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Small Chinese Company Tells Goldman To Take A Hike, Refuses To Pay $80 Million In Derivative Losses
It appears that even after thoroughly dominating the US legislative, judicial and executive branches, the long tentacles of the squid have been no better than the Mongolian hordes at overcoming the Chinese Wall (which is ironic seeking how easy it is to ignore the same construct internally between the firm's prop and flow traders...and yes, we will be posting our response to Goldman shortly, we have not forgotten). In the meantime, half a world away, a small Chinese power generator, Shenzhen Nanshan Power, is blatantly refusing to honor contracts with Goldman Subsidiary J. Aron for $80 million in derivative losses, and it appears that China itself has decided to stand behind the small company.
Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a
"We will not accept the demand by J. Aron for all the
"We will try our best to negotiate with J. Aron and resolve
"J. Aron told us in one notice that if we do not pay the
The State Assets Supervision and Administration Commission
A Beijing-based Goldman Sachs corporate communication
statement that it received several notices from J. Aron &
Company, a trading subsidiary of Goldman Sachs (GS.N), for at
least $79.96 million as compensation for terminating oil option
contracts.
losses and related interests," said Nanshan, in line with the
stance it took last December.
the dispute peacefully...but the possibility of using a lawsuit
can not be ruled out when talks fail," it added.
money, they will reserve the right to launch a lawsuit and will
not send us any further notice."
said in September that it would back state-owned companies in
any legal action against the foreign banks that sold them oil
derivatives, which resulted in losses when oil prices dived
late last year. [ID:nPEK14474]
official declined to comment.
Not sure what Hank Paulson's former firm would comment: alas the Chinese communist party still has to be filled with Goldman alumni. That being said, this is precisely the track that Goldman has been focusing on for the past few years. At this point, the firm realizes all too well that dominating power politics in China in the near futures is far more critical than complete control over D.C., as there is little the world's most important company can do domestically in the context of taxpayer capital transfer without a full fledged revolution.
h/t Sean
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I guess the Chinese are finally getting smart. It's about damn time!!!:))
Just another street fight between a gambler who feels he was cheated and another gambler.
Fuck both of them. Happy New Year!!!!
[E.Snow in China ca.1931, in response to plea for help...]
"There you sit, with thirty centuries of experience behind you," said I. "As an American, I can trace my origins a few generations. How can I answer that question for China!"
"There has to be a new birth," [Wu] said thoughtfully. "It can only come out of our own body, the body of our own history."
Snow Journey to the Beginning Chapter2, p.11, I Meet The Dead
thank u for this dose of sanity.
The USA should just selectively default on all treasury bills, notes and bonds owned by the Chinese....that would send a strong message, don't you think? So what are they going to do, stop trading with the USA? GREAT! Then we will have a reason to rebuild our manufacturing base and put people back to work.....screw the Chinese....they have no concept of contract law in their culture, anyway.
And the USA does? ROTFL!
We used to. Honestly. It does seem to have been lost in the last couple of years. Maybe it just evaporated?
Yea really. You can enforce any contract in the US if you pay the right lawyers (allot $$)
Makes you wonder...what if some company was to set up a shop run by a bunch of Chinese nationals, have the Chinese *traders* make a whole shitload of risky bets with GS, skim the what little profits actually materialize, and tell GS to fuck off on the losses. Hmmm. I bet an operaton like that could be set up in the US.
I think you have described how a corrupt brokerage works. The "fuck off losses" are FTDs the vast majority of which get 'settled" off the books. And I'd wager you that the Chinese have already set up shop... probably in partnership with the great squid.
http://www.deepcapture.com/category/7-the-risk-of-systemic-collapse/
I must be missing something as it seems to me that the US gov't should have taken a similar tack with the payout on derivatives by gov't owned entities. Or at least gotten major concessions. Or let these entities go into bankruptcy where all obligations could be sorted out in view of the public.
This action, IMHO, is the Chinese Central govt using a "vassal state" to probe the defenses of GS & the American govt's resolve without directly incurring any wrath. This play is straight from Sun Tzu. Any comment from the Chinese central govt will merely be "fogging".
100% correct. Fogging the bunch currently in Washington would be child's play. They are already half blind with greed and the illusion of accomplishment.
Master Sun owned this game, outright. The West -- and especially the soft, coddled Wall Street oligarchs -- will have their individual and collective heads handed to them on a plate if they do not present a unified front and a concrete response over the next 6 months.
