from how companies have been raising new money, Professor Baker said, there was little evidence of extreme levels of speculation at the recent stock market high. At least to this extent, he said, this means that “there is less downside risk in the market today than there was in March 2000.”

From seekingalpha.com. Banking crisis in China is just a matter of time?

We can only guess what will happen if Chinese borrowers are hit by a combination of rising interest payments, slowing external demand and credit constraints.  There are already good reasons to suspect that the NPL ratios seriously underestimate the true extent of NPLs, and of course it is well know that most of the improvement in the NPL ratio during the last five years (the NPL ratio was around 20% in 2003) occurred because of the huge increase in loans outstanding – total loans outstanding grew by over 16% in 2007.  The question is whether that increase in loans, made during what can only be described as a party atmosphere, doesn’t include a large amount of future bad loans.  Bad loans, as old bankers always point out, are usually made during good times.

In that context I should bring up an interesting (and alarming) article from yesterday’s Spiegel titled “German State-owned Banks on the Verge of Collapse”.  The opening paragraph says:

The German government has had to bail out state-owned banks with taxpayers' money after their managements recklessly gambled away billions on subprime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy.

The article describes how the state-owned banks, “one of the key pillars of the country's banking system”, had engaged in such reckless lending behavior during the boom years of the recent past that they were almost wholly unable to withstand last year’s credit contraction.  A number of the largest banks have been forced to their knees, and there is an increasing risk that a few major defaults could bring the whole system down.

It is a nightmare scenario that the government financial supervisory authority now believes is increasingly likely. Germany's public-sector banks speculated far more heavily than private banks in American subprime mortgage securities. Now these banks' beleaguered executives are calling on the government to bail them out from a disaster of their own making.

For Wolfgang Reuter, the author of the piece, a major cause of the crisis was the skewed incentives created by state ownership and effective state guarantees.

Ortseifen and Matthäus-Maier are perfect examples of the fatal mix of amateurism, greed and political protection that is symptomatic for many of Germany's state-owned, partially state-owned and public sector banks. It is an environment that can only thrive in the shadow of the state -- and that has drained more than €20 billion from the public treasury within the last decade.

Until now, the government has always been there to pick up the tab in the end. Fully aware of this safety net, the executives at state-owned banks gambled with their employers' assets as if there was no tomorrow. Munich-based BayernLB did it with stocks in Singapore, Bankgesellschaft Berlin with real estate investments, and WestLB with holdings in British companies.

Anyone who is not responsible for bearing the consequences of the risks he or she takes can easily turn into a gambler. And the bets kept increasing in recent years, getting more and more public-sector banks into financial hot water. Now the banks find themselves lacking the assets they need to weather the turmoil of an international financial crisis.

I bring up the German experience to make two points.  First, the speed in which a banking system can unravel after many years of what seemed like robust growth is often astonishing, and the way in which the unraveling takes place is almost always unexpected.  Second, state ownership is no guarantee of safety.  In fact in the German case it seems that state ownership may have exacerbated the poor lending decisions.
 

I shouldn’t need to make the last point, but I cannot remember how many times I have been assured that the difference between Chinese banks and non-Chinese banks is that unlike the latter, Chinese banks are state-owned, and that fact makes a banking crisis in China nearly impossible.  Wrong on both counts.

You can read the Speigel article here.

1954年移居日本的邱永汉，被日本民众称为“股票神仙”和“赚钱之神”，是日本华侨界名声最响的人。从上世纪50年代至今，这个从作家起步的投资家，历经了日本战后的经济腾飞、泡沫时代和泡沫破裂后的萧条；无论社会变迁、经济循环起伏，面临数次危机和挫折，其事业却始终屹立。

　　这位83岁的老人至今每年都有五项新的工作开展。他告诉本报记者：“赚多少钱很高兴的情况已经没有了，现在做事不再是为了钱。”这样一位老人的经验和观点，对于每一个人来说都是财富。

　　关于中国经济：中国还是一架设备很新的过山车，政府要注意不要让经济大起大落

　　广州日报：您觉得中国经济目前面临的问题与上世纪80年代的日本有相似与不同之处吗？

　　邱永汉：中国目前的情况很像日本那个时候，流动性过剩，也就是钱多，影响了股票和不动产的价格。中国一年的贸易顺差有2500亿美元，这就意味着国家要发行这么多价值的人民币，所以钱太多了。一年多以前，我在接受《亚洲周刊》采访时，曾经说过两个观点：

