The Management That Leaves One Speechless

2008/3/11 16:23:53

Having written yesterday's post, given this ID's character, one must naturally get to the bottom of things. Today, let us use the most rational analysis to discuss the performance of this speechless management since 2007.

Clearly, the market's performance after 2007 completely exceeded management's imagination, because they fundamentally failed to understand the historic significance of this so-called liquidity-excess-driven mega bull run.

This ID is certainly one of the earliest and among the very few who firmly opposed the notion of so-called excess liquidity, because the so-called excess liquidity is only relative to the size of the pool. If you're just a chamber pot, one pig can give you excess liquidity; but if you're the Pacific Ocean, where does this excess liquidity come from?

Let me ask: China — a country destined to become the world's strongest capital power, a country destined to become the world's economic leader — does it really only have a chamber-pot-sized pool to face so-called excess liquidity? Shouldn't we be turning our pool into the Pacific Ocean to absorb capital from around the world?

The question is: does our management have the vision and concrete strategies to turn China's pool into the Pacific Ocean? In fact, facing so-called excess liquidity, our management adopted the most hopeless, most technically devoid, most laughable approach. Those continuous interest rate hikes and reserve requirement increases became a technically worthless cosmic joke of the century.

And the result of all of management's financial instruments? Not only was the speculation wave not stopped, but the inflation they didn't want to see arrived uninvited.

Even more laughable: a certain well-known economic cigar serving as an important think-tank for management once proudly disclosed his design publicly, saying that as long as an interest rate differential of such-and-such was maintained with America, and the pace of RMB appreciation maintained at such-and-such, then it would be this beautiful new world. Yet in less than two years, reality was placed so cruelly before us — that interest rate differential mysteriously went from hugely positive to negative, with a trend of further widening. Their wishful designs were thoroughly toyed with by the cruel reality of international finance.

Let me ask management: why do you have time for these laughable games but no time to truly expand our pool?

To counter excessively rapid asset price growth, the simplest method is to increase supply — this is logic one could figure out with one's toenails. Yet our management, from 530's midnight rooster call to the Through Train farce, thrashed about every which way. The result: they still couldn't suppress the rally. Why? Because the approach was fundamentally wrong. And these pointless tricks were not only ineffective but harmful. For example, the stamp tax farce only lasted a few days — ultimately the market went from 4300 to 6100 points, making 530 an event of massive psychological destruction that was completely useless.

As for the decision-making process behind 530, that's an even greater tragedy. But what's more tragic is that now, when discussing bringing the stamp tax back down, they suddenly start taking the so-called legal route — proposals and whatnot. Let me ask: did 530 go through necessary legal procedures? Is there a law that says raising taxes can be decided by one person on a whim, but lowering taxes requires layers of formal procedures? In any country, adjustments to taxation are among the most critical livelihood issues and must go through legislative bodies and other procedures before implementation. And what did we get with 530?

Let's not mince words: 530 will forever be a page of shame in the history of China's capital market development.

Basic necessities like food, clothing, shelter, and transportation are of course important livelihood issues. But if the standard of China's livelihood issues remains stuck at this level, that would be a historical tragedy. One must face the fact that livelihood issues also have levels. Higher-level livelihood issues, from a historical perspective, are even more important. And our current so-called lower-level livelihood issues are, at root, catching up on past debts.

But in any country, the most important livelihood issue ultimately comes down to stable economic growth. A country with economic problems — any discussion of livelihood issues is empty talk. Economic development is the most important livelihood issue.

Originally, we had a powerful momentum — a powerful trend created by massive capital flows and confidence flows — that could have allowed us to quickly resolve a large number of problems. But our management didn't harness this trend. Instead, they adopted an opposite, erroneous strategy and strangled this rare momentum. None of the problems that should have been solved were solved, and instead, even more terrifying problems were left behind.

This is management's report card for 2007.

Most laughably of all: anyone should know with their toenails that without getting the spot market right, futures have no foundation whatsoever. Yet our management, on one hand thrown into complete disarray by market trends (think about those spasm-like decisions: the Through Train, QDII, 530, etc.), on the other hand pushed the Great-Leap-Forward-style advancement of so-called futures — the absurdity of this world probably reaches its maximum limit right here.

Without question, we missed an opportunity to easily solve major problems, and therefore we must pay the price.

But more critically, we now face an even more serious problem. If in 2007 we squandered something at the virtual economy level and it wouldn't have had too great an impact, then in 2008, this reckoning will appear at the real economy level.

As for what happens once wrong choices are made at the real economy level — this ID doesn't even want to say more.

Honestly, this ID has zero confidence. This ID hopes to be wrong. But the facts have always proven that on economic issues, this ID is rarely wrong.

To management: this ID has nothing to say.

My apple.