August 1st, 2012; Why is the Money Leaving China?

Weekly Commentary • Aug 03 2012
August 1st, 2012; Why is the Money Leaving China?
David McAlvany Posted on August 3, 2012

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: David, we had you in Singapore last week and this week, in Beijing. What are you seeing? You said that you were going to have your boots on the ground, and you were going to see firsthand what you would recommend for people to be watching for in China. What trends are you seeing right now?

David: Just to contrast the region for you, Hong Kong is really a place where a lot of investment banking occurs. Singapore is a place where a lot of asset management is being directed to. That is sort of the popular trend at this point. Regionally, it is the hub for wealth management and asset management and Beijing and Shanghai are the two great cities in China. Of course, there are more cities than that that are phenomenal in terms of size and import, but Beijing being the head and heart of that place, if you will, because it is the locus of government.

Kevin: For people who have not been over there, these are three very different places, not just in what they do, but they have three separate currencies, and so, as you travel from place to place over there, you are using either Hong Kong dollars, or Singapore dollars, or in Beijing, yuan. Is that correct?

David: That’s right. If you are reading The Economist these days, you will see in the most recent issue, the Big Mac index is back, which is a way that the economist gauges what currencies around the world are either over-valued or under-valued relative to a Big Mac, and of course, the Big Mac is priced in dollars, so it is really over-valuation and under-valuation, compared to the U.S. dollar. But the Big Mac is that ubiquitous piece of beef that you can pick up on any corner, virtually, anywhere in the world.

Kevin: They tell us it’s beef, but in any case, it is $4.50 for something fairly small, so is the dollar still over-valued relative to the currencies that they measured against?

David: I think one of the things that you have to observe with that is that the renminbi or yuan – it goes by two names – the Hong Kong dollar, and the Singapore dollar, all distinct currencies, are undervalued compared to the Big Mac priced in U.S. dollars. That begs the question: Is it the U.S. dollar, in fact, that is over-valued, or are these currencies under-valued? The policy guys back in D.C. have argued that the renminbi needs to appreciate, and in fact, the global imbalances, economically, that we have today, are in large part because of an undervalued renminbi.

I think what is very disingenuous, in fact unfair, about that, is that if one side of the coin is renminbi being under-valued, then the other side of the coin is that the dollar may, in fact, be over-valued. I think that is an uncomfortable truth for Washington, far more uncomfortable than the benefit they get from slinging mud in the direction of Beijing in terms of currency manipulation and what not.

Kevin: David, you have been watching what businessmen do versus what the actual people are told to do. It can be two very different things. Businessmen have a tendency to see these things ahead of time and either move in and take advantage of it, or quickly move out. I am thinking about the businesses in China. One of the things that you had brought out last time was that Singapore seems to be receiving an awful lot of exiting Chinese or Beijing currency and assets right now. Are you seeing an exit out of China, or are you seeing entrance into that market?

David: Let’s use FIFO, that is, first in/first out accounting method, just as an analogy. FIFO is an accounting method that recognizes inventory that is oldest as that which is sold first. Again, first in, to inventory, and first out, in terms of the sales recognition. But if you take the concept and apply that to the emerging markets, you find that businesses and business leaders, in particular, are usually the first in to an emerging market and they are the ones who are the keenest in terms of having a sense for future profit, recognizing opportunities in the marketplace, in their fledgling state, so they are the first in.

And they are also the first out. It is the business community in the emerging market that is equally keen on risk mitigation, on avoiding changes that negatively impact the bottom line, so you often see the same theme across emerging markets, on a first out basis, as well. This is what has been happening in China. That is not to say that there are not new deals, new business being done, and a vibrant business community.

In terms of all of Asia, it still is probably the strongest economy, but U.S. Treasury studies on the outflow of illicit funds from China skyrocketed starting in 2010. From 2010, 2011, to the present, we have had this unabated flow of capital out of China into anything else. In this case, we are dealing with Chinese business leaders that from 2010 to the present, have assessed the prospect for political change, economic change, and frankly, they are determining on a very self-interested basis, to go ahead and just take a few of their own chips off the table.

Kevin: David, you mentioned last week that real estate markets in Singapore and Hong Kong are getting an awful lot of this exiting money coming into them, to the point where they are starting to burst at the seams.

