Titanic II – Sail or Sink?

Australian businessman Clive Parker’s ambition is launching. Will it cruise?

Fans of luxury ocean cruising and Leonardo DiCaprio, rejoice! Last night, 700 guests in Macau participated in a gala dinner that was the start of an international marketing and publicity roadshow to promote Australian magnate Clive Parker’s project to build a replica of the Titanic. The Macau dinner featured the same 11-course menu served to first-class passengers the night the Titanic sank on April 14, 1912. Though the proposed ship would primarily service the Atlantic Ocean route between Europe and the US once it is completed (target date 2016), Titanic II will make the occasional detour into the Pacific to give Asians a chance at a cruise weighted with history.

 

The more important connection to Asia is that Mr. Parker’s Blue Star Line cruise company, which will own the ship, is aiming to use state-owned Chinese shipyard CSC Jinling to build the vessel. An MOU between the parties was signed in April 2012. That arrangement sounds like a savvy proposition, partially given the publicity that it is meant to generate to the Chinese market. But even more enticing to Mr. Parker is the concessions that he is hoping to wring from the Chinese shipyard and other suppliers to lower the overall construction cost of the ship, which some estimates put at a minimum $500 million. (Blogger’s note: I’ve separately heard that the ship itself costs $100 million, but the extra life boats and flotation devices will add $400 million to the project’s budget). The Chinese shipping industry seems very keen to take on this type of landmark project, just to prove that it can. Basically, though China now accounts for 70% of the world’s shipbuilding, the country’s share of the luxury cruise line construction section is much less impressive, at 2%. The Chinese, therefore, are interested in doing some resume building. Whether world customers are keen to flout the eponymous ship’s ill-fated past by taking a ride on a vessel that has schooled China’s shipbuilding industry is a different question. An early indication of the Titanic II’s seaworthiness will be its initial transfer, escorted by vessels from China’s navy, from Jiansu Province to England’s Southampton, then onward to New York.

 

In any event, at least “half a dozen” potential customers have already indicated an interest to pay upwards of $1 million to take the maiden voyage. Any guesses on who two of them might be? Personally, I wouldn’t bet against Leo and Kate. They’ve probably already booked their place on the bow, ready to shout, “I'm...”. Well, you know the rest.

 

Link to South China Morning Post - Titanic launch dinner in Macau

 

Happy New Year from Asiaonepercent!

       

 

However you might mark this passing and renewal of time, if at all, here’s wishing that the Year of the Snake finds you coiled in happiness and good fortune.

Indians 'Thai' the Knot

... Thai style

An Indian “I do”

Two things that Indians stereotypically love are (a) huge, lavish weddings and (b) bargains. No country celebrates nuptials like the Indians. And no place provides the bargains for hosting them for Indians like... Thailand.

 

It is impossible for any invitee to a proper Indian wedding not to come away feeling punch-drunk from the multi-day explosion of colors, glitter, dancing, food and drink. It is a ceremony that out-ceremonies all the others, anywhere. And such extravaganzas don’t come cheap. The average middle class wedding in India costs US$34,000 and involves hundreds of guests. The top tier Indian families can easily spend US$1 million+ on events that host thousands. Social reciprocity and one-upsmanship are factors that have caused costs to skyrocket across India as the country has modernized over the past few decades.

 

Fortunately, help has been at hand from a neighboring country (if you ignore the massive Bay of Bengal that separates them). Thailand is Asia’s undisputed leader when it comes to theme-related tourism. Weddings have joined beaches, temples, food, medical treatments - and sadly, sex – as reasons why thousands upon thousands of foreigners head for Thailand’s shores every year. For Indian wedding planners, the country provides a compelling combo of significantly lower (30-60%) costs, beautiful and exotic locations, and the bragging rights that accompany a foreign wedding ceremony. The Thai government’s tourism board reports that the average spend per Indian wedding is approximately $340,000 for 200 to 500 guests. The average duration of each wedding is three to five nights, with as many as 600 hotel rooms booked. That’s no small affair, but it is a fraction of what such splash-outs can cost at home.

 

Thai people have long held ambivalent feelings about Indians, even though much of Thai culture and religion trace their roots back to India. However, when it comes to working together to create over-the-top weddings at under-budget prices, the two countries have been a match made in heaven.

 

Bloomberg article on Indian weddings in Thailand

Rent-A-Dude

Well-behaved dude for hire.

As your humble blogger wrote in this column a few months ago, wealthy Chinese in increasing numbers are hiring all sorts of people to help manage the complications that have piled onto their affluent lives like so many underutilized electrical appliances. Hiring Downton Abbey-style English-trained butlers to manage the household is one way to show off la dolce vita cinese. In Hong Kong, following the lifestyle of Hollywood stars, the well-heeled are increasing hiring Personal Managers to help them sort through the chores and mundane aspects of their lives. What do these PMs do? Name it. Organize and file tax returns. Plan weekly menus for the domestic helpers to feed kids healthy meals. Pack artwork for shipping. Sort out administrative chaos for the newly divorced. Set up a home security system. Nothing says "luxury" more than "bespoke". And as human beings (allegedly) have free will, there is nothing more bespoke than, well, a person.

 

Hiring personal help in China isn’t just for the well-established professionals. During this Chinese New Year season when family members gather together from afar, an irritating topic of conversation for young women is whether they will be getting hitched in the foreseeable future. To help address this perennial parental nag, those women with a few spare RMB in their pockets but insufficient interest or time to find an actual boyfriend can, yes you guessed it, rent one to take home to Dad and Mom. Rent-a-Dude service rates range from several hundred to up to two thousand RMB (approximately US$320) per day. And that's just the base fee for the temporary company of a pleasant looking guy on his best behavior and with presumably decent acting skills. Many of the lads charge extra for specific value-added services, including movie watching, party attending, and booze drinking. The booze fees are scaled according to the alcohol content and volume, with white spirits such as baijiu commanding the highest prices. As to whether there are a large number of cases when these short-term arrangements turn into long term romance, I quote a variation on an old Groucho Marx line: wealthy Chinese girls wouldn't marry boyfriends who would allow themselves to be hired as such. Money matters in China.

