Imagine we were just electrified in Tokyo, not tired at all hopping back to Beijing where we continued our trip. After passing through the chaos of the airport taxi rank, we decided to take the metro. Finally, after wandering around a few alleyways and asking a few times we ran into an old Chinese man who pointed us in the right direction and we finally checked into the Inner Mongolia Grand Hotel Beijing.
The first thing that comes to mind about Beijing is the smog in the air and the smell of exhaust fumes. It was very evident that the air here is not very clean even at night. Last time I experienced such air polution was 2007 in Bangalore, India. You hear a lot about it but you have to breathe it to fully comprehend how thick it actually is.
The Forbidden City was the first site that we visited in Beijing. Off limits for 500 years, the Forbidden City in the heart of Beijing was finally opened to the masses in 1949. This is a huge complex and China’s most spectacular architectural structure. The Forbidden City was home to 24 emperors in two dynasties, the Ming and the Qing.
The three main halls of the outer court, Hall of Supreme Harmony, Hall of Central Harmony and Hall of Preserved Harmony form a line inside the gate. These halls are all situated on three-tier marble terraces, with ornate marble balustrades. An impressive stone ramp carved with coiled dragons and clouds is located between the steps leading up to each hall. The ramp of Hall of Preserved Harmony is the largest.
The Forbidden City is an amazing walk around that took us one day. We continued with …
“The journey of a thousand miles begins with one step.” – Lao Tzu
Multicolored neon light that illuminates a major city center with a vibrant nighttime glow, businessmen cackling, Japanese girls in bright outfits: welcome to Shibuya on a Friday night!
Before going to Japan when I thought of Tokyo I thought of the Shibuya crossing which is pretty famous for being one of the world’s most heavily used pedestrian scramble intersections. I have seen so many photos of this spot and it was one of the places I truly wanted to visit.
We ended up in Shibuya a couple times over our trip but the photo in this post is from the very first visit. While the Shibuya crossing does have “pedestrian crossing lines” which cross in different direction it does seem like people will charge in more or less any direction, as you can see in this video that was taken a few days later.
After visiting more than half a dozen Asian countries (including six months in India), I left on my staggering excursion to Japan in June of 2014. I felt the little hairs on my arms standing up as I boarded the Airbus A330-200 at Frankfurt Airport, waves of excitement running up and down my spine, knowing I would end up on the other side of the world, in Tokyo.
After the seventeen-hour journey (via Beijing), and a loud bang, I awoke to a hazy, electric glow, which was almost too much to bear in my awfully jet lagged state. Tokyo glows.
Tokyo is perhaps the most gorgeous ugly city in the world. It’s a super-dense riot of mismatched buildings, overhead wiring and one of the planet’s best mass transit systems. In other words: Blade Runner city.
It’s like being surrounded by embers from a fire on speed at nighttime. There’s lights, such a large number of lights, all different colored sparkling lights reflecting all around, and people, so many people, and sounds, sounds that don’t stop.
After deciding I needed out after some days in Tokyo, I headed to Hakone for a respite from the Shibuya crossing …
Greece has been in recession for past seven years and has already partially defaulted. Greece already has a sovereign debt crisis. The Markets are already in turmoil with bond yields very high, and stock markets falling. Greece already has bank runs. Multinationals are not keeping money in Greek banks.
Due to unemployment of 23% and youth unemployment of 53%, there already is a political backlash, with growth of extremism on both left and right of political spectrum. Recent opinion polls suggest that a new Greek government will be dominated by parties rejecting the Toika-led adjustment programme.
The Greek euro exit is the speculated self-abdication – or dismissal – of Greece from the Eurozone. This is known as Grexit, a slang term introduced in 2012 in world business trading. It is a portmanteau combining the words Greek Euro Area exit. The term was introduced by Citigroup’s Chief Analysts Willem Hendrik Buiter and Ebrahim Rahbari on 6 February 2012.
Deutsche Bank’s economics team sees, however, the potential for an alternative path. This alternative idea facilitates running a Greek parallel currency to the Euro, which Deutsche Bank dubs Geuro to represent government issued IoUs to meet current payment obligations . This would enable, in Deutsche Bank’s view, Greece to engineer exchange rate devaluation without formally exiting the EMU (Economic and Monetary Union of the European Union).
The Greek Euro Exit scenario (“Grexit”)
Compared to the hard struggle trying to recover while remaining in the Euro zone, a faster and more sustainable recover could happen if Greece decides to leave the Euro zone. Greece would begin to recover much faster if it is decoupled from the Euro, defaulted and devalued. The two biggest sectors of the Greek economy are shipping and tourism. Both could benefit hugely from a competitive devaluation.
