China Debt Downgrade: Buy Railroad CSX
Following the first downgrade of China’s debt by Moody’s and other ratings firms, airlines in China are struggling to raise debt because of sovereign ceilings which make debt more expensive for all companies within China now that China’s government finds it more expensive to borrow because its debt is worse rated and this is the first downgrade in three decades made on slowing growth. I never was a fan of the China longterm growth story, vastly preferring the Japan economic model which ran into its own problems but these problems are all ones that China will have to face in various forms such as aging population: China has it worse demographically in many ways. Nonetheless, given struggles with airlines and a struggle in China, we naturally turn away from speculative plays in distillate energy for emerging markets like China in the BRIC growth story as remember “Brazil is the greatest next big economy and always will be” is the saying, turning away from construction-related firms like John Deere and Caterpillar which may be pumped right now so they can be dumped on you, and invest with Warren Buffett who bet a few years ago maybe five years or more ago now on railroads in America: CSX, and he called it a longterm bet on the future of the American economy. We have self-driving cars and maybe trucks emerging but railroads will always be cost efficient for some goods because of the volatility in fuel prices for automobiles while railroads can hedge much of that fuel risk because they can deliver on a much greater scale. China’s growth story is problematic as an economist for three key reasons: first, the renminbi escaped currency crises only on virtue of the size of China during the Asian financial crisis in 1997, but size can ultimately become a liability with internal pressure, second, there had been little investment in exogenous industrial policy like there has been in Japan with robotics which is designed to give Japan a long-term edge against cheap labor in Asian economies in neighbors as honestly anyone can get educated in a poor country and demand jobs come in from foreign companies and generate an economy that way but Japan isn’t Vietnam and actually builds its economy from the ground up and Japan isn’t Korea either and doesn’t create a lot of inbred conglomerates that are totally opaque to the outside world and are impossible to do business with. Japan by and large is a normal country with an incredible economy that ran out of space to grow as it got dwarfed by froth and real excitement over China but it is not just about capital inflows. Think about sushi, you have to use specialized soy sauce to bring out the taste and ginger to cleanse the palate before each new piece if you are a connoisseur and you never answer if someone asks you: “is it good?” with a smile. That is because sushi is meant to be an experience before, during and after and it is not like a cuisine that makes you eat it until you are stuffed and then you remark on how delicious it is. The high rate of stomach cancer in Japan had nothing to do with sushi as most Japanese don’t consume that much sushi but more to do with mercury levels in the sea and we have to deal with that because we eat not the fish that we wish we have but the fish we have. I also partake in the China Diet which is a great book that talks about how Chinese cuisine reduces the risk of cardiovascular disease and I think the primary reason is Chinese always ask you after you finish eating: “was it good to eat?” The result is you only eat if you think what’s in front of you is good to eat so you can answer that question honestly. Since it all tastes about the same, you eat a low fat diet considering all else equal because low fat diets are good to eat for your body. Nonetheless the final reason China’s growth story is flawed is because their government largely instructs their people to be capitalists in the absence of sufficient capital. This will inevitably result in capital decay as too much energy will be spent fighting over capital such that capital isn’t maintained properly. There is no comparison to America. Compare instead to Japan. Japan takes very good care of people who enter hospitals for emergency care and the elderly. Perhaps Japan doesn’t take care of immigrants enough with one Japanese man recently on the Internet saying two things: “if everyone in the world were against his friend, he would still be her ally. Second he said it would be totally outrageous if immigrants made fun of the people already in the country as that sort of jousting is not appropriate while it is natural for a low level of discrimination to occur the other way even if not desirable.” Right-wing Japanese are a courageous lot and I say courageous not interesting because unlike Americans they don’t stand behind a massive military but their economy is incredible. At FIFA, I cheer for the blue samurai and I think I understand now when the emperor of Japan said he would conquer the world another way after he lost, he had experienced a catastrophic defeat, and with his words won the sympathies of some women who were on the other side, and he didn’t mean he would conquer the world economically to own all the USA treasuries for example but that if someone needed to be on the wrong side of history ever again, Japan