God Bless China – Why You Can Make More Money In China And Australia Than The USA

Back to the past

You may also recall reading a newsletter with information on who the world’s biggest oil companies were (refer to “Invest News” August 2005) and how they spent their money diversifying into other industries. The “common sense” belief that higher oil prices would make oil companies go broke, may be commonly held… this doesn’t mean that it is true….

Oil goes up, buy more oil…

Huh? Since the article was written, the price of oil (and petrol) has continued to rise at a massive rate. The profits of oil companies have increased dramatically, as has their share price. Did you buy into any oil companies? Prices on fuels and lubricants have risen by 21%, so did we all buy 20% less oil? Nope, we bought 18% MORE.

The oil companies don’t just have us over a barrel; they have us over millions of barrels a day… Did you buy into oil companies yet?

See the Past, now look at the Now

OK, so you’ve got the message about the oil companies. Like the dinosaurs that they dig up, these huge juggernauts* will rule the world for a long time. Don’t fight it, get used to it, and learn to profit from it. If you don’t take my word for it, look at what the major investment managers are doing with their money.

Which fund managers are buying into oil companies, and how much are they buying? Are they hoping to make more money in the future than they did this year? The fund manager’s job is to make money in the future, so what are they doing now?

Fund Manager —–

What is in their Top Ten? (as at June 30th 2005)

Credit Suisse—- Mortgages, phone companies and finance companies.

Barclays: —–Total Fina Elf is number two, Exxon Mobil at seven.

Merril Lynch —–Total Fina Elf is number two stock on their list also Platinum Royal Dutch Shell is number ten stock

UBS Global —-Total Fina Elf is number 3, BP at number 10

Westpac Intl —-Exxon Mobil number 1 stock held

BT USA —-Exxon Mobil number 2

BT Global —-Exxon Mobil number 1

BT European —-Royal Dutch Shell number 1, Total Fina Elf number 3

Oil = Money

If the oil companies are NOT going to make massive billions of dollars worth of profits in future years, then why are the biggest and smartest fund managers investing into the oil companies? Perhaps with all their money and all their research, the major oil companies know that major oil companies will continue to turn gargantuan profits. Perhaps with the largest fund managers’ money and research, the fund managers have also come to the same conclusion: oil equals money.

Save the trees: shoot a beaver…

Sure, you can buck the trend against the juggernauts*. You can invest all of your money into stocks other than mining and oil. You can invest into “new” areas such internet stocks and bio-technology. You can invest into mortgages and finance companies like Credit Suisse. You can invest into eco-responsible, genetically unmodified, environmentally-sustainable alfalfa-eating, alpaca-friendly, tree-hugging hippy stocks**.

It may make you feel good. It may even make you a dollar or two. A good idea is to diversify your money: — have some smiley, care-bear investments** and also have a little bit of investment into some of the “smash, pillage and wreck the environment” stocks.

Exxon/Mobil hurt some penguins with a leaking oil-tanker. Fine, sell their shares, punch the CEO, or volunteer at Greenpeace.

Union Carbide upset some people with dodgy battery acid. Throw out your torches, toys and computers or choose to make a positive difference.

When I discovered that a subsidiary of BHP was mining uranium, I felt so bad about it that I donated some of my BHP dividends to my favourite charity***. Now, BHP were not making uranium nuclear weapons, it was for nuclear energy; and it was not BHP, just one of their connections.

I am not crazy enough to sell all of my BHP shares just because some of their friends are a little environmentally unfriendly: — that would be silly. Besides, I can do a lot more for the environment by gifting thousands of dollars to good causes, than I can by chaining myself to a bulldozer… Bulldozer. Hmm, that gives me another excuse to use the term “juggernaut”… ☺

Speaking of big powerful, heavy things without restraint or social conscience, let’s have a look at the world’s biggest super power and largest economy. Do you know who it is? Do you think that the answer may change in future?

Live in the Now, Look to the future

Hey, I don’t wish to be an alarmist; you have the newspapers and horror movies to make you frightened. I just wish to point out a few things and make you “alert but not alarmed”.