David: And they have had to actually change rules, both in Singapore and Hong Kong, new rules and limitations to address the flood of money that is coming toward them, with Singapore actually altering residency requirements, simply unable to handle the increased traffic into what is, frankly, a very tiny country. Real estate is certainly that. Singapore has seen that huge inflow, as well as Hong Kong, and Vancouver, and you can go farther afield in terms of major cities around the world. They are seeing Chinese purchases of real estate, and it is money that they want out of China.

FIFO – again, think about that, because as we often have discussed on the program, insider selling in the United States, where the chiefs of these companies have looked ahead to business opportunities immediately on the horizon, and frankly, the constraints, the business growth, and market expansion, and guess what they choose? They choose to reduce their personal exposure to the very companies which they are managing. That says something, doesn’t it?

Kevin: That’s exactly right, David. When you see the presidents of corporations getting out of their own corporations and selling the stock, granted, that may be to raise a little bit of capital for themselves, but usually, it is a sign that they are getting off of the ship, and what you are saying is, maybe it is not happening en masse right now, but it is happening enough that the people inside of China are moving their assets out. You said, according to this Treasury study, it is at record pace at this point, so what is that saying about China. Is this a little bit like the canary in the coal mine?

David: Exactly. What does it tell you when the elite in China begin to exercise a plan B? That is something that you should not, you cannot, ignore. And certainly, there is change coming. What kind of change is less clear. For that, I think no one has a crystal ball. Is it simply the market offering less opportunities, and thus smart people are reducing their personal balance sheet risk by diversifying into other assets? That is very prudent. That makes sense.

Or, is it an economic change that shifts the dynamics and benefits from producers, manufacturers, exporters, to consumers? That is a big change. That is a big question mark. Is that what they are anticipating? “This would be good for the man on the street.” In this case, that sort of change may be unwelcome by the producers, even if in the long-run they would benefit from it, too.

I think what is part of the issue here is that people are thinking in shorter and shorter time frames. Getting rich quickly is more in vogue today than the slow traditional way of growing wealth and growing a business enterprise. So, if things are changing, the question is, are they willing to stick with the slower rates of growth that are ahead for China, or is it time to cash in? Again, there are more unanswered questions for us than answered questions here, but it’s absolutely important to figure out why people in the business community are taking money out of the country – never a good sign.

Kevin: David, one of the things that you have pointed out and tried to bring to this program with guests that are far broader than just the financial questions or the business questions, and this goes to our interview with Minxin Pei just a few weeks ago: Could it be anticipation for political change that is causing these private enterprises, or these personal assets, to be moving outside of China?

David: When you have a shift in leadership, moving an appointment, if you will. Of course, it is a one-party deal, so it is not like there are official elections or a democratic process, but you are going to have new appointees in leadership this next year, and they may take a different approach to the implementation of this five-year plan. They may look at future five-year plans at the end of this one, 4-1/2 years out, and have a very different point of emphasis.

Is it more of a hard-line emphasis, or is it something that is more of what we have contrasted as a Washington consensus, more of an emphasis on transparency to the rule of law, things that would, in fact, allow for the Chinese market to expand and grow and become, frankly, the dominant player in the region, if not one of the dominant players, or the dominant player, ultimately, in the world?

Kevin: We have already experienced the fact that China cannot depend on America or Europe anymore. China has, for 40 years, pretty much depended on America’s ability to borrow money and spend it in China. At this point, it has to be internal consumption or it is not going to be driven at all, is it?

David: Again, we are shifting from the old growth model and we are moving to the new growth model, and we hope that they can do that. In essence, China cannot depend, as you say, on the U.S. and Europe for future growth. We are dealing with our own constraints, domestically, and this has everything to do with credit contracting in the U.S. and Europe, and, if nothing else, being stagnant, and not growing the way it did for 25 to 30+ years.

We have consumers that are constrained. They are not spending out of their savings, and they don’t have access to credit, so it is not like they can go out and buy more than they can actually afford, which impacts the end manufacturer. Now we are talking about China, so yes, something has to change, because they have benefited from U.S. over-consumption by supplying us with all that our hearts could desire. Now we don’t have the cash, and they’ve got to figure out either a new market to sell into, which they may very well do, other continents, other people, or they just have to figure out a new growth model, which is what they are trying to do.

Kevin: David, I can’t miss this. Here we are, watching the Olympics in London right now, and the idea is that this is going to be an economic boom for England since they got the Olympics. But you are in the city that had the Olympics just recently, as well – the Beijing Olympics. What is your thought, as far as economic impact on having an Olympics in your particular town? What does that do for the economics of the surrounding area and the city, itself?