    一是中国股市要涨10倍，二是人民币要从1块变成4块，现在看来中国股市已经有5倍了，我说还会再涨的，整个市场会上升，但个人的投资操作情况不同，你操作错了的话，你就会输。

　　我们现在坐着的这个地方，是我40年前买下的，当时一坪(3.3平方米)30万日元，现在是3000万日元一坪（100倍）。在我们旁边的写字楼，当时是50万日元，不久就涨到了100万日元、1000万日元，最高的泡沫时代涨到1亿日元（200倍）。

　　广州日报：正如您说的，中国的股市和房市的资产价格都出现了大幅的上升，你认为中国经济会步日本泡沫经济后尘吗？

　　邱永汉：目前中国才是刚刚开始，还不算泡沫，离泡沫经济还有很远很远的道路。我想会让大家都高兴一次才跌的，在这一形成泡沫的过程中很多人会成为有钱人。但要注意的是，泡沫的时间持续得越长，落差也就越大。我来日本的时候，日经指数是1000点，泡沫经济时期最高涨到了39000点，涨了39倍，很多人都想不到。泡沫破裂后跌到了16000点，最低才不到8000点（跌去80%）。中国还是一架设备很新的过山车，中国政府要注意不要让经济大起大落，不要从缆车上掉下来。

　　广州日报：您对目前日本的金融体系怎么评价？对中国的金融体系又做何评价？

　　邱永汉：在日本经济高速增长的时候，日本银行起的作用很大，在日本政府保护下的金融系统没有适应潮流，所以在泡沫经济破裂后经历了一个重新倒闭到重新建立的过程，现在日本很多银行都合并了。我认为中国的银行也会有这种趋势。我记得在中国的时候，我打电话到银行马上要取30万日元，因为有紧急的用处，银行告诉我没有，只能给你4万日元，超过5万日元都要预约，全世界都没有这样的银行，自己的钱不能随意地取，我觉得中国的银行落后于时代，最近有一部分外资进入金融系统了，它比前些年要好了。

　　关于投资策略：我目前比较看好的是消费板块，生物、制药板块

　　广州日报：现在对比2005年，中国股市已经有了5倍的增长，您觉得目前中国的股市之中，还有哪些板块和品种值得投资的？

　　邱永汉：前年我认为应当投资金融和保险股，但现在我认为不要靠近它们了。我目前比较看好的是消费板块，生物、制药板块。

    制药行业目前政府控制价格，药品价格比较低，但制药方面的业务量会越来越大。中国会逐步走向农业的工业化，这就必然要发展生物技术。

    我认为，H股以后还会有10倍的上涨，目前才刚刚起步。至于B股市场，A、B股早晚是要合并的。A股市场，如果跌的话，你们大家就都去买，跌的时候就是买的机会。巴菲特在股票涨的时候是没事干的，跌的时候就要不断地注意下跌的状况。当然也是要有一定勇气的，如果你之前的选择是错误的，这个时候就要做出改变。

　　广州日报：您取得了楼市投资的极大成功，您认为中国目前的房价上涨惊人，是合理的现象吗？您怎么预测中国楼市的发展趋势？

　　邱永汉：楼市还会涨，政府控制得越严，房价就越会涨，政府的功能和政策改变不了经济的方向。但要注意的是中国的房子与外国的不同，首先中国的房子只有70年的使用权，其次中国的很多房子由于公共环境保护得不好，二手的市场就没有什么投资价值了。所以投资中国的不动产，第一是地点，第二是地点，第三还是地点。

　　在房地产投资上我有一点感受，我在上海浦东投资不动产，在我开始投资的时候，政府告诉我这个区域总共是20栋楼，如果按这样的规模，我计算一平方米的租金应该可以到20元，但当我的楼建好后，周边大楼林立，每平方米的租金只能收到2元。