Question 1 Who in the world uses the most oil?

Question 2 Where do the oil users get the oil from?

Question 3 What are they prepared to do to keep it this way?

If you answered, “USA”, “The Middle East” and “start wars”, you would be fairly close to the truth… or the truth, as it was, for most of the last century. In the last few decades we have seen the USA using most of the world’s oil, and sourcing it from the Middle Eastern countries. We have seen the USA involved in conflicts in Afghanistan, Iran, Iraq, Saudi Arabia, Kuwait and Iraq (part two).

In more recent years, the amount of oil being used by China is on the rise. Soon, your answers to the above three questions will be “China”, “Africa”, and “anything”.

Be prepared for a world-wide shifting of the scales. Why does China source their oil from African countries and not Middle Eastern countries? Does the oil taste nicer? Does it last longer? Is it cheaper? Or does it simply not raise the ire of the US government, as Africa is not seen as de-facto US soil?

Anyone stomping around in the Kuwaiti oil-fields for long enough would eventually upset the USA: look at what happened to poor old Saddam Hussein in 1991. Oops, it happened again in 2003. The USA sees the Middle East as their own little vegetable patch. They let the gardeners have a few carrots to keep them happy, but they don’t like any rogue rabbits intruding, or any sign that someone else wants to dictate gardening terms or market conditions.

Prepare for War….again….ho-hum

Will there be more wars in the Gulf? Probably. Will things change? Not much. Sometimes the US sells arms to the left side (“allies”) and sometimes the US sells arms to the right side (“axis of evil”). Sometimes they sell weapons to both sides (“Iran-contra”) and blame it on Oliver North. So long as one side wins and agrees to sell oil to the USA at a fair price, they are happy.

In the style of true diversity, the US doesn’t really care who wins: the winner will sell them oil, and the loser will come back and buy more weapons for next time. The USA is a business. They sell guns and buy oil in the same way that Australia sells steel and buys DVD players. War is a business activity for some countries. It is good for their economy. Realise this, and thank God if you are smart enough to stay out of the firing line and in front of the check-out queue.

So the wars in the Middle East will continue, much like the war between Coke and Pepsi, or McDonalds and Burger King. It’s just business. It’s just money. It’s nothing personal. The “War on Terror” will be never-ending; it will just ebb and flow, like the tides. America makes weapons and needs to sell them. They use oil and need to buy it. What are you gonna do? They are the biggest economy in the world and they need to protect their economy from anything that would threaten it. God bless America…

In all probability, the pugilistic Americans are a threat to world peace, inasmuch as they believe that it is their duty to police the world (“finish the wars that others start”) and supply arms to the highest bidder. By the same token, we are probably lucky to have them. Without the massive power of the world’s “school bully”, there could be complete anarchy.

As much as the US Marshall Plan is objectionable, it (and its clones) can be seen to have helped the world at large. It is arguable that victory in World War One could have gone to Germans, or eluded the British a lot longer without the help of the USA. World War Two was also largely decided by the entry of the good old USA. The US involvement in Korea, Vietnam and Kuwait were possibly self-serving, but did have some positive impact on the rest of the world.

Where does this leave us? And what about China? Hmm, glad you asked. China is not even going near the Middle East. No need to. Why fight over something that has been fought over for centuries, against an enemy that has lots of money and plenty of guns? The Chinese are not into suicide, Hare Kari was a Japanese trait…

While Americans fight Arabs in the Middle East (and anybody else who enters), China is quietly and diligently drilling for oil in Africa… Shh!

Will China fight to survive, or will they buy friends? The Chinese are making friends in Africa, building infrastructure, creating jobs, buying oil. They are sourcing blood to infuse into their economy. Far from sucking Sudan and Zimbabwe dry of oil to feed the Chinese machine; it is more of a symbiotic relationship.

