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Just read an article (”Markets Crisis tests Resolve of Fed, Officials”) on yesterday’s WSJ by Greg Ip, Deborah Solomon and David Wessel on recent market volatility.

I remember Karma recommended Ip during our econ class and I have been following him closely ever since. I really enjoyed reading this article: well balanced view on the possible causes/variables of short-term market behavior and non-sensational comments on Fed’s possible moves. Together with a side article “How Does the Fed Inject Money into The Economy? A Primer” this is really a very informative piece of work.

Some of the points these two articles touched upon:
1. Ben Bernanke’s academic interests in the relationship between financial markets and the rest of the economy
2. The difference between a rate cut and a “repo” intervention
3. The prospect of a Sept. 18 rate cut: largely depends on whether the credit crunch will be contained before then
4. The comparison between now and 1998 (after Russia defaulted). The spread between Treasury securities with different (perceived) liquidity as an indicator of risk.
5. The Fed encourages dealers using MBS as repo collaterals in order to save Treasury
6. The President’s Working Group on Financial Markets: their high level of alertness vs. the publicly nonchalant officials
7. For Douglas McArthur, it is “duty, honor, country”. For mandarins in the Fed, it is “growth, inflation and financial stability”.

On a related but separate note: Dow tumbled again today (8/15), down below 13,000. It is just so interesting to see WSJ reports are full of hints of an expected rate cut: “Many market watchers now believe a Fed cut will come later this year, and some – mostly those most closely tied to equities – think there will be an “emergency” cut before the Fed’s September meeting. ” or “Inflation is not the beast”. But NYT is equally adamant about NOT cutting rates: “Though the latest economic readings indicate that growth is steady, they also make a rate cut by the Federal Reserve less likely. ”

Remember Ip in his article mentioned something called “Greenspan put“, referring to Greenspan’s willingness to cover losses from risky investments. Apparently, NYT bought a different type of option.

I have been looking for a good place to scan my old photos. Here are some outfits I tried:
1. DigMyPics, http://www.digmypics.com
Price: 600dpi@$0.59, TIFF, 1 free CD
Good: Has physical address, prominently displaying 1-800 number, simple ordering page.
Poor: Very high shipping ($11 using USPS Priority), inbound shipping NOT included, too many options, no order confirmation, the final instruction is long and confusing: when is the credit card charged? Too much “done locally” chanting–why does it matter?
Shipped out 4 pics on 7/5, received confirmation on 7/8. Order comes back on 7/18.
Includes: invoice w/ price, two CDs (TIFF and JPEG), original photos in orginal package.
Total $7.

2. http://www.photoscanclub.com/
Price: up to 150 @ 59, 300 @ 99, duplicate CD: $9
Good: send shipping package to you, good “How It Works”
Poor: No 600 dpi, 10-15 day turnaround, stair pricing, high CD price, needs to create account/
3. http://www.scandigital.com/index.php
Price: 0.48 @ 300 dpi or 0.68 @ 600 dpi
Good: has referral program and physical location. Good website.

I guess I am late on arrival again … There is a company that does exactly what I envisioned for JSIS: Affinity Circles.

A very interesting company and here is its founding story:
“Affinity Circles was founded by a couple of students at Stanford. They created a social networking platform called “Club Nexus” for undergrads at Stanford. They got funding, secured the Stanford Alumni Association as their first customer and then hired a CEO to stabilize the company.” (found at a blog site)

I am glad there is something out there. But at the same time, now that UWAA’s already built a website for all UW alum, I am wondering what space there is left for JSIS. Particularlly, how do we get data from UWAA?

But then again, if we can get easy access to JSIS alum, that will be a very good thing indeed.

There have been a few articles on virtual money spilled over to the real world. First it was a piece on NPR about SecondLife. Now I just read one about QQ money on WSJ (c).

I take issue with the WSJ article because it implied that virtual money could pose a threat to total money supply. As one of the interviewed said, “If I were a policy maker, I would certainly be very cautious,” My contention is, the virtual money is there because even cash is not liquid enough sometimes. Infact, if it has anything to do with inflation, because virtual money reduces transaction cost, it actually helps to reduce inflation not to increase it.

First of all, to assert that the wide adoption of virtual money could have any impact on inflation assumes it has deeply penetrated economic life. There has to be such a popular usage that items in the CPI basket are contaminated. Therefore, as long as Chinese consumers are not paying their grocer, housing, education, transportation … in QQ money, I suppose policy makers don’t have to be so cauticous.

Secondly, although cash is supposed to be the most liquid form of money, it is not liquid enough in this context (online gaming). The driver that propels QQ money is precisely because of the lack of digital form of money (e.g. credit card) in China. In other words, virtual money is a substitute of credit card, not cash. The WSJ article said itself: the QQ money is not unlike airline mileage points. If that is the case, what is to be “cauticous” about?

The question then turns to: what determines the exchange rate between the real and virtual money and what does that tell us, if anything at all, about foreign exchange? Conceptually, one may say this exchange rate represents two “economies”: one real, one virtual. Then can we apply existing FOREX model to this situation? If not, where is the problem?