“Plan Z” is the name given to a plan to enable Greece to withdraw from the Eurozone in the event of Greek bank collapse. It was drawn up by officials at the European Commission (Brussels), the European Central Bank (Frankfurt) and the IMF (Washington). Those officials were headed by Jörg Asmussen (member of the executive board of the European Central Bank), Thomas Wieser (Euro working group), Poul Thomsen (IMF) and Marco Buti (European Commission).
In order to prevent premature disclosure no single document was created, no emails were exchanged, and no Greece officials were informed. The plan was based on the 2003 introduction of new dinars into Iraq by the Americans and would have required rebuilding the Greek economy and banking system from the beginning, including isolating Greek banks by disconnecting them from the Target 2 system, closing ATMs and imposing capital and currency controls.
The implementation of Grexit would have to occur “within days or even hours of the decision being made” due to the high volatility that would result. It would have to be timed at one of the public holidays in Greece. In the long-term, Greece would see an improvement in domestic demand. Demand for imports would fall due to higher cost. Greece would benefit from higher exports and (if political situation stabilizes) an inflow of tourism. Furthermore, Greece would no longer feel it is following dictates of EU (i.e. Germany) and would have greater economic and political independence.
The parallel currency scenario (“Geuro”)
Due to political pressure Greece might be unlikely to formally leave the euro, nor are the other euro area countries likely to abandon Greece entirely. The path of least resistance could be the stop of financial assistance to the Greek government and the continuation of payments for debt service and the stabilization of the Greek banks in a European “Bad Bank”.
In this case, a Greek parallel currency to the euro, the Geuro, could emerge when the government issues IoUs to meet current payment obligations. This would also allow Greece to engineer exchange rate devaluation without formally exiting EMU (see chart below). Initially there would be a large depreciation, but at the same time Greek authorities would reclaim some semblance of control to stabilize or even strengthen over time their own Geuro against the Euro. In fact this would leave the door open to a return to the Euro at some point.
Emerging markets offer plenty of opportunities for investors. By opening themselves to international trade, the structure of these markets is dramatically altered. Foreign and local investments flood the economy with the aim of gaining enormous returns. A massive reallocation takes place and demand explodes.
As a result of these disruptions, the number of mergers and acquisitions grows exponentially. Under these circumstances, it becomes of crucial importance to understand the nature of companies in emerging markets. Such companies share many of the following characteristics:
1. Unreliable market measures:
When valuing publicly traded companies, we draw liberally from market-based measures of risk. To illustrate, we use betas, estimated by regressing stock returns against a market index, to estimate costs of equity and corporate bond ratings and interest rates to estimate the cost of debt. In many emerging markets, both these measures can be rendered less useful, if financial markets are not liquid and companies borrow from banks.
2. Currency volatility:
In many emerging markets, the local currency is volatile. This is the case in terms of what it buys of foreign currencies (exchange rates), as well as in its own purchasing power (inflation). In some emerging market economies, the exchange rate for foreign currencies is fixed. This is creating the illusion of stability, but there are significant shifts every time the currency is devalued or revalued. Furthermore, when computing risk free rates, the absence of long-term default free bonds in a currency denies us one of the basic inputs into valuation: the riskfree rate.
3. Country risk:
There is substantial growth in emerging market economies, but this growth is accompanied by significant macro economic risk. Hence, the prospects of an emerging market company will depend as much on how the country in which it operates does as it does on the company’s own decisions. Put another way, even the best run companies in an emerging economy will find themselves hurt badly if that economy collapses, politically or economically.
4. Corporate governance:
Many emerging market companies used to be family-owned businesses and while they might have made the transition to being publicly traded companies, the families retain control through a variety of devices – shares with different voting rights, pyramid holdings and cross holdings across companies. In addition, investors who challenge management at these companies often find themselves stymied by legal restrictions and absence of access to capital. As a consequence, changing the management at an emerging market company is far more difficult than at a developed market company.
5. Discontinuous risk:
The previously mentioned country risk referred to the greater volatility in emerging market economies and the effect that has on companies operating in these economies. In some emerging markets, there is an added layer of risk that can cause sudden and significant changes in a firm’s fortunes. Included here would be the threat of nationalization or terrorism. While the probability of these events may be small, the consequences are so dramatic that we ignore them at our own peril.
6. Information gaps and accounting differences:
It is not unusual for significant and material information about earnings, reinvestment and debt to be withheld in some emerging markets, making it more arduous to value firms in these markets. On top of the information gaps are differences in accounting standards that can make it difficult to compare numbers for emerging market companies with developed market firms.
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