#16 What exactly do you mean?

The written word is a two way process, it requires a deliverer (the author) and a receiver (the reader). It’s also circular, rather than linear, in that the author is conveying a message which he/she wishes the reader to act on, thereby resulting in the wishes of the author being fulfilled. Unfortunately, as I travel around Hong Kong, I frequently come across examples of translations into English that break these basic rules.

 

The following memo is from the management office of Peninsula Heights, where I live. There is no doubt that the memo is informing people about the discovery of a snake. But, there is some confusion about which tense the memo should have been written in – particularly the use of the past perfect progressive. Also, blaming the unstable weather for the appearance of snakes and insects is a little bizarre. I’m also confused about the connection between the call to the police (had the snake broken the law? trespassing maybe?) and the professional (professional what?). The reminder, at the end, is a little unusual because it is not clear what exactly is the issue (the unstable weather, calling the police/professional or something else). The final paragraph seems to sort of confirms that the discovery of a snake in the grounds of the estate requires the attention of the police, rather than the Agricultural and Fisheries Department.

 

Here is another memo from our estate managers about driving slowly in the car park. Again, I understand what the memo is saying, but the grammar is awful, and the repetition of the message is tedious.

I’ve also added this latest missive from the management office of Peninsula Heights, which asks residents to wrap glass objects before throwing them away. It’s not as badly written as the others examples posted here, but the grammar is annoyingly almost correct.

The sign in the photograph below is delivering a message, but it’s very clumsy. The Chinese says “please do not damage the plants”, but the English can be intepreted as “do not damage various parts of the plants” or “there is no damage to the plants” (please make sure it stays that way).

 

Now, you may point out, quite correctly, that I should be grateful and I should consider myself fortunate that these notices/signs etc have been translated into English. I am grateful, and I’m not trying to be pedantic, but I believe that anyone that attempts to translate something into English should spare some time to consult with someone who can write English to a reasonable standard, if there is a doubt about the accuracy of the translation. Otherwise, something bad could happen: for instance, if the notice on a broken park bench said “No damage of bench” would you sit on it? Possibly! Could you sue the sign maker for putting a misleading sign on the bench if you hurt yourself? Possibly. Although the sign was supposed to warn people not to damage the bench, the English reader assumed that the sign was declaring that the bench was safe to sit on, when, in fact, it was not.

 

The following notice from Peninsula Height’s management is an annual treat for me because of the weirdness of the concepts as well as the terrible grammar. I am not sure what the author believes Halloween to be, but he seems to thing that children should pretend to be a Western idol (whatever that is) and dress bizarrely and that they should then make an “appointment for candy”. As with all the other notices I receive from the guys downstairs, I just about understand what he means, but it’s written in such a bizarre way.

 

Here’s another notice from the management of my building, warning people not to drop things when leaning out of their windows while cleaning them. I don’t have an issue with the content, which I (amazingly) understand, but the descriptions of: securing your cleaning equipment (“tighten up their domestic cleaning tools at a fixed point”), leaning out of a window (“body over-projection”), and the warning (“please don’t try it”) are a) confusing b) overly technical and c) accusatory (it suggests that people having been trying it out) and provocative (“now that you mention it, let’s throw cleaning objects out the window to see what happens”). None of these descrpitions were entirely intentional, but badly constructed English notices can cause these effects.

#1 Investment Weekly – One down, two to go

I need to clarify a couple of points relating to last week’s rather radical ideas (that the ECB should cut interest rates and the Chinese should remove its oil subsidies) to revive the dollar, prick the oil bubble and reduce global inflation. It would appear, at first glance, that cutting interest rates and removing subsidies would be inflationary, and are thus counter-intuitive under current circumstances. Not so. Simply put: EU/global inflation has not spiked recently because of demand push (unemployment rates are too high and consumer confidence is too low for this to be true), and, higher oil prices in China would reduce the demand and, therefore, eventually, reduce oil prices.

