February 5, 2007
A Hopeless Financial Morass?
Good bit excerpted from an uneven (meaning occasionally brilliant but largely wrong) July 2005 essay by Bedlam Asset Management called, Remember Golmud (PDF):
“Guanxi (or connections) is not just having a Scottish Cabinet ruling England and Wales, or Enarques, all of whom attended the same two schools, running the French civil service. It is more subtle. It includes blood relatives and in-laws; it can extend to cousins of cousins, clans of the same name, people from your village or province and hopefully, senior politicians for whom one of your set once did a favour.
It has been around for hundreds of years. Neither the Manchu nor Mongol rulers understood it or could break it. Guanxi has its strengths; it provides a support net for the weak and dispossessed. Very large personal networks on a national level can make the creation of new businesses and raising capital a remarkably smooth operation. It also embeds corruption, deeply. Thus any attempt at reform becomes mired and compromised. Government regulators find themselves having to pull the plug on their own connections, including perhaps their bosses or even worse, senior army officers and politicians.
This is why so many of Hong Kong’s listed ‘red-chip’ companies, run by wholly unqualified children of senior officials, were able to get all the funding, licences and assets they wanted in record time.”
February 5th, 2007 at 11:48 pm
I have no insight on the content, but ‘Bedlam Asset Management’ is a tremendous name choice. Along the lines of ‘Stinking Fish Realty’.
“With a name this bad, we have to be good.”
February 6th, 2007 at 8:12 am
Ollie: I kind of like it… these guys are British of course, probably absolute nutters (a lot of fun to yack with but not sure I’d give ‘em a dime to manage).
February 7th, 2007 at 3:48 am
“Largely wrong”? I am pretty sure the jury is still out on that one.
It’s hard enough to be vindicated on a correct bearish forecast when your shorts get squeezed by a flood of people dancing on the bubble. How are you supposed to know how much of a bubble there is, or if there is one, let alone do anything about it, when you can’t even short anything?
February 7th, 2007 at 9:04 am
Alex: You can short the US- and HK-listed China stocks and indexes.