　　关于泡沫时代：我一只脚快要倒下去了，一只脚还站着，度过了泡沫破裂时代

　　广州日报：您是从一个作家起步的，一部小说《香港》荣获了日本最高文学奖直木奖，怎么会从写作走上投资之路的？

  　邱永汉：我一开始以写文章为生，在日本写文章能赚钱的分成两种，一种是写性的，一种是写钱的。写性的人很多，我竞争不过来，所以我就写钱。

　　在日本，以前对钱的事情是不能公开讲的，我是在日本头一个公开讲钱的。要写钱，就当然要亲身投资。我进入股市，一直到差不多淹死的时候才明白股市是怎么回事。

　　当时大部分人操作股票的方式是这样的，买入股票，涨一点就卖，但我不这样，我选择哪个行业，哪一家企业会成长，比如说我看中了丰田公司和索尼公司，我认为他们会成长。当年丰田公司一年才是生产两万辆车的小公司，但现在丰田是全世界最大的制造业企业。我认识一个朋友，他是索尼的股东，当时他花5万日元买了一千股索尼的股份，在他死的时候他拥有的索尼股票市值已经有15亿日元，可惜的是他一直到去世也没有卖掉股票，所以也没有享受过。（其实享受了安全感！）

　　广州日报：您投资楼市、股票，在泡沫经济中您有没有受到影响，是如何度过泡沫破裂的岁月的？

　　邱永汉：在泡沫经济破裂中我差一点也倒了，一只脚快要倒下去了，一只脚还站着，度过了泡沫破裂时代。在泡沫时代有很多企业家来找我投资，我做了很多投资，有的30万日元变成了9000万日元，1000万日元变成了两亿多日元，但也有的血本无归。在泡沫经济时候，我盖了一栋楼，本来签了合同租给八佰伴，但泡沫破裂，八佰伴倒闭了，这一笔就亏了80多亿日元。呵呵，我不会看人，差一点也倒了。我的保险柜里有许多已经成为废纸的股票，足足有1米多高吧。哈哈。

　　我这里曾经来过很多人，当时都号称排名世界第几的富人，在泡沫时代有的倒下了，有的进了监狱。我之所以能够把自己小小的财产保留下来，就因为没有超出自己的能力去向银行借贷。在那个时代，每天都有很多银行的人来到我这里要借钱给我。

　  关于启示和教训：要在有能力掌控的情况下举债

　　广州日报：您觉得中国经济在目前需要警惕哪些问题？可以从日本的泡沫经济过程中吸取什么样的教训？

　　邱永汉：从目前来看，避开泡沫经济去发展看来是不大可能的。我认为对于实业家来说，就是要关心自己不要倒闭，最危险就是举债(贷款)，但不举债又发展不了，所以要在矛盾中发展，要在有能力掌控的情况下举债。不过我想中国不会马上面临这样的危机。

　　对于个人投资者来说，关键是在股市中看准涨跌。在财产上不要保留美元财产，不要用美元去投资，买B股的话，虽然是用美元买的，实际上买的还是人民币资产，所以没有问题。美元跌的话，股票还会涨。

From wsj.com.

The findings come in a closely watched annual report from Joint Venture Silicon Valley and the Silicon Valley Community Foundation, two nonprofit groups representing businesses, government agencies and philanthropies in the San Francisco and San Jose, Calif., area.

The report tracks Silicon Valley as the tech-heavy region continues to resurrect itself after the dot-com bust earlier this decade. While that slump wiped out tens of thousands of jobs and caused a net outflow in the local population, the area has been on the upswing since 2005, when a net gain of 2,000 jobs was recorded -- the first time since 2001.

For the 12 months through the first quarter of 2007, Silicon Valley added a net new 28,000 jobs, or 2.1% growth, ahead of 0.9% job growth in the rest of California and 1.4% growth nationally. Still, that was down from 33,000 new jobs a year earlier. Overall, median household income in the Silicon Valley area increased 2% to more than $82,000 a year, faster than the 1.5% growth in the rest of the country.

Fueling the upswing are trends such as rising venture-capital investments and a structural shift away from traditional tech industries such as semiconductors toward newer tech sectors such as the Internet and software, biomedical devices and "clean technology," or businesses that produce products and services to reduce environmental degradation.

Russell Hancock, Joint Venture's president and chief executive, noted that worsening economic conditions nationally are having an effect on the region. In particular, the number of mid-wage jobs -- those commanding $30,000 to $80,000 a year -- has been shrinking in recent years. Coupled with the high cost of living in the region, plus stock-market volatility and subprime-mortgage woes, "it makes it harder for people to feel stable here," said Mr. Hancock. The report found that Silicon Valley's cost of living -- including housing -- is 47% higher than the rest of the nation.

Doug Henton, a co-author of the report, added there are few retraining programs in place, making it tough for midwage workers to participate in some of the emerging sectors of the local tech economy. Other red flags include a declining high-school graduation rate and modest growth in juvenile felony offenses.