David: We drove outside of town to see the famous Bird’s Nest, where much of the 2008 Olympics took place here in Beijing, and it is very telling. Other than an occasional soccer game, the facility goes unused. That is what we are told by locals, and by the looks of it, it is quiet. It is dead quiet. It is still not clear to me that hosting the games is anything more than, number one, good PR for the country that is hosting, and number two, an opportunity for politicians to give development projects to their friends and family. Very little lasting benefit to the community, and certainly, we could say that there is just not much positive return on the dollars invested.

But we saw this in Salt Lake City, as well. It is not just Beijing or London, this is every city that does this. In Salt Lake City, there were a few, select Salt Lake City families that handled all the infrastructure improvements. PR was nice and that kind of lingers as the community that hosted the games, but the real benefit was to a few families within that area, whether it is Salt Lake City, Beijing, or London. Beyond that, I think Cameron is going to look back and say, “That was really a mistake.” Of course, he wasn’t in office when they made the bid for it, but if they spend 10 billion plus to get it there, they have a pretty high bar in terms of revenues over the next couple of years to hopefully generate just to break even.

Kevin: Let’s look at a model here for a second. I am going to shift away from the Olympics and back over to the economics of China. China has benefited through the years from the American ability to float bonds, to borrow money, and then take that borrowed money and invest it in China. China is realizing, at this point, that we are starting to run out of that ability. America is no longer the impact that it was before.

China has not been able to create bonds and internationally trade those bonds, because there just has not been entrance into the Western markets. We have not really allowed them to have the yuan as an international currency. But that is changing, isn’t it? I am hearing that one of the ways that China is going to finance themselves now is to create internationally traded bonds. Are you seeing signs of that?

David: Yuan-denominated bonds were issued this week to a number of African Central Banks. Specifically, the Tanzanian and Nigerian central banks were offered the bonds as an addition to their foreign exchange reserves, so this is a trend to watch. This is something that, today, may be a trickle, tomorrow, may be a flood, but what you have is currency reserve diversification, not only away from dollars, but toward the Chinese RMB, or yuan, as it is often called. This internationalization process of the RMB, or yuan, is a slow process, but one where gradual progress is being made – we have examples of that even this week.

We made the point in our last DVD that over the next several years we would see a crowding out, if you will, of the private sector in favor of public sector IOUs, both old ones coming due, and new ones being issued to meet current funding needs. We may very well find that U.S. Treasury purchases are affected at the margins, adding pressure to both the price and interest rate trends in that market. It is not only a currency reserve issue, but the countries interested in expanding their yuan or RMB exposure are consistently the same countries moving toward settling trade in that currency, as well. Again, this is what we noted in the last DVD, that is, to the exclusion of U.S. dollar invoice and U.S. dollar trade settlement.

Kevin: We have been the only game in town up to this point, with Treasury bills. You have talked about this in the past. We have interest rate repression right now, or financial repression, which means that our government can keep interest rates unnaturally low. They don’t match the risk that is taken when you buy a U.S. Treasury. Now when you have these other entrants into the market, like China, that takes a little of the control over interest rates and what we have to pay away from us, does it not?

David: Of course. The standard bank calculated that for 2011, there was 36 billion yuan worth of trade which was settled in that currency. Again, that’s just a start, but it’s a start nonetheless, and it is a hugely important slow burn issue, as it applies to the U.S. dollar and the erosion, if you will, of world reserve currency status. If you reflect on it, frankly, it is easier for all of us to imagine a sort of cataclysm, and an instant change that you can account for. The slow process of erosion stretched over months or years, is where we tend to lose focus, because the nature of the event is so tedious.

That is really what we are talking about – a number of ways in which, chipped away, a little at a time, is this monolithic stature of world reserve currency status, and this is just one area. The issuance of RMB bonds, or yuan-denominated bonds, is monumental, even if it is minor in terms of the dollar value, because what it signals is a transition. It signals a change in people’s minds, and when people have a change in their intellectual schema, then their actions tend to follow, and their actions get in line with what their thoughts have been previously. We see that not only there, but we are also seeing it in the gold market.

Kevin: It is interesting, as you see the trend changing, whereas a person, in the past, from another country would say, well, we have to settle this in dollars, that they are finding creative ways not to settle things in dollars, either with their own currencies internally, or with assets internally. When we put the embargo on Iran, the idea at that point was for China to possibly start buying its oil from Iran in gold. So as this paradigm shift occurs, which we have talked about for five years, and actually, your family has talked about it for 40 years, David, real gold is real money. Are we seeing that paradigm shift coming into, also, the realization that gold may be money?

