Cyreenik Says

September 2016 issues

End of the World investing mania in progress?

One of the topics I have written about in my Profit from History book is the investing mania that often accompanies exciting "End of the World"-style events. (EOW) We may be experiencing such a mania right now, one that is associated with the upcoming Clinton-Trump election contest.

An EOW event happens when lots of people get excited about an upcoming event, often one that could bring lots of doom and gloom.

My favorite example is the Y2K event that happened as we crossed from 1999 into the year 2000 -- there was lots of excitement as the year end approached, but it quickly became a forgotten non-event when nothing calamitous happened.

The EOW event itself becomes a non-event, but there are interesting things happening behind the scenes that have much more lasting effect and become much more memorable. What is happening behind the scenes is a lot of overly-risky investing in all sorts of enterprises. When the EOW event then becomes a non-event this risky investing becomes a much more memorable financial crash. Y2K was followed by the Dot-com Bust in business and finance. The Hong Kong Turnover to China in 1997 was followed by the Asian Flu Bust in Pacific Rim office properties and other businesses.

This mania investing ahead of an exciting event is a common pattern. Another place it routinely happens is in cities hosting Olympics and World Cup events -- these aren't doom and gloom, but they are exciting, and during the run-up to them lots of money gets spent in crazy ways.

We could be experiencing this right now, ahead of the doom-and-gloom presidential election coming up in November. If so, if there is an investing mania in progress, expect some kind of memorable hang-over bust to happen some time shortly after the election.

Rodrigo Duterte: the new shining face of populist frustration

In June Rodrigo Duterte was voted in as president of the Philippines. He was a frustration candidate -- a Donald Trump but much more so. And, yes, since then he has been putting the Philippines through a vigorous reign of terror.

This 14 Sep 16 Economist article, Rodrigo Duterte may undo the economic gains of recent years The new president is not just crass and brutal, but also alarmingly volatile, describes how spooky things are getting in the Philippines and how this is bringing all kinds of spooky changes to the region.

From the article, "UNDER Rodrigo Duterte, president of the Philippines since late June, things have a habit of spiralling out of control. First came his campaign against drugs, which has led to the killing of almost 3,000 suspected dealers by police and unknown assailants, without even a nod at due process.

On September 13th he told his defence secretary to buy weapons from Russia and China rather than America. He also said the navy would no longer patrol the South China Sea alongside American vessels. “I do not like the Americans,” said Mr Duterte. “It’s simply a matter of principle for me.”"

In addition to the surprising issues this is bringing up for the West Pacific region, this is also a cautionary tale about electing volatile candidates.

The Time of Nutcases is upon us. We need to recognize that. What we need to be doing now is recognizing how much the political acrimony of the last decade is at the root of this phenomenon, and now work very hard to transition into Big Vision mode -- a social condition in which we can argue, but while we are doing so we are also cooperating and pursuing a Big Vision.

North Korea Nukes: Beijing needs to seriously worry about a "woman scorned" response

North Korea is at its nuclear testing again. And the rest of the world is once again not coming up with sufficiently forceful sanctions to make it stop.

One of the key players in this dithering is China. They don't see much threat because they are North Korea's "main man" -- the ones who provide most of the money that keeps the regime in power. The result: the Chinese see an ally and don't apply much pressure.

Part of the reason for this is the Korean War legacy, and another part is that these days North Korea constantly threatens South Korea, Japan and the US, but it never threatens China.

But... China watch out! What you are not keeping in mind is the "woman scorned" mentality, as in, "Hell hath no fury like a woman scorned." This is important because this is what North Korea's leadership will feel like as soon as China even starts to get serious about sanctioning North Korea. The North Korean leaders will feel betrayed, as in, this becomes an emotional issue.

And what happens then?

Watch those nuclear missle crosshairs suddenly swivel from Seoul, Tokyo and Washington to Beijing and Shenyang!


China needs to keep the "woman scorned" mentality in mind. At some point as this nuclear crisis evolves it is going to bring on big and scary surprises in the China-North Korea relation.

(And, yeah, this has been going on a while. Here is a 2013 Cyreenik Says talking about how to deal with North Korea and this nuke issue. (the last item))

This 9 Sep 16 WSJ article, U.S.-China Tensions Thwart Response to North Korea Threat Beijing’s distrust of Washington may limit options for punishing Pyongyang by Jeremy Page in Beijing and Alastair Gale in Seoul, describes the US-China part of the quandary in dealing with North Korea.

From the article, "Options the U.N. body could consider range from tightening sanctions imposed earlier this year to further cutting off North Korea from the international banking system, experts said. But whether the Security Council can act depends heavily on Beijing—North Korea’s ally and main trading partner—which has increasingly sparred with Washington over regional security issues, including tensions in the South China Sea and on the Korean Peninsula.

