FINANCIAL NEWS

pictured: Chinese capitalists collecting used bottles for resale

The word on the street is: sell China. Various macroeconomic factors are turning to shit there, particularly inflation, but the key problem is the incestuous lovefest developing on the local Chinese stock market. Chinese companies are rediverting revenues away from investment in organic growth – and, increasingly, borrowing money from banks – in order to invest it in the Chinese stock market. Given that Chinese companies are the Chinese stock market, they are effectively investing it in each other.

Clothing manufacturers and steel factories are setting up whole separate investment divisions, often secretively and in violation of financial regulation, to buy other companies’ stocks. This creates a weird virtuous cycle. Acme China buys stock in a whole bunch of other Chinese companies, pushing their stock price up. But Acme China’s stock price is affected by the performance of its investments, which are going up. So Acme China’s stock price goes up, encouraging other companies to buy Acme China’s stock, which in turn pushes their stock price up because they hold Acme China’s stock and it’s doing well, so Acme buys a bit more of their stock, and so on. So on, until someone calls bullshit on the whole thing, and the virtuous cycle becomes a vicious cycle: Acme China has a lot of overvalued stock, so other firms sell Acme China stock, lessening the value of their investment portfolio, so Acme sells their stock, and so on.

Bubbles form and pop all the time, but it’s particularly dangerous with China for two reasons. The first is just the sheer scale of its economy. This is one big fucking butterfly to start flapping its wings. The second is the primitive nature of its financial services industry. Over the last ten years, the Western financial services world, led largely by the City of London, has realised that bankers can make huge amounts of money by spreading risk around a broad range of investors. This has had the fortunate effect of stabilising the global financial markets, because when things go wrong in a particular market, a lot of people take a small hit, rather than a few people taking a massive hit. The imminent collapse of the US sub-prime (aka junk) mortgage market will probably not cause the collapse of the US economy, as the banks and lenders who wrote those crappy mortgages in the first place have since sold on that risk to a diverse range of other investors, who will simply have to make do with a cheaper brand of port this Christmas.

China, however, is still cowboy country when it comes to financial derivatives and risk management. The banks there are shouldering most of the risks themselves. If things go tits up, banks may collapse. This is rarely a good thing, although I would probably welcome the collapse of NatWest. In China’s case, it could be catastrophic. Sell, sell, sell!

SPORTS NEWS

Cricket

Twenty20Cup
Group game

Sussex Sharks bt Surrey Brown Caps by 5 runs

Last night TUPNews visited the Oval, in South London, to watch a spot of cricket.

Despite the threat of rain, I was awfully excited. My last visit to the Oval was three years ago, where I watched Andrew Flintoff, then approaching the peak of his ability, put fifty past a hapless West Indies touring side. It was a beautiful summery day, and the start of my conversion to our national sport: a conversion completed by England’s defeat of Australia in the 2005 Ashes series, a magnificent summer for which I already feel nostalgia.

In looking to foster my newfound love of cricket through participation in the county game, however, I was frustrated. My obvious home ground is The Oval: a fifteen-minute bus journey from my home in South London. I like where I live and would happily support the South London team.

The Oval, however, is the home of Surrey Cricket Club. A fine institution no doubt, but I have never thought of Brixton as being part of Surrey. To me, Surrey is a far away county of which I know nothing – I cannot see myself getting behind the Surrey boys. Equally, the county structure means that I automatically owe my allegiance to Somerset, land of my youth. But Somerset CC play at Taunton, some five hours by train. Factor in the baffling and sub-optimal structure of the league system, and county cricket is looking like a non-starter.

I was attending this match simply because a friend had a spare ticket for an office-organised day out. My friend works for one of the many secretive arms of the government charged with protecting us from the threat of terrorism, and as such I was surprised to see so many of them in the same place at the same time. His stories of incompetence and corruption in his corner of Whitehall do not inspire sound sleep, and I will not repeat them here. I did, however, meet a Detective Constable of the Metropolitan Police, who is stationed in my own borough of Southwark. He is soon to move into the burglary division, and let me in on a delicious little scam known in the trade as TIC, or Taken Into Consideration.

TIC works like this: thanks to the current government’s obsession with the meeting of targets, police are looking at novel ways to solve more crimes. One way is to take an imprisoned burglar out for the day: “Buy him a nice lunch, let him see his mum, maybe even let him boff the missus,” as my new friend explained. Then, during a post-prandial, post-coital leisurely drive around his old stomping ground, the con will suddenly start admitting to all kinds of previously unsolved burglaries. Which is great for the Met, of course, as the solved crimes target box gets ticked.

“Some of the stuff they come out with is ridiculous,” the detective said, even though the prisoners are usually briefed, sans brief, on which jobs to cop to. “’I done that whole hotel!’ Really? Don’t you mean that house over there? ‘Yes, guv.’” Or they admit to crimes that were committed while they were still inside.

Surely, I asked, the prisoners would be reticent, given that admitting more crimes could add to their sentence?

“Are you kidding?” he laughed. “That’s the best bit – the more they admit to, the more gets taken off!”

It’s simply not cricket, but even as a taxpayer, I couldn’t help but find this funny.

The game had been scheduled to begin at half five; with the skies still dark grey at half seven, we were just about ready to give up and go home. Economics came to the rescue: ten overs must be played to prevent the issuance of refunds, so the two teams were more or less shooed onto the pitch to bowl five overs apiece. The conditions were comical, but the players managed to put on a good show for the now inebriated die-hards: several sixes and clean-bowled wickets, a hairline run-out decision, some comedy misfielding. We requested several times that Sussex player Rana Naved give us a wave; eventually he did. Sussex set a tough target of 65 and Surrey, despite leading their group in the Twenty20 competition, were unable to match it.

We left buoyed and a little drunk, and I had a change of heart about the county game. The Oval is a unique and charming ground, and I simply want to be a part of it. Even without any cricket being played, we had had a fine old time, chatting and drinking reasonably priced beer. A major bookmaker had even helpfully set up a mobile betting shop, so I was able to fritter away cash on the dogs while we waited for the skies to clear. While I still cannot see myself as a fan of Surrey CC, I resolved that I would become a fan of “cricket at the Oval”, and spend long summer weekends indiscriminately applauding fine play.