David: Sure, we are. In terms of the price action of gold, just a comment or two on that. We are not out of the woods yet. We are sitting at around $1620, just above $1600. We are getting closer to the next up-trend, and this next price move may surprise everyone, frankly, on the upside. Year-end prices of $1900 to $2100 would not surprise us, but it makes these levels very attractive to be accumulating yet. I think, obviously, downside exists, but in the face of limited central bank options, globally, not just in the United States, we see the downside as tolerable, and the risk versus reward relationship as compelling.

Honestly, that cannot be said of virtually any other asset class today where downside risks are tolerable versus the upside reward. Psychologically, it is easier to buy an asset that is immediately gratifying in terms of an increase in price. To me, I think, though, the smart money knows that building a position in any asset class entails purchases at a variety of prices, preferably at the lower end of the short-term fluctuation and that is what we have had.

We continue to build a position in gold and silver ourselves, and certainly encourage folks to do the same, not confusing short-term volatility with what has been a consistent and solid long-term trend. I am speaking straight from experience today. I bought my first gold from the China National Gold Group Corporation, and it is sponsored by the government. They sell gold all over China. I looked at my renminbi, and even though, by the Big Mac index, if under-valued, I still didn’t mind parting with a little bit of fiat for a few more grams of gold.

Kevin: I have to think how ironic it is, and maybe it is more than irony, maybe this is actually by design, that China, a communist country, actually has a national gold exchange and they sell gold to their people. The old saying, “He who owns the gold, ultimately, makes the rules.” I think it is a strange contrast. You are in China. You are buying gold in China. They have no problem with you switching out of your currency and going into gold. In fact, it is encouraged.

Yet, here we have an organization that is supposedly representing the nation that discourages the purchase of gold. In fact, it encourages us to just continue to accumulate dollars. Dollars are based on nothing, but with the European situation recently, the dollar has had an unusual rally. I am wondering if that is sustainable, if we have real value in the dollar returning, or if we are just still on the decrease.

David: The rally from 72½ on the euro index to 83½ has been what we expected. We have continued stress in the Eurozone. That makes the U.S. dollar the best-looking horse in the glue factory, as one of our guests is fond of saying. The rally may, in fact, continue to the high 80s, although, frankly, it is looking a little tired at present, and the euro has been refusing to break down below 120. If interest rates were allowed to rise in the U.S., that would certainly be dollar-positive. We would have fresh inflows, satisfied both with being in a liquid pool of capital, and they would be more impressed with the yield. I guess they would be impressed with any yield at this point.

On that point, though, I think it is important to remember, that we would really have to see a significant rise in interest rates that have a negative impact on metal, so we are talking about a positive real rate of return that is several percentage points above where we are today. So, after taxes, after inflation, you make a couple of percent, and then gold lacks a little bit of its luster, but we are a long way off from that, considering that we are in negative rate territory today.

Kevin: To make a real rate of return today you have to factor in what the real inflation rate is, and we have talked about that. That could be anywhere from 7-9% depending on what index you look at, and then still get a positive 1%, 2%, maybe even 3%, because you still have to factor in taxes, as well. So we are a long, long, dangerous way, frankly, from 10% interest rates. Our government couldn’t possibly afford its debt if we had 10% on the interest rate. Am I right on that?

David: Yes. There is a reason why they are keeping rates low. It is the only way you can afford to make payments on 16 trillion dollars worth of debt. You do run into a bit of an issue in terms of cash flow squeeze if your interest rates are much higher. I think when we look at the dollar, yes, it is traded higher, but interestingly, it is traded higher along with equities, and that is odd of late. They have been trading in opposite directions, and now they are moving in lock-step to the upside, frankly, along with gold, and this is muddying the asset class distinctions which we think will be clarified and the soap will drift to the bottom over the next 60 days. The merits of each of these asset classes, or the lack thereof, may become more apparent, and we think that over the next 60-90 days there will be a return to appreciating the fundamentals driving each of these markets.

Kevin: David, we, in the past, have been trained that the dollar was the safe place to be if you were not going to go into the stock market, but right now it seems that every little bit of bad news is bringing the short-term traders in and they are driving up equities. The Dow, right now, doesn’t seem to represent any kind of reality or strength. You have the high-frequency trading and a lot of the strange bits that are coming into the stock market right now, bringing this thing up into the 13,000 point range. What is your thought on the Dow?