 

Links:

 

Personal Managers for hire in Hong Kong

 

Temp Boyfriends to Show Off to Mom and Dad

Did I Rip You Off? Oh Pardon.

SK Chairman Chey Tae Won heading to jail

Election time in Korea, as elsewhere, is a time when some – usually the incoming parties - talk tough and others – the outgoing – settle scores while they still can. In this regard, two major news items have converged in the past few days to ignite a firestorm of public animosity against Korea’s rich and powerful. First, the outgoing President, Lee Myung-bak, has just granted presidential pardons to 55 people, many of whom were senior political allies who had been jailed for corruption and bribery. The incoming President Park Geun-hye, who was elected to office in December partially on the promise to deal with the continually growing wealth disparity between the chaebol-related Haves and the Have-nots, has duly expressed her outrage at this outsized display of magnanimity.

Secondly, Chey Tae Won, the charismatic Chairman of SK Corporation, has been ordered to jail by a judge for a US$45 million embezzlement charge that he has been on trial for during the past year. He is appealing the case and his four-year jail term; therefore, his guilt is not yet finally established. However, it is clear that Mr. Chey seems to have been untidy with the governance of Korea’s 3rd largest chaebol, relying on his political clout to clean up any mess. In 2003, he was convicted of a bookkeeping fraud, but had his sentence suspended. The magnanimous President Lee then pardoned him in 2008.

This situation hands the incoming President Park an early test case to prove her resolve to be Ms. Clean-up and a champion of “economic democracy.” It is unusual for someone of Mr. Chey’s stature to be tossed behind bars while the case is on appeal. However, these are unsettled, angry times in Korea politically. The income gap has noticeably widened over the past five years – the top 20% of society now make 7.8x more than the bottom fifth. Furthermore, the large chaebol have a habit of squeezing the life out of small-medium sized businesses, while not providing employment and security to the masses. Studies show that, in 2010, the top 30 chaebol accounted for roughly 42% of the economy’s output, but only employed 6% of the country’s workforce.

With the touchy public sentiment against Korea’s power elite, President Park will think twice about using her influence to go easy on Mr. Chey. The masses may not be so pardoning towards her.

New York Times Article on SK Chairman's Send-off to Jail

Economist Article on Recent Korean Presidential Pardons

Beijing, Get a Whiff of This!

One Chinese businessman’s answer to Perrier

http://abcnews.go.com/International/chinas-filthy-air-prompts-mask-rush-cans-fresh/story?id=18352787

 

The main topic of conversation these days in Beijing is the horribly toxic air quality, which is the worst that it has been in decades. The government is attempting to take emergency measures to address this serious and chronic structural problem. However, an already-wealthy individual, Chen Guangbiao, who made his fortune in the recycling business, has come up with an enterprising solution – clean air in a can. The pristine product is allegedly sourced from the far-reaches of the country, where people can actually trust air that they can’t see. Each can sells for RMB 5, or US$0.80.

 

A gimmick? Absolutely! But, with the sale proceeds going to charity, this publicity stunt is clearly meant to draw attention to more than one social problem facing China. So hopefully, the 1% won’t mind buying a six pack or two. It will probably go well with the imported designer water that they have already stocked up on.

Rating the Quality of Banks - Scary!

 
     

Bank Ratings, then...

...and now.

Financial analysts, like military types, are fond of using acronyms. These abbreviations can be useful in either simplifying overly complicated ideas and concepts, or putting a snappy name on irredeemably inscrutable notions. Anyone who has had his/her 401k and IRA whiplashed by CLOs, ETFs and MBSs issued by BAML, DBS, CS, ING etc. over the past few years knows what I am talking about.

The criteria used to assess the health of banks is no exception. For many years now, a commonly used method of analyzing the quality of banks has been the CAMELS grading system. It stands for Capital, Asset quality, Management, Earnings, asset/Liability management, and Sensitivity to market risk. Banks are scored 1 to 5 on each criterion. The US bank regulators utilize this system on a regular basis and provide the results to banks’ management teams (though not to the public). In theory, this is all well and good – no one would argue that the CAMELS components are not the correct ones to focus on. However, it’s hard not to think that CAMELS is a misnomer. Banks are hardly the type of creatures that can steadfastly trudge their way through a hostile environment and remain standing when others would drop of dehydration and exposure.

Now, we have an alternative. Berenberg Bank, a small, steady German private bank (the type that services an elite clientele), has come up with another acronym to rate the durability of European banks – SCARY. It stands for Solvency, Complexity, Adaptability, Risk, and ‘Yes, we do believe in structural change’. Okay, the ‘Y’ is a bit of a stretch, but at least it tries to capture a very important feature of a bank’s profile – its culture. Not surprisingly, Berenberg’s analysis revealed that the riskiest European banks are those in Italy, Spain and France. Some of the global banks such as Barclays and UBS received a mixed report card. The winners tended to be the stiff-backed and stingy northern European banks. The good news for Asia is that HSBC was among the strongest names.

So Berenberg Bank is on to something; if nothing else, SCARY is a better reflection than CAMELS of the zeitgeist of the times. And Berenberg should know something about adaptability. After all, they’ve been around since 1590, making them one of the oldest banks in the world. OMG!

LINK: http://www.efinancialnews.com/story/2013-01-29/scary-the-terrifying-new-banking-acronym?mod=sectionheadlines-AM-IB