Hong Kong Turmoil


For a few minutes, it looked as though there was a chance for Sudan to transition from one of the world’s worst trouble spots to a democratic government. Long term leader Omar al-Bashir was forced from office, his piles of loot seized, and a transitional council set up.

But two months later, it is clear that this transition was nothing more than a traditional military coup, as army officers continue to vie with each other for power.

The violence and poverty continue unabated, and descent into civil war between the military factions seems more and more likely. Recent demonstrations were brutally attacked by the army, with soldiers indiscriminately killing and raping both men and women, and the country remains paralyzed by civil disobedience.

Long Term Investing

I just came from a conference in Las Vegas for the Investments & Wealth Institute, attended by the top Wall Street names and investment managers from throughout the US, and discussing the major issues impacting investment management today.

As Donald Trump escalates the trade war with China to distract from his personal shortcomings, the market has dropped precipitously due to the countermeasures taken by the Chinese in response. While it is impossible to see the end result of all this, one thing I can predict with certainty is that, whatever the outcome, The Don will proclaim that he has saved the day.

China is rapidly militarizing and the geopolitical vacuum created by Trump is allowing both China and Russia to step in and take advantage of our absence from the world stage. The damage to US interests is yet to be calculated, but Western interests are being severely hampered worldwide.

But there was little concern about this at the conference, which focused instead on the practical aspects of managing money, how people should handle their Social Security payouts, and so on.

Having watched the markets since 1979, this makes sense to me. It is clear that no one can predict what will happen—an analyst who calls one outcome correctly still has no greater chance of being right on the next one. This is especially true with our current administration, fond as it is of dramatically changing course, often several times in the same day.

That doesn’t mean I am bullish or bearish on the overall market, but it is important not to try to time the market based on geopolitical news. Focus instead on long term investment returns, where results are smoothed out over time. Ignore the short term gyrations of the market, and look at your portfolio balance, and the money managers advising you.

Hong Kong

It is with a heavy heart that I watch the news from Hong Kong. When Hong reverted back to China in 1997, it was on the basis that China would leave it independent for 50 years. China, however, is steadily implementing laws designed to curtail the freedoms enjoyed there relative to mainland China. Most recently, this is reflected in the imposition of an extradition law that would effectively make Hong Kong residents subject to Chinese mainland laws.

Protesters took to the streets to peacefully express their alarm at thus new law, but as it has since Tiananmen Square, the Chinese Government has reacted by brutally suppressing every small challenge to its power.

I have long been a China watcher and booster of the genius that has produced the second biggest economy, and it really dismays me to see this. It seems the current regime is focused on holding onto power, at the expense of preserving the growth and energy of this economic powerhouse. This waves a big red flag about the future prospects of a country which had previously embraced the best aspects of capital growth, and it will surely impact the levels of future foreign direct investment.

Hong Kong has served as a very important conduit to the West and is the headquarters for many multinational companies with operations in China, a vital cushion for their senior management from the authoritarianism on the mainland.

It is hard to avoid the conclusion that under the administration of Xi Jinping, there will be no relief from heavy-handed control by the central government, either in Hong Kong or anywhere else in China.

Already, the negative publicity around the police brutality has resulted in a statement by Nancy Pelosi, Speaker of the House, suggesting that Washington reconsider a law exempting Hong Kong from some of the trade and technology limits imposed on China. If this policy is indeed overturned, it will wreak irreparable havoc on the economy of both Hong Kong and China, with a knock-on effect on the US.