In that time, the entire play of modern history could turn on a dime. That would be at least seven shades of ironic.
cougar
Anyone following the minutes of the Copenhagen Climate Conference should have been embarrassed the way the Chinese bitch slapped Obama & Merkel. Any Chinese fishmonger could have taken those two.
You just cracked me up. Thanks for so eloquently summing up the current state of global intrigue.
Fishmonger indeed.
cougar
Tyler writes:
"...as there is little the world's most important company can do domestically in the context of taxpayer capital transfer without a full fledged revolution."
The world's most important company? You've been reading too many of your own posts. Perhaps the most corrupt, but this company is a joke, alive only because of lawlessness in the United States. Goldman Sachs is a phantasm that will disappear as soon as leadership arrives. Poof, they will be gone.
BLOODY EXCELLENT!!!
I see someone is flagging as "junk" some really interesting and thoughtful posts.
Not that it matters, but you would do more good saying something to counter these arguments than poke others in the eye.
If you are rabid anti-Communist, get a life. The PRC are an interesting bunch and an important part of the global picture, and we are all looking forward to what they do next. Capitalism is fun, and Chinese Capitalism is if nothing else fascinating.
If on the other hand you are just another GS shill, then you are admitting that you have already lost the high ground. How does it feel to be standing alone and outgunned in the crosshairs of history?
cougar
Bring on a posts rating system. I try not to use the Flag as Junk anymore b/c it has deteriorated into an "I disagree" button. Maybe I'm old-fashioned but I still think of "junk" as forum spam (ads, phishing and so forth). Or - maybe - for 'flagrant' off-topic or obvious trolls.
I've noticed that a few commentors here have even attracted their own stalkers, someone who flags as junk pretty much every post they leave. These are some of the most intelligent (and yes, opinionated) comments. It only takes a couple readers of Palin-level IQ to render this flag meaningless.
Flag as Junk, unfortunately, should be junked, or at least complemented by an intelligent ratings system. Such rating system could even include a Spam or Troll rating.
Strongly agree. No more of this idiotic rating as junk just because you disagree.
'alone and outgunned in the crosshairs of history'
I hate to detract from your elegant phrasing, but to the squid, 'history' is the last-but-one financial quarter...
19th century labor practices are not 'fascinating'. Endless streams of poorly built junk is not 'fascinating'. Seeing tons of 'fellow travelers' offshore work of various professions is not 'fascinating'.
Trading freedom/honesty for transactional efficiency is not 'fascinating', whether you're doing it for a Squid, Dragon, both, or neither.
If you've ever seen the worst of the old, bad 'company towns', you'll get what I am talking about. They've been bad enough in the US, the Third World turns them into an grotesque art form. If not, study some history about them in the US.
I like to keep my organs intact, not at the behest of some Audi/Buick/Benz/[Chinese knockoff]-driving party boss.
I hate to side with the Squid here but this is the way China operates. China is playing a game of global domination and the US isn't willing to play. How about the US declare all China's treasury bonds worthless and stop all trade with China. Europe should do the same until the renminbi floats.
Do you mean ....Squid = Fucker and is now the Fuckee ??
Eureka.
Too bad it's only about petty cash.
I was about to make a comment about the primacy of contract and the assumption of risk in dealing with a totalitarian government...
But then I remembered Chrysler and the senior secured lenders....
+ 1,000. Ginsburg flicked that Chrysler bondholder appeal off the Supreme Court calendar like it was a fly on her forearm. WaPo and the rest of the MSM just shrugged it off.
Totalitarianism. Gotta' love it.
Hehe, just a small kick in the ass, announcing the big kick in the ass.
Let the 21st Century Opium war begin. If this continues, expect a US Naval Brigade in Hangzhou Bay......or maybe that's what Afghanistan is all about....hmmmm
Ok
Boooyaaaah refuses to honor his losses
And if we all refuse at the same time to honor our losses
What would we need to pull this off
So China bitch-slaps the corrupt GS to the tune of 80MM USD. Small matter for them, and a smaller amount to GS, who scammed billions this year. We have under estimated them for decades, whilst over estimating ourselves, and they have turned the tables on us. How much "Made in China" crap did you buy this year?
Or to put it another way: How much "made in China" crap did your existence depend on this year?