Got this slide from Jennifer’s class.

“The world is rich in data, and if tortured sufficiently, any data will confess.”
–Jan Rivkin, “An Option-led Approach to Making Strategic Choices”, HBS Note 9-702-433, Feb. 2006

I first heard of Porter when I read Huntington’s Culture Matters.

In the strategy class, we are assigned to his reading. The one I just read, “What Is Strategy?” is a great essay. Basically, Porter made the argument that Strategy is:
1. Being different;
2. Making trade-offs;
3. Building fit activities (to reinforce competitive edge/unique values);

It is hard to find fault with this kind of logic of course. My prof. said there are two things missing in Porter’s framework: the 5 force is a snapshot analysis that devoid of market trend or demand shifts (e.g. being totally exogenous).

What I see the biggest weakness in his theory is the lack of consideration of risks. His analysis only makes sense, his definition of strategy being true, if there is no significant risks involved in any of the three objectives.

However, in real life, this is far from the truth. Only startup companies can afford to take chances. Large companies, with a few exceptions, have to consider the risk involved.

Another thing he is missing in his work is a constrain line that is tangent to the position frontier. The constrain line is a combination of limitation of resources, aversion to risks (due to capital structure for example) and other organizational factors–which maps roughly to the “activity system” of his.

Then again, Porter has an IQ of 180… we are definitely on different intelligence frontiers.

I was awestruck after reading Theodore Levitt’s Marketing Myopia. I thought MBA was all about Tom Peters, Peter Drucker and so on. Reading Levitt’s essay certainly help to make me feel better of my choice. Anyway, great article.

He breaks down a convoluted management issue into two simple categories: production and marketing. Or what we do best versus what customers want most. What Levitt tells me is that these two are not always in sync. Instead, it is at one’s peril to focus on production only (aka too much focus on JIT, zero inventory, etc.). How he read Henry Ford shows the two are the two sides of one dialectic process. Ford said he set a price that he knew would move sales and he was certain the cost would fall in line afterwards. Of course, how Ford did it was not as important as how he thought about it.

Wonderful read.

Chinese perspective of why “going out”:
????????
?????????????????????????????????????????????????????????????????????
Comparing outbound FDI with Trade:
????????????????????????????????????????????????????????TCL????????????????IBM????????????????????????????TCL???????????????????IBM???????????????
Tempering the optimism: ??????????????????????????????
1. ????????????
2. 2.??????????????????
3. http://www.studa.net/qiye/060811/1634288.html

??????????????????????????????????????????????????????????????????2?????????????????????????????????????????????????????????????????????????????3????????????“????”????????????????“????”??????????????????????????????????????????????????????????????????????????????4???????????
http://www.studa.net/qiye/060811/1634288-2.html

Extra cash, private equity, financial investment:
real estate, asset appreciation: and Taiwanese investments and developments have flowed into the Northwest in recent years. Taiwanese investors, for example, own and are developing the Eaglemont Golf Course near Mount Vernon, Skagit County. http://www.uscc.gov/hearings/2005hearings/transcripts/05_01_13.pdf

Political show off:
?????????????????????????!???????”%??????????????!??”’ ????????!???”?????!???”(??_???_?????TCL??????.pdf)

Technology acquisition:
Glanz model (??_???_?????TCL??????.pdf)

It is a fair global game, foreign competition, monopoly, industrial competitiveness:
2005??_????????.pdf

Trade barrier:
???????????.pdf
http://www.chinafair.org.cn/chinafair2004/website/china/paper/2005-8-8/p4.htm
Even Haier: ??????.pdf

WanXiang (Universal Joints)
??????????????7??????????????????24???, ?????100?????13000?
2001?8?28????????????????UAI?????????????????????
http://news.xinhuanet.com/employment/2003-04/16/content_835690.htm

“has been buying stakes in small Midwestern companies for several years and now is setting his sights on several other targets, including the distressed assets of auto-parts giant Delphi Corp., ”
Consider the case of Rockford Powertrain Inc., a company that was on the edge of extinction several years ago when Ni and Tom Corcoran, the company’s CEO, decided to join forces.
“We were like a microcosm of the auto industry,” Corcoran said.
(Randy Whelchel, president of UAW Local 803, feels) this was probably the best solution. “The only alternative was to close the doors, and it came close to that,” Whelchel said. “The one good thing is that the 100 who are left have good jobs.”
Powertrain’s Corcoran sums it up this way: “If they weren’t here, there might be no jobs at all.”
http://www.chicagotribune.com/business/chi-0601290433jan29,0,1044842.story?coll=chi-business-utl

Industry already being integrated
Industry figures show world automobile trade volume is expected to hit 1.2 trillion U.S.dollars in 2010, and up to 35 billion U.S. dollars will flow into China for auto part procurement.
http://english.peopledaily.com.cn/200612/27/eng20061227_336072.html

