China’s Economy is improving. My kids told me so
April 21st, 2009 by Kent KedlTeenage Attitude Index
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Every market prognosticator worth his/her/its salt is in constant search-mode for “leading indicators” – data points that show us which way the markets are shifting and where trends will be moving before they actually become trends. The easiest (and most used) are probably the ones everyone knows: GDP, consumer prices, commodity prices, exchange rates, etc. Look on the back page of any financial magazine and you’ll find them … the problem, is that different sources will have different data, all highlighted by an asterisk that tells you why they are different. Then mix in the challenge in China where economic data is so fraught with government intervention and interpretation so as to make it intelligible at best and downright false at worse.
These indicators are pretty important – as we’ve discussed in these pages before, everyone is looking for the “bottom” of the market and the economic windsocks and canaries in the coalmine are the only way we have of seeing this. Everyone is looking for the upswing, particularly here in China which is expected (read: “desperately hoped”) to help lead a global recovery.
The more smarmy among the economists have tried to come up with “common sense” indicators, the best-known of which, probably, is the Economist’s Big Mac Index. This is based on the theory of purchasing power parity (PPP) which says that exchange rates should equalize the price of similar goods between economies. They use the Big Mac, a product available across most markets in the world, as that standard and compare the Big Mac prices when converted into US dollars at current exchange rates. This is all well and good … but with the increasing health consciousness of many populations, it might be a good idea to get away from the Super Size Me indices.
So what else can we use? I might have an idea …
I live in Pudong, the “new” area of Shanghai where construction cranes have been the city bird for the past 5 years and building has been going on 24-7: industrial, commercial, residential … everything has been going up in a flurry of activity. However, starting last fall and then hitting a low point around Chinese New Year this year, things have been going oddly quiet. In what used to be a dust-choked part of town we can now see blue sky. What’s up with that?? Dust, dirt and noise are good – they are signs that stuff is happening!
But over the past few weeks, things seem to be changing, and that has resulted in my discovery of the perfect indicator that we are on the upswing in China – I call it the Teenage Attitude Index (or TAI). The TAI is plotted on a matrix with “Weekend Wake-Up Time” on the vertical (plotted inversely so an earlier wake up time gets a higher score) and “Crabbiness Factor” on the horizontal. The louder the construction is around us and the earlier it starts, even on Saturday and Sunday, the earlier the kids wake up and the more angry they are that they had to wake up early. It works really well and I can clearly plot the upswing here: the past few weekend mornings, I have observed my teenagers very carefully and have noted that they are not only waking up earlier but are in a MUCH worse mood when they do. And I could not be happier!! Sure, we start to hear jackhammers and cement trucks at 5 a.m. on a Saturday, but that just means that life is returning to our definition of normal. And the grumpy look on the faces of my darling children are empirical proof of this.
The only piece I have not worked out yet is how to differentiate between the crabbiness brought on by construction noise and the crabbiness associated with simply being a teenager. But once I figure that one out, I am going to be the Nostradamus of Asia. Who knew that teenagers could be so helpful??
