Ronnie Chan Chichung has been waxing lyrical about the virtues of Hang Lung Properties.
In his chairman's letter to shareholders, he discusses the question of guanxi and how the company does business on the mainland.
Hang Lung does not approach government officials in Hong Kong or on the mainland. It doesn't "unnecessarily befriend" local leaders here or in Beijing and it never gives gifts, at least not expensive ones. Impressed? The list goes on. Hang Lung does not entertain officials at expensive restaurants - "We always do what is proper and reasonable". Last but by no means least, "We do not only abhor evil but also avoid the appearance of evil".
We get the picture - Ronnie, like the proverbial wise monkey, does not see, hear or do evil. However, one is left wandering how Hang Lung does any business at all. He says the company's reputation is enough to open the doors he needs to. "Having established our reputation of being a straight shooter, corrupt officials probably know better than to ask us for favours." But what's Ronnie up to here? Is he suggesting that there are other property companies which hire former government officials and conduct business in a less than straightforward manner?
Do banks have any more gold?
To the Mines and Money conference for another wrist-slitting session, this time with Eric Sprott arguing that the financial system will be crushed by high levels of sovereign debt, eventually resulting in a soaring gold price. Sprott is the chief executive, chief investment officer and senior portfolio manager of Sprott Asset Management. A gold bull, he is often grouped with those commentators whose views of the gold market are scoffed at as "conspiracy theory". He also believes Western central banks are lending large amounts of their gold reserves to the gold market with the aim of suppressing the price so as to maintain the fiction that all is well with the world's financial system. In a recent report, he argues there is a hidden source supplying the rising demand for physical gold. He says it has to be Western central banks releasing gold into the market without reporting it in a transparent manner. He believes so much has been released and then sold on that he wonders, "Do Western central banks have any gold left?" Sprott finds it suspicious, for example, that it is going to take Germany seven years to get back its 350 tonnes of gold that are stored at the New York Fed, while 90 tonnes were imported by China through Hong Kong in December alone last year.
"The time will come," he told Lai See, "when the Western central banks will run out of gold." Despite his love for gold, Sprott believes silver will turn out to be a better investment over the next 10 years. This is because 11 times more silver is produced than gold, but he says that the evidence of the gold and silver coin sales at the US Mint and from his own observations in Canada, is that 55 times more silver than gold is being bought by investors. At this rate, there will eventually be a shortage leading to a price squeeze, which will be good news for those holding the metal. Other words of advice from Sprott include, "don't buy bonds" since they could end up worthless in the not unlikely event that countries or companies default. Just about all of the world's financial problems from 2000 onwards have been due to the existence of an over-leveraged banking system. "Whatever you do, don't put your money in a bank. You are taking a huge risk since you are depositing your money with a leveraged counterparty."
The bottom line
A chocolate rhinoceros to the Reuters reporter, by way of reward, for the introduction to the following report. "Lululemon Athletica Inc is pulling shipments of unexpectedly sheer women's yoga pants from its stores, in a move the athletic clothing maker said would hurt its bottom line." After the announcement, the company's share price fell 6 per cent since the move would have a significant impact on its financial results and lead to a shortage of its signature black luon fabric yoga pants in its stores. Reuters continues, "Certain shipments of yoga pants that went on sale this month had an unacceptable 'level of sheerness', and affected about 17 per cent of all women's bottoms in its stores, Lululemon said".
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