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The China Boom Story: Alibaba And The 40 Thieves
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
I suspect the Alibaba IPO may well prove to be the high water mark of the China Boom Story in more ways than one.
We all know the story of Ali Baba and the 40 Thieves. Poor woodcutter Ali Baba discovers the 40 Thieves' secret cave where they stashed all their ill-gotten wealth. Various adventures follow, with the loyal slave girl being the heroine who repeatedly saves Ali Baba from death at the hands of the Thieves and their resourceful, cunning leader.
My favorite filmic depiction of the story is the 1934 film Chu Chin Chow starring Chinese-American actress Anna Mae Wong as the heroic slave girl. (Another Arabian Nights' inspired fantasy also stars Wong as a loyal slave girl: the 1924 silent film The Thief of Bagdad with Douglas Fairbanks and Anna Mae Wong. Clearly, Hollywood's favored role for Miss Wong was loyal "exotic" slave.)
On the current stage, the drama being played out is that of Chinese Internet company Alibaba, which is set to go public on the U.S. stock market next week in a staggering $21 billion IPO (initial public offering). Many market pundits expect the current rally in stocks to continue through next week, if for no other reason than to insure the investment banks dump all the Alibaba shares on a credulous public at full pop. Alibaba To Raise $21 Billion In Historic IPO.
The IPO share price of between $60 and $66 would peg Alibaba's value around $160 billion.
Behind the rah-rah, Alibaba's fair market value is problematic: What's an accounting puzzle like Alibaba (really) worth?
As the world’s largest e-commerce company prepares to go public, its murky financials don’t make it any easier for investors to figure out the company’s value.
As the world’s largest e-commerce company prepares to go public, its murky financials don’t make it any easier for investors to figure out the company’s value.
In the bigger picture, the same can be said of the entire China Boom Story, which has supported the global expansion of trade, commodities and stocks for the past two decades: is it for real, or is it fundamentally an elaborate facade of carefully designed props, borrowed money and opaque accounting?
Let's start by stipulating that the great wealth created by China has been generated by the hard work of its enormous workforce, many millions of whom have toiled back-breaking hours in mind-numbing factory jobs to better the prospects of their children, many of whom were left behind in the rural villages the parents left as migrant workers.
This story has been told in two documentaries: China Blue and Last Train Home.
The largely untold story of the China Boom is the vast thievery that has siphoned off much of the wealth into the hands of a crony-Communist Party-state few:
-- peasants' land stolen by local governments and their crony developers
-- wages stolen from workers by unscrupulous factory owners and their thoroughly corrupt government cronies
-- value stolen from consumers via the substitution of shoddy or even poisoned ingredients for the product being advertised (top Party officials get all their food from secret organic farms)
-- product design and intellectual property stolen by copycat manufacturers who pirate everything under the sun without paying a yuan of royalties
-- corrupt officials stealing from everyone via bribes, illicit partnerships, shares in land development deals, etc. etc. etc.
-- last but not least, the European, American, Japanese and Korean corporations that are complicit in all these layers of officially sanctioned theft to lower the wholesale cost of their $40 jeans (retail) to $4 from $5 to maximize their gargantuan profits at the expense of the officially exploited. (Interesting how that reduction didn't result in any corresponding reduction in the retail price.)
Few dare ask if the Alibaba IPO isn't just the latest in an unending string of officially sanctioned thievery of the credulous or powerless. Is Alibaba worth $160 billion as advertised? Based on what earnings? By what accounting standards? How much of these net earnings will actually flow to shareholders?
Or is the Alibaba IPO just another snatch-and-grab by U.S. investment banks anxious to skim their share of the China Boom Story before the whole flimsy backstage set implodes in the collapse of shadow banking and shoddy real estate development?
I suspect the Alibaba IPO may well prove to be the high water mark of the China Boom Story in more ways than one: the apex of Wall Street's greedy complicity in selling the fantasy, the apex of "China's real estate bubble is not a bubble, and no, it will never pop," and the apex of the wealth divide between the handful of thieves who are busy transferring their wealth out of China and the reach of those they ripped off, and the exploited mired in a polluted factory to the world that cannot possibly prosper without a permanently expanding real estate bubble and an equally permanent global expansion.
The Chinese thieves are busy stashing their ill-gotten wealth in the West. Perhaps it's just a matter of time before the modern-day equivalent of loyal slaves arise to take back what was stolen from them.
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Remember the first one...November 2007...just saying...so enjoy the final melt up in the on-going rally...
Am I missing something? You don't have to buy just because they are selling it and the MSM is marketing it.
Don't tell that to the morons waiting in line for the latest iShit.