David: The worse things get, the more traders bid up equities. They are really convinced that the Fed will do something in the form of stimulus. We have seen a rapid deterioration in earnings. Full-year expectations are being slashed by most of the companies out there, and it has become grossly apparent that the stock market is not trading on fundamentals, or even technical indicators, but rather, just the hopeful wishes of Wall Street traders. They have already bought the recovery story, and frankly, they are refusing to admit being in error.

Nothing is more powerful, ultimately, and disruptive, than unmet expectations, and this is our concern in terms of the Dow. The point here is that with prices reaching the outer limits of valuation sanity, if you will, we see late summer, early fall, as potentially catastrophic in the U.S. equities market. Barring the Fed slinging a trillion or more dollars into expanded asset purchases or some other form of quantitative easing, we are going to see some real pressures there, because again, we have hype and hope that are driving this market. Hype and hope is not a good investment thesis.

Kevin: Talking about hype and hope, Mario Draghi last week said, “We will do whatever it takes to save the euro.” You can’t just come out and say those things without affecting not only the currency value, but interest rates, themselves. We can see interest rates change pretty dramatically by just a single comment, can’t we?

David: Yes, but then, last week it was amazing. We were in the 140s, with an eye on 125 before Draghi’s comments, and we reversed the trend at the end of the week. What these moves to lower levels are implying is that the financial community sees deleveraging and deflation as the primary threat. The bet that very few are making at this point is central bank efforts to fight this deflation could, in fact, fail.

The other thing that I think it neglects is that we may see select asset classes inflate as a result of the central bank activities, whether that is Draghi’s comment, “We await with bated breath,” or Bernanke’s comments this week. Will he ride in on a white horse and save the day? We don’t know. But there are assets that are likely to take on the characteristics of money and will be trading, I think, very differently than any asset class that has debt against it.

Kevin: David, as you say this, in the back of my mind, you are right, the majority is thinking we have to watch out for deflation. Frankly, we know that even if we go into a deflation, all deflations tend to end in hyperinflation or high inflation. I can’t help but picture your dad, in the back of my mind, I’ve known him 25 years, and he would just sort of chuckle and get that look on his face, and talk about the majority, (laughter) and they weren’t necessarily complimentary comments.

David: No, the majority is always wrong was one of the principles that he would share in the opening notes of any of his lectures. I do wonder if the consensus view on deflation isn’t painting with too broad a brush stroke. In a deleveraging, not all assets are effective, and certainly, the assets which are most vulnerable are those with a liability component to them. In the case of gold and silver, they are no one’s liability. A number of global asset managers are beginning to connect the dots on this.

Kevin: There is a brilliant manager over at Templeton who has been there for many years, I think a couple of decades, because I have been watching his career – a guy named Mark Mobius. He really was ahead of the curve. He has been ahead of the curve on emerging markets and money management for years. Strangely enough, I’ve never heard Mobius talking about gold, but he is now saying that to keep the fiat currency from completely failing, we are going to ultimately have to have some form of gold standard.

David: Before we discuss the Mobius interview, I just want to finish this idea of Treasury strength versus weakness, because it is not long-term-oriented money that is lighting up for voluntary losses in the Treasury market today – and by voluntary losses I mean you are running negative real rates of return. Someone is taking a hit up front and they know it, and they are happy to do that. Buying short-dated paper and sitting with a negative real return and smiling about it is done by a group of people with a very short-term perspective.

What I mean is this: We have professional money that has a gut instinct about the instability in the world financial markets, and has considered what a total meltdown looks like. Taking a little hit is, to this audience, a far better way to approach it than taking a big hit. The big hit may very well be around the corner, so professional money is sitting on these minor losses, as an acceptable loss, knowing that the gain is one of opportunity in the future.

But underlying that choice is this assumption. While commercial counter-parties are more and more suspect, we can say Mr. Corzine and everyone is concerned about commercial counter-parties, but we also have sovereign counter-parties – again, this assumption that they are believed to be a better bet. Yet, the history of finance is replete with sovereigns walking away, or inflating away their obligations.

I guess after looking at the U.S. Treasury market today, the one truly great thing about our U.S. debt obligations is that they are, in fact, dollar-denominated. This is in stark contrast to the previous default cycles we have seen in Latin America and other parts of the world where, predominantly, the debt that they defaulted on was denominated in a foreign currency. We look at that, and yes, it is an advantage that gives us a veneer of stability in the U.S. Treasury market.