Not all the crap is equally disposable. Some of their crap is keeping some of us employed, or clothed, or fed or just maybe alive. The dark side of outsourcing and globalization is that we in the US of A are far more dependant on the kindness of strangers than we dare imagine.
cougar
Actually you can live well and more healthy by avoiding all "made in China" crap. This is a country so ashamed of their inferior crap that they are now refusing to put the "made in China" label on individual items- only the cardboard boxes the crap is crated in.
The sooner America gets over the "sugar high" of low-priced inferior crap sold by Chinese Wallmart, the sooner this country will recover from the false economy of the past 10 years.
Chinese crap sold to America has the life span of a fruit fly, but Americans get to pay long term debt to China because China is a currency manipulator and trade cheater. China refuses to purchase an equal dollar amount from its' so-called trading partner.
And as far as Goldman and the China backed oil gambler goes, this is as disingenuous as Stalin calling Hitler dishonorable.
I bought a chinese generator, the other day, for $99. I've been using a $120 chinese compressor, for 6 years, no problems. compare a briggs and stratton engine, to a chinese model. the chinese engine, is comparable, but $50 less. some of the stuff, out of china, is inferior, but not all of it. you can buy a brand new 4 cyl small chinese , quad cab pickup truck, for $4500. how can american mfg. compete with that?
Yippeee! what kind of collision standards does that truck meet?
You can use it to go pick up a load of Chinese drywall to re-model your basement with.
Explain the hesitance to publicly tout this 'virtue' in the unwillingness to talk about outsourcing/globalization with any more honesty than a pink slip?
1st US based solar panel plant in Arizona
http://www.businessweek.com/technology/content/nov2009/tc20091115_970512.htm
"The U.S. market is on the cusp of greatness," says Steven Chan, Americas president and chief strategy officer for Suntech.
Screw solar panels, and all other alternative energy.
We need THORIUM.
http://nextbigfuture.com/2009/12/liquid-fluoride-thorium-reactor-in.html
http://www.wired.com/magazine/2009/12/ff_new_nukes/
http://www.wired.com/science/discoveries/news/2005/07/68045
http://thoriumenergy.blogspot.com/
"If the US reactor fleet could be converted to LFTRs overnight, existing thorium reserves would power the US for a thousand years."
This is moral hazard exported. Heads I win, tails you lose. It worked for Wall Street; China just wants to try their hand at the same game.
China may win this battle, but lose the war. Investment banks are neither as stupid nor as clueless as the US taxpayer, so they just won't play anymore.
In the future, panicked Chinese firms will create a lot of blow-off tops and capitulation bottoms, since they will be operating without a hedge. The world will learn just how stupid most Chinese firms are, which is pretty stupid. I haven't seen one mining or natural resource firm make a profit yet, whether it is in Africa or SEAsia.
I'm absolutely the first to agree that the Chinese, until recently, were poor businessmen. Great negotiators yes, businessmen no. (this is based on my 25 years on the ground in China). Chinese drafted "business models" were hilarious.
That said, the Chinese work on a much longer time horizon that we do in the west. To not make a profit for 20 years, but, by doing so, control a valuable asset makes sense to them.
Well said chinaguy and thank you for sharing your 25 yrs of experience.
I agree that the time horizon paradigm makes a huge difference in identifying cultural and societal traits.
But they do not respect the idea that intellectual property is an asset that takes money and sometimes allot of it to develop.
It would be useful to publicise the nature of the trades that they are refusing to cover. My bet is a mid-level treasury manager was asked to hedge oil risk, so entered into a structure buying a call and selling some form of floor to cheapen the price, but the floor was most likely one that accrued notional if in the money, so the end result was they ended up paying above market rate on the floor and on a multiple of the original notional. These are "standard" products sold by the big banks into emerging markets, that are called hedges but are in reality anything but. For years, the banks have screwed smaller less sophisticated entities around the world, but owing to the position of the west and the reliance on western capital, the banks never get called out. There are hundreds of companies and other entities that have been brought to the brink of ruin but the practices of the banks and the use of exotic hedging strategies (which in truth are nothing more than huge amounts of hidden optionality that is hugely profitable to the banks). What the financial crisis showed was the weakness of the banks, and their inability to provide capital.
Anyway, this story is the same as countless others that have not been made public, all across emerging markets and I completely understand why they are maing this stand. The banks need to stop peddling this crap because all this embedded optionality makes the markets more risky, not less, but they want this as banks make money from volatility.
"the banks never get called out." and funny how so many on ZH are criticizing a small company who has the cajones to call out the squid. and with eloquence no less:
"We will not accept the demand by J. Aron for all the losses and related interests," said Nanshan, in line with the stance it took last December.