Wanxiang’s U.S. sales are expected to grow 60% to about $400 million in 2004
“Wanxiang has been growing like a weed,” says Gary Wetzel, chief operating officer for Wanxiang America Corp.
His single workshop spawned more than 30 factories and 31,000 employees in China.
Wanxiang’s investments brought close to 1,000 new employees under its umbrella.
Nodding to the machinists behind him, he says: “There are 50 jobs out there that wouldn’t be there otherwise.”
Powertrain is now expecting a 30% increase in 2004 sales — its best result in years.
A 1998 Wanxiang deal in the U.S., to buy a cash-strapped engine-parts maker in Muskegon, Mich., fell apart when its union balked at Wanxiang’s lifeline. The engine-parts company, Guidion Manufacturing Co., went bankrupt, dealing a blow to the Muskegon economy.
http://www.wanxiang.com/wallstreet.html, PETER WONACOTT, WSJ, 11/26/04

Its investment banker: http://www.amherstpartners.com/China.html

Knowledge acquisition: business operation and management.
Sharpening competitiveness: ?????.pdf

Haier:
Haier’s own reason why setting up factories in the U.S.: http://www.haier.com/cn/haier/view.asp?newsid=1559
Haier’s scale and government help compared with WanXiang: see PDF.

Market acquisition and expansion: ??+IBM???????.pdf, ????IBM?????.pdf,CNET article:
Meanwhile, it will give Lenovo the opportunity it has always craved to expand beyond China. In 2002, the company began to slightly expand into Spain and regional European markets but retreated due to market share losses at home.
??????IBM??PC??.pdf
slowing sales and miniscue oversea income: ????IBM PC?_???_?????.pdf

8. Cheap asset: TCL/Thompson (??_IBM PC?????.pdf)?
9. Alternative to outsourcing: ??????IBM??PC??.pdf

*** Government and business:
Lenovo: ????IBM?????.pdf

***. Risk:
1. political objection from US: Committee on Foreign Investment in the United States re: Richard Perle’s comments

Lenovo case:
Financial terms: ???????????.pdf
Concerns Mount Over Lenovo’s IBM Deal:
“That may not be enough to avoid an extended review of the deal by the U.S. Treasury Department’s Committee on Foreign Investment in the United States (CFIUS).”
“Without IBM’s R&D support, it is hard for Lenovo to compete against Dell,”
They should also be prepared to switch vendors if IBM’s responsiveness to their concerns dropped, it said.
“Most customers [in Japan] received the news with anxiety,”
“My nervousness is that the vision of the ThinkPad will get lost in transition,”

2. execution risk: gap in operations: profit gap (??_IBM PC?????.pdf) ??????IBM??PC??.pdf

March 2006 : Chinese-owned computer plant Lenovo in Greenock announces 400 to 500 job losses. Work goes to eastern Europe and China.http://www.tmcnet.com/usubmit/2007/01/12/2242059.htm

According to computer security experts, however, the State Department’s decision shows a lack of understanding about the global nature of PC manufacturing. Most U.S. computer makers use overseas manufacturing plants, notes James Mulvenon, a Chinese computer warfare expert with the Center for Intelligence Research and Analysis. It’s nearly impossible to make a computer without using foreign-made parts.

http://www.cio.com/archive/071506/tl_lenovo.html

The agreement was quickly approved by the U.S Federal Trade Commission. But in January, the CFIUS–which is made up of 11 government agencies, including the departments of Justice and the Treasury–decided to conduct an extended review.
http://news.com.com/Lenovo+buy+gets+green+light+from+Washington/2100-1003_3-5605657.html

The tech bellwether said it plans to add an additional 8,800 workers to its previous forecast of 10,000 new jobs. The majority of the jobs will be in Linux services, grid computing and business transformation services, according to IBM spokesperson Clint Roswell, who added that about two-thirds of the jobs would be in business consulting.
http://www.internetnews.com/bus-news/article.php/3394241

The PC maker Lenovo, which bought IBM’s personal computer business, “is majority- owned by the Chinese Academy of Sciences.” 3 Most of the other companies making global headlines are also part of the decision made by the government some years ago that “30–50 of its best state firms should be built into ‘national champions’ of ‘globally competitive multinationals’ by 2010.” 4
http://www.cato.org/pubs/edb/edb3.html#_edn3

Data/Quant:
1. Market acquisition:
Summarize Yao Yang: ????????????????????????????(85%)????????(51%)????????????(50%)??????????????????39%??????????????http://www.bimba.org/ips/article.asp?articleid=1367

Read a recent article on New York Times. The author wrote a scathing review of a recent truck commercial where GM invoke tragedies to sell its trucks. I found some of his remarks relevant to our studies.

Some quotes:

“The first time I saw it, I thought, holy mackerel, they are using negative images to generate positive emotions,”

“I don’t mind when they have a tent sale on President’s Day, but those guys have been dead for 200 years. I’m not sure I’m ready for a Rosa Parks sale-a-bration.”

“The message seems to be, ‘If you don’t buy our truck, we will go bankrupt,’” said Al Ries of Ries & Ries, a brand consultancy. “The kind of people who buy trucks are not going to buy them because a company is in trouble. People like to buy from winners.”