You are unlikely to find Africans hating Chinese in the same way that the Arabs can hate the Americans. For every Chinese oil-well in Africa, there are thousands more schools and jobs. African people who used to till the soil are now drilling for oil, on larger wages. Their once uneducated children, who were destined to work farms, are now studying to become geologists and engineers for the oilfields.

The Chinese do not need to sell weapons to the Africans or the African’s enemies; instead, the Chinese do a nice sideline in selling cheap DVD players, laptop computers, cameras, T-shirts and the like. Just as the Chinese bought plenty of Australian steel and coal, then gave Aussies cheap plasma screen televisions, they are now doing similar things with the African nations to get oil. Can we blame them? Of course not, it’s a free world, isn’t it? Well, maybe it’s not free; it’s just not so tightly controlled as it once was…

Who’s the Boss?

It is certainly interesting to live in a generation where we have seen the Japanese economy and the American fire-power dominate the world for almost 50 years. The Japanese economy has since stalled, the Indians and Chinese are spending more on their armies than the USA and with all this strutting and chest-puffing, I am glad to live in Australia…

OK, so some researchologist is going to check my facts, do a Google search and claim that the Asians are NOT putting more money into military spending than the USA…

Think again. With the same $100 note, I can pay an American man for four hour’s labour, or one Chinese man for more than a week… The wages in Asia are minuscule when compared to average wages in America. The American-made TV costs ten times as much as the Chinese one. Do you think that armaments, tanks, guns and bombs are any different? They are all just products. It is all just labour. When you read that China spent $15 Million on their army, the Americans would have to spend over $200 Million to have the same impact…

If all armies were mercenary, you could pay both sides to fight each other. A million dollar investment on each side could see 25 US Marines fighting against over 300 Chinese soldiers. Both sides will have the same training and equipment; it’s just that one side paid a lot more for their boots than the ones that were “Made in China”.

If 300 men fought 25 men, which side do you think would win?

There is no need to panic, just watch the economy.

Again, I will say it again. Be alert and not alarmed. We are NOT facing the “yellow peril” that grandma feared. Australia will not be invaded by masses of hungry Asians who want to take your life. Just as the Japanese didn’t take your money at the point of a gun; you gave it to them! After Japan lost the war in 1945, the Japanese battled to get their country back onto its feet, and then made a success of their economy and their people.

Economically-empowered Japanese businessmen started buying up Australian soil on the Gold Coast, they were not stealing it. They could not have taken our houses and land if we didn’t first take their money. We gave up our territory willingly.

The Chinese will not invade your back yard, because that will result in a war. As we have seen previously, the only winners in a war are the Americans…and nobody wants that to happen… The Chinese will simply continue to make products to offer you, and you will continue to give them money. Eventually, neauvo-riche Chinese businessmen will buy all of the Australian land from the Japanese and the Aussies.

The Chinese will become our new land-lords and we will all live in harmony without a shot being fired. Some of you may not believe my forecast of Australia becoming “little China”. You are entitled to your opinion. No-one thought that that war-torn Japan would go from wasteland to dreamland within a few short decades. Quick tip: learn to nod and bow.

Thank God and watch the destination of your dollar.
There will be no use complaining once the Chinese own half of Australia: the time to protest was last week when you went shopping… People complained when the Japanese bought the Gold Coast, but these whingers were the same people who had spent half a generation and half their wages on buying Japanese watches, Japanese TVs and Japanese portable stereos. Be thankful that the Japanese actually injected their money back into Australia. Without them, we may have been broke and stuck with owning the Gold Coast ourselves…

Hmmm, maybe we should send the Japanese a Thank You card… Or a Thank God card. Can you send God a Thank You card?

Thank God that the Chinese are buying Aussie steel and coal. If we sent all our money to China to buy appliances and T-shirts, and if the Chinese sent that money to Ecuador to buy raw materials, Ecuador would prosper and Australia would go broke!

The Chinese economy is booming, India is coming second, and Australia is coming along for a ride on the coat-tails of our Asian neighbours. We are making money, creating jobs and things are looking good. Our old buddies, the British and the Americans are on the ropes and have been for some time. Their economies are sick and may not recover. The question is, will you offer to help our old imperial friends or will you switch camps and learn Mandarin?