"We will try our best to negotiate with J. Aron and resolve the dispute peacefully...but the possibility of using a lawsuit can not be ruled out when talks fail," it added.
isn't this exactly what many here think Timmy should have done during the AIG shakedown? but when a chinese company does it, all of a sudden, it's now "reneging on a contract", even though there's potential evidence all over the internets that JA/GS may have been behind the spike in oil?
god bless america...and goldman sacks.
i say bring on the lawsuit bitches. time to air out the laundry...
How much time do we have before the Squid presses the red button? You coulkd win today. In ten years Chian will kick your butts.
It took two years for Birmingham to get a measure of relief from the SEC. The Chinese simply took the short course....
http://currents.westlawbusiness.com/Articles/2009/11/20091104_0014.aspx?...
Relax, this isn't real money, it's just BennyBux! If it were real money, this would be a Big Deal.
The USA will default on China debts. The EU will.
No problem, as long as we maintained some manufacturing structures and safeguard the flow of oil and natural gas.
From that perspective Iraq was strategically clever. Afghanistan daft.
Once oil flows start trickling and reserves don't cover the military to defend inbound flows of oil and other resources, the party is over. Collapse of mankind.
Start learning eco logics. Forget Mandarin.
All china has to do is send a couple hundred shoulder launch rockets and all the US air support is screwed. It's what we did to russia when they tried to take afghanistan.
No, not really. Our military aircraft aren't so susceptible to such weapons, and while the Soviet Union had decent military aircraft during their time in 'stan, it's not close to the range of air power that we have.
You have got to be kidding...
ALL aircraft are susceptible to such weapons.
If anything like a decent supply of modern weapons started flowing into the hands of the Taliban, then it would be game over for the Coalition in Afghanistan.
The only answer the Soviets had was to go high and fast.
It wouldn't be any different now, and that only works as long as there isn't anything bigger and better than a Stinger class missile.
You don't need to shoot down every plane in the sky, you just need to get a couple and threaten the rest...
Why is everybody talking nasty about The US Bank of China?
Enjoy life now, I've been on a spending spree, buying exotic leather boots and today wearing my Chippewa Elephant skin boots, feeling so good today, waiting for tomorrow!
"The enemy of my enemy is my friend"...form a line and take a number
That's an Arab saying, BTW. Tribal warfare has been a way of life for centuries.
Having spent many months in China in 30 plus cities and towns, having met and lived with 4 star generals, senators, and a host of very rich and powerful people, also lived and traveled with people that lived on 1,000 rmb a month, (~150 usd) there was never a moment that i saw or heard of anyone not enjoying their life there. There is more wealth there then one can fathom, there are no taxes, everyone pays cash, not many borrow money at all. Everyone has a cell phone and a decent place to live, outside the farms. The wealthy number greater the the whole of the USA. The spas are muti-story wonders, expensive cars are everywhere, although most still take the bus or ride a electric bike. The in country tourism is staggering with so many people going to the sights. The freedoms there are greater then here. They know they do not have a free press while here we think we do. My last trip there i was not allowed to spend a dime, they even bought my plane ticket. Another thing, no one bows in China, and if you are an American you better not bow ever. The only way you can bow there is when you are drinking and you click glasses a little lower then the person you are toasting with to show some respect, even that is hard to do as they will always get their glass in lower then yours. Now there are problems in China, most of it due to the lack of a federal power over the states. They need a clean water/air act and have the power in the states to enforce it. Had to go to the hospital one time and was amazed at the number of people there, i did get to see a couple of top docs and found there was no problem, just a scare. Anyway the massage at the spa cost more later that day, and that was only a few bucks. Medical care is super cheap there and there are many private hospitals that are quite modern.
Sounds exactly like the heir to the British throne in the 1930's when he visited Hitler in Nazi Germany. I wonder if the Nazi apologist got free tickets to visit the boss man and his disciples, just like you my friend.
The only China miracle is that they still have some people fooled.
No, sorry that would be the $700 trillion derivatives bubble artificially propping up the us dollar and the economy.
Otherwise America would have collapsed into anarchy. Not china, which people have been predicting to collapse year after year after year ever since the ccp took power.
Ultimately all contracts are enforced by the threat or use of force, whether we like to admit to it or not. Goldman is powerful in the U.S. but in China they are just another foreign company. I'd like to see Blankfein go to China and try to enforce the contract.