 

There is another possible contradiction: liquidity is still too abundant to be cutting interest rates. However, as I mentioned last week, the ECB has been sitting on its hands rather than providing liquidity support. Also, although US/European loan growth appears to be elevated, this has been almost entirely driven by the calling of banks’ contingent liabilities, that were written ages ago by some rather loose bankers, rather than due to genuine “new” demand. Therefore, the current increase in money is not contributing to inflation.

 

Further, the French economist, Jean-Baptiste Says, declared in his “Says Law” that money is neutral within the workings of an economy, because it is irrational for consumers to stash it away (particularly when prices are rising quickly). Instead, it is the production of products and the demand for those products that determines the pace of economic activity, price inflation and the creation of wealth. Apply this thought to today’s inflation and China’s new consumers are creating demand as they bring their cash savings into the real economy.

 

Finally, the US Federal Reserve has already stated that it will not keep its emergency liquidity facilities switched open for ever. Therefore, as a modification to what I believe to be the necessary steps needed to strengthen the US$ (and therefore lower oil prices and inflation), I would advocate some tightening of the current liquidity facilities, that were erected as emergency measures to soften the effects of the US housing derivatives crisis. There is a general consensus that the mark-to-market crisis at US and European investment banks is almost over, as the banks have written down the value of these investments to almost zero, and have recapitalized their balance sheets.

 

This triumvirate of actions by the ECB, China (already implemented) and the Fed should be sufficient to achieve the aim of deflating the oil bubble. However, there are always repercussions to radical financial actions. The most notable this time around will be the losses some investors are going to feel when the oil price falls as dramatically as I expect. These losses could be so great that some will go out of business. Unfortunately, the banks that are funding these investments are going to get smacked too.

 

When the bubble breaks there will invariably be some liquidation pressure and general asset prices may fall because of it. But I would see this as a buying opportunity – particularly if the selling becomes acute. It may mean, for instance, that the bottom of the current bear market will be V shaped, with the Hang Seng Index only spending a couple of sessions in oversold territory in the 19-20k range.

 

Locally, investors have moved to the sidelines, as they watch the inflation story unfold, with turnover hitting a 12-month low last Tuesday, with only 19.7 billion shares traded in Hang Seng Index stocks. This apathy has also been reflected in the decline in gross open interest on the June futures to below 100k contracts. Generally speaking, low volume and low participation signal misery ahead.

 

Certainly, if investors are looking for precursors to a precipitous drop in equity/asset prices in Hong Kong, then they might look nervously at the chart below. It’s a 1970s classic, the Misery Index (unemployment rate and CPI – in other words it’s a real unemployment rate). As local unemployment has been low for quite a while now (below 3.4% since the year started), the recent surge in the index is totally due to the rise in oil and food prices. The index did predict the 1997 bursting of the local property and equity markets, but sailed through the tech bubble because asset prices in Hong Kong were still deflating. The recent surge hasn’t hit the highs of 1997, but it certainly appears to have some upside potential. Any further rises could signal a major problem, which is why action to trim inflation pressures is so urgently required.

Hong Kong’s Misery Index (unemployment rate + CPI) (%)

Here’s another chart, which shows the relationship between real PER of the Hang Seng Index and CPI over the past 10 years. There is a clear de-rating of the index’s real PER as inflation rises, with Hong Kong’s long bout of price deflation allowing a ballooning of the real PER during the 2000 internet bubble.

HS Index real PER vs CPI levels (and # of months)

 

At the moment, the index’s real PER is ~10x, with inflation at 5% and the PER at 15x. This is a little high, because the index’s real PER has been as low as 5x, and used to trade at 7-8% before 1997. The average real PER since then has been 15x, which is about the same as the average nominal PER of 16x (in other words, five years of price deflation in Hong Kong almost wiped out five years of price inflation). Unless more urgent action is taken to deflate the oil price bubble, persistent inflation will deflate Hong Kong’s real PER, with the inverse being a rise in the Misery Index.