Shé Shé is Chinese for Thankyou

Next time I go shopping, I may make a conscious effort to “Buy Australian” to keep jobs here and to support my immediate neighbours inside of my country. There is a very strong chance that I will “Buy Asian” if the price is fair and the quality is good. There is an extremely low chance that I will buy products from the UK or the USA. It’s not just that I have zero respect for the leaders of both countries, their economic policy, war-mongering antics and education systems… the citizens also talk funny! ☺

Thank God I live in a country where I can openly criticise not only my own political leader, but the leaders in other countries as well. I can also criticise the popular media and choose to disbelieve most of what they say.

Thank God the economy of my country is more closely aligned with selling “good” things that people need, such as steel, coal, gas, wheat and wool; not selling things that people just want, like stereos (China), drugs (South America) and guns (USA).

She’ll be right, mate

If a world-wide recession happens, people will still need to trade with Australia to get our wonderful and essential raw materials and agricultural items. There will be less demand for baseball caps and more demand for minerals and food. We will be OK.

Australia is an English-speaking nation in the middle of Asia, giving us license to trade with other English speakers on the other side of the world, or trade with our closest neighbours in our region. We can make our own terms of trade and create our own destiny. We do not have arranged marriages and starving citizens like those in India, nor do we experience government control and internet censorship like the Chinese. There is no over-crowding in our country and you can have as many children as you can afford to feed. Our children can have religious education at school and do not get frisked for weapons on the way into class. We truly are the lucky country.

If you are Australian, take a deep breath and allow your chest to swell with pride. Chances are, this is the lucky country because your fore-fathers (and fore-mothers) were convicts who fought with the Imperial British task-masters and built infrastructure for the new colony. Their offspring (and your ancestors) were probably free settlers who fought against invasion by foreign powers in several wars. You don’t have to fight for your country now, just invest into it.

Think Global, Act Local

Buy Australian when you can and when you want to.
Buy Asian sometimes without feeling guilty. After all, they are our neighbours and they buy our stuff too! It is possible that your job ultimately depends on a product, service or raw material being sold in Asia.

Do some research on the internet or at the library. Read about US economic policy, read about the Marshall Plan, watch “Bowling for Columbine” or “Fahrenheit 911” on DVD. Realise that sometimes politicians lie, and the bigger the economy, the bigger the lie has to be in order to protect it.

Know that the media is used by governments and corporations to sell you things that you didn’t know that you needed; not all the time, but often. Realise why Derryn Hinch spent a lot of time in jail, and why John Laws lied about the banks paying him. Look for the story behind the story. Be alert and not alarmed. Know the “destination of your dollar” and find out “who’s taking your money”. Look long-term. Then hold your breath and invest.

Jeremy

*A juggernaut is an “irresistible force that destroys everything in its path” (named from the Indian “Jagganauth”, a Hindu deity who is carried on a large float during religious festivals. Other examples may include tyrannosaurs, arrogant corporations and American presidents. ☺

**You can find eco-friendly, tree-hugging, smiley care-bear investments with many fund managers these days. Yes, I do tease them, but with a big wink. Many “sustainable resource managed funds” out-performed benchmarks, with some returning over 20% in 2004-2005. Ask your financial planner for more details.

***To discover my favourite charities, you will have to read Invest News September 2005 “Keep me for Free” or donate money to INVEST to see the hidden webpage. Thanks to the person who donated $15 anonymously last month. This helps to keep the website going and enables us to offer you free education, free mp3’s and free books.

This article, e-mail and its attachments are not intended to constitute any form of financial advice or recommendation of, or an offer to buy or offer to sell, any security or other financial product. This advice is general in nature and does not take into account any of your unique circumstances. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. Remember to send this on to your friends if you learned something. If you can read this then you probably do not need glasses, contact lenses or shares in OPSM.