would make sure with all its power, it will be the other sucker going home on the wrong side. They say kyokushin full contact karate beats drunken boxing which is a Chinese art form designed to confuse with pliable motions while karate sticks to standard linear motions and fights straight for the most part. Well now, you see judo beats wing chun, the Cantonese spring fists which focused on locking and trapping range which is the range in between striking and the clinch. A Chinese Kuomingtang Nationalist waving a white sun on a blue flag under Chiang Kaishek, a Chinese Communist wearing a green cap waving a red flag under Chairman Mao Zedong revolutionary poet and commander, and a Qing Dynasty Manchu wearing a Ponytail come to Lü Bu who in the Romance of Three Kingdoms during Han Dynasty China was considered heads and shoulders above all other Chinese generals at fighting in the three-way civil war, Lü Bu took many mentors and got in many fights, was a soloist, had a horse called Red Hare unrivaled among horses as he was unrivaled among fighters, and he spent most of his time chasing a legendary beauty named Diao Chen while most Chinese weren’t interested in courtship of women at all, most Chinese men took multiple wives, and most Chinese men were practicing oaths in secret brotherhoods which he had no interest in. At one confrontation, he challenged the brotherhood of three good guys, King Liu Bei, God of War Guan Yu, and Noble Peasant Zhang Fei to a fight and fought them to a stand still. Zhang Fei called Lü Bu a, excuse my french but the literal meaning is important here, bastard with three fathers. Lü Bu asked how could he, the great Lü Bu, become a bastard with three fathers. Liu Bei tried to persuade Lü Bu to be a good guy but Lü Bu said he can’t lie, he was screwed over by a girl at a young age and now he is like this. Anyway, to finish the story, the Chinese Nationalist, Chinese Communist, and Chinese Qing found Lü Bu and say we have got to fight the Japanese or you are a traitor to the fatherland, you are the son, you are China, we are the fathers. Lü Bu says: “what? No Japanese ever said I have three fathers.” I found the Japanese who speak Chinese found this funny over New Year’s, but I’m afraid again like the other article the humor can rub the wrong way. Am I a Chinese person? I like all Chinese except the ones who fall by my sword like a Phoenix and rise to the heavens like a Dragon! Same people. My name is Alex and my Japanese Greek hybrid isn’t working so I say I am German and it was made in USA. This was my whole argument why you should bet on Japan: Japan and friends of Japan like me, we understand China as a powerful civilization. We don’t trivialize it nor do we dare to hide from it. Japanese Communists came to China to defend the name of Japan against Japanese Imperialists in the Second World War: they actually took up arms and defended another country against their own’s aggressions and war crimes using far inferior weapons. I will do the same: I will strive to make up for Japan’s mistakes by practicing compassionate capitalism in whichever party I am in, I am Republican, and I will take on those who use the past role of Japan to expand their interests as the current Japan wants no part in that: we no longer believe in wars for the honor of our race, it is okay if races are unequal as we as in Japan and friends of Japan insisted on a racial equality clause in the Anglo-Japanese Alliance and it was removed by the British because of colonial considerations. That was equivalent to an emotional scar left by Lü Bu’s girlfriend who left him a wreck, and that is where we are today. We no longer take pride in Russo-Japanese War as first war where colonized peoples defeated a colonialist power, and the first war an Asian power defeated a white power because that type of thinking is sick, it really is, and led to Japan being two more nukes away from being exterminated from the face of the planet. The army of Japan was crazy during that war and the war criminals should be removed from Yasukuni where I went when I still identified primary with my ancestors the Chinese to make my separate peace and the Japanese have delivered on it and you see me deliver on my half now as someone who was of the real China. China is a country that suffered under much colonialism, and speaking for Japan, a largely voiceless country, we did our best, until perhaps we became so intrigued by those secretive male-only clubs that Lü Bu eschewed that we sold out our ancestors and brothers and sisters. Even the man who entered Nanking was considered a China expert before he was a war criminal, and he called the Second Sino-Japanese War a tragedy of a fight between two brothers. Chinese troops threw away their uniforms to hide among civilians in Nanking. And I think Japan at the time felt a sense of betrayal that the Chinese Nationalists which Japan had helped train and sponsor suddenly started siding with the international community against Japan to censure Japan. There is a saying in Russia: “you think the safest place for your babe is beside you but you may give it your illness.” I think the Japanese army went crazy and gave Hiroshima an illness.
That is enough. Believe in us. Believe in anything. The soul of Japan is sorry for Pearl Harbor.
Buy Recommendation: CSX $54.54. June 4.