Kevin: David, you have brought out in the past that if you borrow money in your own currency, if you can print that money, it is really not a concern as far as default. You are probably not going to default. You are probably just going to print more money, which leads to the devaluation of the fiat currency in the long run. We have talked about the potential of the United States being able to, on what we would call a slow drip, continue to feed quantitative easing into the system, ad infinitum. Would that not warrant some sort of discipline or gold standard in the future once the currency finally reduces itself to where it is no longer a valid issue?

David: Yes, and I think that is what Mobius was getting at in his CNBC Asia interview earlier this week. This is what they commented on in the article: “Major central banks are all desperate to stimulate their economies. Some say currencies have entered a dangerous new phase, often described as a race to the bottom.” And this is exactly what they said in the interview: “Mark Mobius, Executive Chairman of Templeton Emerging Markets Group, says investors will soon start to demand fiat currencies be backed by gold or other hard assets.”

Well, it’s already happening. We are beginning to see that trend with central banks stocking up on gold. The estimate is that at least half of the buying is central bank buying. They are looking to the day when they can say, “Okay, our currency is backed by gold, and therefore we are a strong country.”

Kevin, to me, it is fantastic to have bought my first gold from China Gold today and know that this is a part of their M.O. A grand strategy may be internationalizing the RMB, and it may take them ten years to get that done, but the project is going to be supported. If you want to know what the substructure of their currency will be ten years hence, it will be built on a gold standard, even if it is just partially backed, but if you want to see the purchasing power of the Chinese consumer unleashed, see their currency appreciate in light of the inherent strength of the currency.

Kevin: David it is such a contrast, but again, what we are trying to do is look at China and contrast it with what we see here in America. I look at CNBC and I look at the various financial television programs right now, and I think they could almost be renamed Bernanke TV because there has just been a desperate need, since we are still clinging so hard to the dollar, just a worthless currency. Yet as other countries such as China are moving the direction of gold, we are clinging to this fiat currency, and it is making us completely dependent on the next verbiage coming out of the Federal Reserve. It is scary that we are in this place.

David: Central bankers have become essentially demagogues in our marketplace today. From one week to the next, markets are dramatically, and this can only be on a temporary basis, impacted by central bank language, or even occasionally, when they take action (laughter). This is, in my mind, producing greater degrees of fragility, and instability, ultimately, in the financial markets.

I say this because if the markets wake up one day and we see prices in disarray in the Dow or the S&P, or the NASDAQ, and central bankers have essentially lost the game of Print-To-Save, if you want to call it that, then I think we will have found ourselves in a very nasty pricing vortex. 1987 comes to mind. The equivalent drop today, in terms of point drops, would be over a 2000-point drop in the Dow, to be the equivalent of that 1987 drop. We can’t rule out those circumstances. Again, it is because so much desperate hope is being put into these central bank demagogues.

Kevin: Dave, so that we aren’t always accused of talking about just money or politics, I know one of the closest things to your heart is food, and wherever you travel, you seem to find the places that serve the best food. You have been to Singapore, you have been to Hong Kong, you have been to Beijing. What have you discovered on that side of things? Is there food there that is worth the trip?

David: We have such an unfair advantage. We have been going around with a film crew in Beijing, and the guys and gals that are with us have taken us to some amazing out-of-the-way spots. I tell you what. It’s time for a bowl of Beijing noodles, just thinking about it. I have discovered that my palate prefers sort of north and western Chinese cuisines, a little bit more savory, it seems to me. Yes, what a delight.

Having said that, I am going back here shortly to Singapore, pick up my whole family and then we move on in our journey. But in Singapore, off the street, for four bucks, you can have one of the most amazing meals of your life.

Kevin: David, we aren’t going to be able to smell or even see the food in the video that you are coming back with, but you said you were traveling with a film crew, and I know this is for the second portion of this year’s DVD. When do you expect that we are going to have the Asian portion of this DVD available to our listeners?

David: It will be sometime in September, for sure. We have a lot of the story that still has to be put together, but in September we should have it available. If we have your email address, you will have it post haste, otherwise it will be 6-8 weeks before a hard copy is available. If you are interested in the analysis and the conversations that we are having with economists here in Asia, then by all means, make sure we have the means of communicating with you directly and quickly. Shoot us your email and we will make sure that you get one of the first views as we send out the email notification here in just a matter of weeks.

Kevin: David, we are looking forward to your return trip, you and your family.


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