Military R and D Procurement Considered

Our great nation’s number one job is to protect the American People, everything else, is merely an elective. To stay the strongest and most powerful nation on Earth allows us to negotiate from a position of strength and thus, carry our ideals; liberty, freedom, and democracy into the future for all mankind – planet wide and some day beyond. To do that we must stay on the bleeding edge of technology, there is no other way – at least not in the present period, and if there is to be on in the future, it will take R&D to get there, and that’s going to cost money.

On December 20, 2011 there was an interesting research report put out titled; “Restructuring defense R&D’ by Subrata Ghoshroy and it was published in the Bulletin of Atomic Scientists. The report noted three main highlighted points; namely that:

“The US spends nearly $76 Billion annually on defense R&D – exceeding the total defense spending of any other country except China. Much military R&D goes not to research but to development and demonstration projects for expensive gadgets based on unsound technology.

Reform of defense R&D could save tens of billions of dollars while increasing support for the basic research that has powered the American economy, from radar to the Internet.”

It would seem to me that the first point of that research paper is not relevant to having the greatest military in the solar system, and we must look ahead to the future. The transfer technologies are also paramount to what President Obama calls WTF or Winning the Future. My grandfather worked on pure Naval Research, early radar, ultrasound, microwave, acoustic transducers, and his team even built the first ring-gyro (6-feet tall) which they put into a submarine.

Interestingly enough, I was having a similar side-bar topic with a retired Naval Contracting Officer not long ago about how a military contractor was thrown out of the running on an upcoming prototype aircraft for close air support. The contractor obviously protested, and the protest was rejected having no basis, and the contracting office stood its legal ground, most likely ending the entire issue in that case. Then we discussed the intense difficulty in awarding R&D and prototype contracts.

Indeed, I then understood his point, and saw that in fact, he was right, I can totally see the challenge – and the difficulty to remain fair and impartial. But in the case you mention, that was the smart way to play it. And I agree, sometimes it would make sense to award prototype development to two-different companies, of course, if there are only a couple of scientists, engineers, or superstars of humanity who can pull it off or even know what they are talking about, and if those folks work for different companies, then there is also a problem.

It’s as if the two-teams need to get together, such as what occurred with the Satellite DARPA contract with Boeing and Lockheed, they put them both in the same presentation room to hear each-others plan for the proposal, since each had mostly what was needed, but each had their own scientists – and the military needed both sets of ideas in one prototype.

Also, I found the JSF fly off case study interesting, as whomever won the contract, the other prototype team would jump ship and bring their minds into the manufacturing phase of the contract winner, as the prototype phase was over, and their jobs would most likely be over anyway or re-assigned thus, TEAM USA loses that expertise – if all those minds don’t remain working on the project moving forward.

And speaking of all this, I think that DARPA’s head got into a little hot water with her being a family member of someone who had an electronic “sniffer” contract for WMD of various types. The challenge I see is that in the upper levels of high-end tech, everyone is sort of a large family, and knows everyone else, and each has a specific line of expertise on the science tree, “leaf masters” and inter-conflicts can arise, and keeping it honest becomes tough, and thus, a matter of personal integrity, which is damn hard to come by when the government starts throwing money around – who knew?

There are challenges, but the trick is to keep it legit, as a taxpayer that concerns me, and then there is the media blowing things out of proportion, creating conflict which may not exist, and condemning folks in the mass media of public opinion whether or not “irregularities?” – did or did not occur, and then throw in the blowhard lobbyist-bribed politicians, and it’s a damned three-ring circus – so the contracting office MUST stick to its guns and take the heat – which is pretty darn unfair to those folks working for all of us out here in the real-world and seeing that our tax dollars are not stolen and our military get a fair shake.

Our competition, China let’s say can build things a lot cheaper, and thus, out produce us for quantity, that’s a problem, but luckily they have so much corruption that it will be hard for them to develop anything that can be operationally sound when the shit hits the fan, we see this with their Three Gorges Dam, Bullet Trains, and in their military too, not just with baby formula, livestock food, and lead based painted toys.