The U.S. won't do anything to China because American MNC love subcontracting to slave labor shops, and because American MNC have pipe dreams about selling to the Chinese in the future. The American taxpayer will end up paying for OTC derivative losses of well-armed sovereigns.
Oxidation
I'm delighted to see this happen to GS but annoyed that it's a Chinese company--especially state owned.
The fact is, the Chinese don't know the meaning of a contract and this is not a stereotype. Anyone who has done business in China knows exactly what I mean. This problem is much deeper than GS and their shady ways.
This situation is what you Yanks call a "double edged sword." Either outcome will leave serious scar tissue....
Go Shenzhen Nanzhan!
You have shown the rest of us the way.
Go ahead Squid - bring on the lawsuit.
I'm willing to bet that SN will not lack for EAGER securities fraud counsel ready and willing to take the case.
And when the Feds get ahold of what gets brought out in discovery and that gets applied to several other similar cases....
GS, you are going to be calamari pretty damn quick.
And just understand I like my calamari deep-fried with mozarella and a side of marinara sauce...
The way Chief Cook Schultz does with the squid we catch in the ELF antenna on patrol..
KptLt. laughing swordfish
9er Unterseeboote Flotille
by PolishHammer
on Tue, 12/29/2009 - 12:26
#176812
the message is that the UK is finished, they are a completely insignificant little country, with a glorious imperial past. China dont give a shit.
If the world was a house, the UK would be the middle bedroom but Poland would allways be the outside toilet.
It will be interesting to see how China loses this one, just as Japan did in the 80's. China is up against our Jews, so smart and evil that nothing can stop them. The Chinese let Greenburg's AIG in.. It is only a matter of time till the jews infiltrate and destroy. They have a weakness, the Jews will exploit it. My guess... The industrial toxins sicken them en masse.
The "jews" were not able to even "infiltrate" japan let alone china.
Post-WW2 Japan is a puppet of the US, that much is true. China however is completely independent. Chinese look out China's interests first. They let the dollar collapse eventually.
Mark this story as another anecdote in the escalating trade/economic/finance war between the US & China. I'm expecting more anecdotes to come in this conflict in 2010 and beyond.
china is not too clear on the honoring contracts concept, or honor for that matter.
China (like Iran) sees the UK and US as two sides of the same coin - with an unbroken imperial past from c.1600 until today.
They also know that empires usually last hundreds of years, and then a new empire takes over. The fractional-lending debt-fuelled, hollowed-out manufacturing failure and decline of the Anglo-American empire is an opportunity rather than a problem.
Vampire Squid and its 79.96 feet of hacked off tentacles is just a pawn in this great game.
I'm waiting for a cult following to develop for Jiang Wu. She is a spokesperson for the Chinese Foreign Ministry. Her image is presented to politely tell the West to "stuff it" for whatever reason. Her appearance is more stylish than one would expect for a Chinese bureaucrat.
the jingoists have hijacked the junk button, haha.
someone desperately needs to take a yoga class.
Face it, the Chinese do not view the world's resources as their own to be grabbed by force. The white man, by contrast, has historically waged bloody wars to take resources from indigenous peoples. For sure that is the heritage of Europeans and Americans.
If America and Europe go down, and China is the man standing, she/he will not write the same rules as we have experienced since global rule by the white man.
Slightly tangential to this thread but ...
When a hedge fund owns an exchange, interesting things start to happen. GS partly owns India's National Stock Exchange (along with NYSE Euronext). It seems it is putting quite some effort to rig this market to its satisfaction. One example is the forced extension of trading hours in the morning ( afternoon will follow) - even when 80% of the exchange members are against it. The NSE chief (part GS employee by definition) could not produce any viable justification for the same - except that it will increase volume and hence help traders etc etc...
The growth of this smart parasite is too fascinating to watch. India should be an easy game for GS in due time. There are already many dots that seem to be forming a pattern. China is a somewhat different game. For all we know, the chinese political system may outlive GS.
Are there any Chinese-Jewish (/Jewish-Chinese) folks? Is it an oxymoron?
Hmmm. I bet the next big terrorist incident will be in (drumroll) CHINA.
...
-MobBarley
Well, they could have it happen tomorrow, just create one and just have CCTV promote it. If you have anyone who promotes otherwise, just make sure they disappear.
See Tibet and Xinjiang; if you have a large enough uprising, just bake up an excuse to put it down as a "terrorist incident".
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