Central to Beijing’s growing distrust is a U.S.-built missile-defense system planned for deployment in South Korea, known as Terminal High-Altitude Area Defense, or Thaad. The U.S. says the system is designed to protect its ally from North Korean missiles, but Beijing says Thaad could also be used to track Chinese ones, undermining its nuclear deterrent."

This 10 Sep 16 Xinhua article, China says DPRK's nuclear test not conducive to Korean peninsular stability, describes a Chinese response.

From the article, "Chinese Vice Foreign Minister Zhang Yesui said Saturday the nuclear test launched by the Democratic People's Republic of Korea (DPRK) is "not conducive to the peace and stability of the Korean peninsula."

Zhang made the remarks in a meeting with DPRK ambassador to China Ji Jae Ryong to voice China's position on DPRK's nuclear test.

Zhang said it is China's "firm and consistent" stance to realize denuclearization on the Korean peninsula, maintain regional peace and stability and resolve problems through dialogue and consultation."

A Panic situation in a surprise venue: container shipping

Surprise, being scary and feeling that immediate action is necessary are the three elements necessary to creating panic feelings and to fostering a blunder in response.

This month those three have come together in a surprising venue: the container shipping industry. Hanjin Shipping a major player in the container shipping industry surprised the industry and its customers by declaring bankruptcy a week ago. The industry is now responding with panic and blunder.

The response to this is going to be interesting to watch. There will be blunders -- expensive choices made based on instinctive thinking. But this is a business-to-business environment, not religion or politics or consumer goods, so it will be interesting to see how much analytic thinking is used, versus how much instinctive thinking is used. In particular, it will be interesting to watch how many "lets make laws to make sure this never happens again" episodes happen versus "OK... Lesson Learned. Let's get on with business." episodes where policies are made and "war stories" told, not hastily created laws passed.

This 7 Sep 16 WSJ article, Billions in Cargo Remains Stranded at Sea Owners strive to recover their goods and get them to customers after Hanjin Shipping seeks bankruptcy protection by By Costas Paris and Erica E. Phillips, is describing this surprising and scary situation and how people involved are responding.

From the article, "Hanjin Shipping Co.’s financial and legal troubles have left as much as $14 billion worth of cargo stranded at sea, sending owners scrambling to try to recover their goods and get them to customers, according to industry executives, brokers and cargo owners.

Samsung Electronics Co. said “We’re passengers on a bus, and we’re being told we can’t get off,” said Evan Jones, a lawyer for Samsung.

The tech giant said it is considering chartering 16 cargo planes to fulfill its shipment contracts, principally to the U.S."

This 10 Sep 16 Economist article, Profits overboard The shipping business is in crisis. The industry leader is not exempt, is also covering this surprising event, and describing just how big the problem is.

From the article, "Hanjin is not alone. Of the biggest 12 shipping companies that have published results for the past quarter, 11 have announced huge losses. Several weaker outfits are teetering on the edge of bankruptcy. In Japan three firms, Mitsui OSK Lines, NYK Line and Kawasaki Kisen Kaisha, look vulnerable. Activist investors are now pressing for them to merge to avoid the same fate as the South Korean line."

The Sacred Masculine is already mixing with the World of TES

The Sacred Masculine is my term for human males staying involved with other people and in building a better community. It is not a given. The alternative that is easy to slip into is lone wolf mentality. (although this is better described as male deer mentality) This is the condition when adult males have little to do with their community except when it comes time to fight over females for mating rights.

This 1 Sep 16 WSJ article, The Idle Army: America’s Unworking Men Millions of young males have left the workforce and civic life. Full employment? The U.S. isn’t even close. by Nicholas Eberstadt, describes US communities loosing Sacred Masculine. American men are finding other things to do rather than engaging in a formal job. This tendency to lone wolf lifestyle is going to get even stronger as we get more and more into the Total Entitlement State (TES) lifestyle.

From the article, "America is now home to a vast army of jobless men who are no longer even looking for work—roughly seven million of them age 25 to 54, the traditional prime of working life.

In 2015 the work rate (the ratio of employment to population) for American males age 25 to 54 was 84.4%. That’s slightly lower than it had been in 1940, 86.4%, at the tail end of the Great Depression.

Or look at the fraction of American men age 20 and older without paid work. In the past 50 years it rose to 32% from 19%, and not mainly because of population aging."

We haven't reached Total Entitlement State yet, but we have already begun the process of letting male "loner instinct" flower. This instinct is widespread in mammal species. When it flowers the mature males go off and do their thing, alone, and only show up with the rest of the crowd when it is time to fight over mating rights. Avoiding this lifestyle for males is what I call encouraging the Sacred Masculine. It means keeping lifestyles in forms that encourage males to stay engaged and enfranchised.

Encouraging the Sacred Masculine -- for males to stay involved in building a better community -- is going to be an important challenge for all forms of TES.



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