Keeping us honest, keeps us safe – more efficient, and that means fewer accidents, tighter quality control, and operationally sound, I guess. Comparing our nation’s R&D defense expenditures to anyone else is ridiculous, we are a Super Power in a league of our own, and to remain there, we must pony up. The important thing is to do it rationally and as inexpensively as conceivable, and yes, we are going to have to take risks, and crash and burn a few, often extremely expensive prototypes – so be it I say, so be it.

We are the United States of America, the greatest nation ever created in the history of mankind, and we have duty to ourselves, and the rest of the world to keep it that way. So let’s refine the process, streamline it, and when we fail; fail fast, get it over with, learn from it, and carry on that knowledge to the next. That’s what it takes to win the future, and may I ask my reader; how do you think I know that? Sincerely, Lance

7 HR Basics for Small Business

This article could easily be titled “Employees, Paperwork, Leadership…oh my!”. I’m sure it would be safe to say that when you decided to start your own business and venture into the world of an entrepreneur – there are many things you anticipated. You anticipated the long hours, tight budgets, having to do your own marketing, and making sales calls. You also dreamed of how it would be to have flexibility, be the master of your schedule and reaping the rewards of your hard work. You have seen your company grow and now you find yourself hiring others to assist in the work load. Here is the good news/bad news. The good news is that you have developed from a one person operation to several people or more. The bad news, these extra people have laws, expectations and dreams of their own that you need to manage.

To assist you on this path and to make the transition from entrepreneur to boss, here are 7 human resource basics to keep you on the road to success.

Legalities. Having employees means having to follow both state and federal laws, the laws you have to follow vary by the number of employees you have and the state you live in. You can visit the Department of Labor to learn which federal laws apply to you and through this site you can visit your state’s site. Regardless of size or state – you will have to do the following:

  • All employees must complete tax forms (general rule of thumb – if you are taking money out of someone’s paycheck you will need their signature on a piece of paper)
  • All employees must complete an I9 form (this is the one where an employee declares they are legally able to work in the USA)
  • I9’s must be kept separate from the employee file.

Benefits. Most people don’t realize this but a company does NOT have to provide benefits (yes, this will change for some in 2014 with healthcare reform). You must pay people at least minimum wage but benefits are currently not a requirement. However and this is big HOWEVER – if you do provide benefits there are rules on how they are provided and what has to be done when someone leaves. For example: if you provide healthcare insurance you will have to abide by COBRA when someone leaves. States also vary on this so check out your states Department of Labor site for details.

Recruitment. This is how you are going to find people to work for you. You must have a clear plan on the requirements you need, how you will determine if candidates possess the requirements, how you will interview and what you will offer. For many business owners this can be a difficult task as there is a tendency to hire strictly based on personality or skill instead of a balance between the two. Spend extra time on the process and don’t rush to hire the first person who walks in the door.

Listen. Having people work for you is a great sense of accomplishment and can be time consuming as well. If you did your recruitment correctly the next step is to listen. Listen to their concerns, ideas, thoughts, etc. You don’t have to agree with them but listening and giving your attention will go a long way in building a strong working relationship.

Open Communication. Let those who are around you know what you are up to. Share your plans, ideas, concerns, etc. as much as you are comfortable. Tell them about the new client you are going to see, discuss the new product/service you want to implement, and ask for their feedback. This will allow you to start building your credibility as a leader.

Coach. Your employees aren’t going to think the same way you do or view your business the same way. You need to coach each one on how they fit into the organization, on their position (training) and how to improve. Push the limits, set high expectations, and help them get there.

Departures. Some people will decide to leave or you will ask them to leave. Treat each person with dignity as they depart and they will become a positive spokesperson for your business. You never know who they are talking to – future employees, future clients or possibly future investors.

Don’t let your dreams get clouded because you aren’t following the basics. Having employees will help you grow your business your business beyond your expectations – enjoy it!

This is the first in a series of articles addressing the HR basics for small business.