Corporate governance and state governance

The Wall Street Journal featured a story about corporate governance in China today. The reporter touted an ex-Goldman Sacks banker's efforts to help erect new corporate governance paradigm in China. The banker, John Thornton, is a legendary figure who gave up his banking career and chose instead to teach in Tsinghua University in Beijing, China.

I always support attempts that help modernize China. Only a civilized and modernized China could stabilize the entire Asia Pacific region. But Mr. Thornton's efforts will eventually hit the unbreakable Great Wall of Chinese Communist Party. It is all good that Netcom's chairman, Zhang Chunjiang, supports changes happening in Netcom. However, Netcom is not Mr. Zhang's company. It is still controlled by the Party. What if some reforms pursued by Messrs. Zhang and Thornton are in conflict with the Party's other goals?

Just by looking at how the Communist Party ousted Shanghai's party chief a couple of days ago, I would not be so optimistic as to believe Mr. Thornton's efforts will go anywhere.

Wal-Mart bashing

American liberals are lashing out hard at Wal-Mart right now. Chicago city council's attempt to mandate giant retailers to pay a "super minimum wage" was just a little episode of their efforts. I was relieved to find out that the mayor vetoed the Big Box Ordinance. There are still sane men standing among us.

On the other hand, I heard some commenter on NPR demanding the break-up of Wal-Mart for its being a monopolist. I couldn't believe my ears. Why is it branded as a monopolist? I haven't seen a single customer being forced into buying at Wal-Mart. Even when mom-and-pop stores are driven out of business by Wal-Mart, people still have a great deal of choices for their grocery shopping. And what do mom-and-pop shops do consumers any good anyway?

People always need an enemy to motivate themselves. Wal-Mart is a huge and easy target. I just hope the critics have studied economics harder in college. That way we will have a more constructive discussion of helping out the poor.

(Picture: www.yoest.org)

Moneyball and no-trade theory

To non-A's fans' chagrin, Billy Beane once again proved Moneyball rules in the big league. A's are red hot and Frank Thomas is on a home-run streak. Thomas costs the A's only half a million this year! Heard of Mark Mulder this year? I still remember how people scolded Billy Beane for giving away two of the big three. Voila! A's got a new pitching trio. Yet, not only Mulder is gone for the season, but Hudson doesn't do well, either.

Every time I read stories like that, I always recalled the no-trade theory learned in game theory class. If someone is giving up something valuable, he must know that stuff is flawed. On the other hand, if someone is eager to get something, he must know that stuff is very valuable. Consequently, there shouldn't be any trade at all.

Billy Beane is a proven genius. I just don't understand why any sane general managers would do deal with him. What do you know? They just keep on being preyed. I root for LA Angels, but can't find a way to hate Billy Beane, even when Angels are trailing right now. I just wish Arte Moreno can acquire Billy Beane some day.

(Picture: AP)

Driven by love- From China to America

Donald Tang wrote a piece in LA Times today. He told a compelling story of his love and his remarkable journey. He is Bear Stearns' China hand and recently said to broker a monster deal between China Construction Bank and Bear Stearns.

The story tells us that you are bound to succeed if you are sincere and able to concentrate. What a motto!

(Picture: Milken Institute)

Grading exams

Grading exams or papers is perhaps the least satisfying part of teaching. But sometimes students provide very entertaining and creative answers. This is not taken from the actual exams I have graded, but it serves the purpose.

Hedge your gasoline spending

Oil price dropped a few bucks the last few weeks. I beleive it is a good time to lock in the gasoline price now. If you have to spend 2 grands a year on gas, you can buy the same amount of oil price-pegged ETFs(Exchange Traded Funds). That way your gas bill won't be subejct to any fluctuations in crude oil or to any stupid conflicts in the middle east.

A few caveats: (1) The hedging strategy only lasts for a certain period of time. In the previous example, you still will have to take whatever the gas price is next year. If you want to lock in the price for more years, interests forgone should be taken into consideration as well.

(2) Hedging is a double-edged sword. You won't have losses, but you also give up any potential gains. If the oil price keeps dropping, your ETF holding will shrink, too. Such an outcome will be worse than doing nothing at all.

It is no magic that I came up with this strategy. I got burned pretty bad by owning this ETF (symbol: USO) lately. I need to think a way to comfort myself and here it is. What a finance genius!

(Picture: Yahoo! Finance)