I knew it, It's not China accumulating gold, its Ali Baba repatriating his gold
A lot of China's gold has swastikas......don't tell Merkel.
Listen, the swastika has a much different meaning to Buddhists and it was around "LONG BEFORE" that evil do'er(Hitler) hijacked it for his disgusting propaganda!
So "LET'S" not start "MORE" of this well known disinformation and "LET'S" get back-on-track!
Classic pump & dump by Wall Street tycoons. Its going to be biblical when they make off with the loot, just like Bernie Madoff.
insanelysane: Yeah, but you see, there's these pension funds. And they have all this money. And they don't know what to do with it. And it's not their money. And the owners won't notice the money is missing for another ten to forty years. And the nice salesman just took them out for a night on the town but it lasted all weekend ...
P.S. Those damn baby boomers keep retiring. You might not have enough money in your superannuation to retire on. You'd better contribute more.
..... <sniff> ... <guffaw> ... he he he ...
Hilarious.
not
Awwww, too close to the truth?
And it's gone. www.youtube.com/watch?v=-DT7bX-B1Mg
IPO "crazes" always occur before downturns as useless paper-pushing fucks start to "cash out" and demand their pounds of flesh.
Same as it ever was on this fiat planet.
Look how the BABA underwriters are PROPPING Nasdaq, at wil using free Fed money, last week there were 2 back-to-back 250K shares of QQQ around $99.38-99.43, happening all the time!
Since the initial IPO about 5000 years ago, physical gold and silver is still around and looking as shiny as ever. I´d much rather buy 3 oz. of hard silver vs. an Alibaba piece of (electronic) paper.
Pretty much the same here in Amerika....The banksters robbing the sheeple.
Dude the markets are Central Bank (the TBTF) software applications. They are going to go up. The bankers have been placed above the law. They are going to counterfeit money in every way they can. They are like pedophiles that won't stop until they are locked up or forced to stop. The military needs to take on this task because the entire world is now in jeopardy. The TBTF banks and the system they have created needs ever increasing amounts of money. The sooner they are overthrown the less damage that will be done.
At $1,4 quadrillion, the current amount of derivatives underlining the entire world´s economic system, has already reached a level that ensures the vaporisation of the current system when it implodes. In other words, it´s too late to fix...if anything, the fiscal nuclear yield increases with each passing day. This bitch is terminal, and when the system reaches criticality, you better hope you have your own fiscal bomb shelter.
This Worldonline lady went to the Caribbean with a few billion
http://www.vdc-it.nl/blog/wp-content/uploads/2011/05/nina-brink.jpg
Thumbs up, just like Ali!
when i added double chu chin to my netflix queue, it was suggested that i might like this moive also: http://dvd.netflix.com/Movie/Meet-Me-in-St.-Louis/60010643?trkid=8304971
i think it is a prelude into the Ferguson MO situation
Fuck it. At this point I no longer even question whether the great reset is coming. It's a question of how MadMax it's going to get.
I finished my V8 Interceptor right after Detroit declared bankruptcy. So, you know about where I stand on that question. And yes, it's got a blower on it.
Truck mounted ion pulse cannon powered by 24 deep cycle marine bateries. Fires once and then recharge for 24 hours.
"Accounting standards" re: Alibaba...what standards would you like? The standards that show unlimited upside with no downside? Got it!
How many black swans do we have circling now?
Plenty of black swans where i come from.... black swans aren't even considered a freak occurance, so much so that the surf club even has one as its logo. We KNOW you'll see one eventually. http://www.maroochysurfclub.com.au
Black Swans are now bullish. We're waiting for Dead Swans to start showing up.
ha!
I'm shorting the shit out of Alibaba as soon as I get my unemployment check
Doesn't all this remind you of the tech bubble circa 2000? Overvalued social media/e-commerce comapnies....then again as I look around me and see all those fuckin zombies glued to their iPhones 16 hours a day, I think twice....is this really the future for the world?
It’s not ‘social media’
It’s lifestyle data collection.
Don't forget
--fake/counterfeit/tungsten gold and silver (including fake US minted coins among other fake/counterfeit official minted coins/bars by many other countries) selling on Alibaba with impunity
http://www.alibaba.com/product-detail/Laser-engraved-numbers-stamped-gol...
http://www.alibaba.com/product-detail/22k-gold-plated-tungsten-1-oz_7341...
http://www.alibaba.com/product-detail/Royal-Canadian-Mint-RCM-1-Troy_130...
http://www.alibaba.com/product-detail/2014-new-coming-silver-eagle-in_60...
and plenty more where those came from, all at Alibaba.com!
(just now today with this post I discovered new fake 2014 ASE now for sale. Guess I'll have to stop buying ASE as well and switch to something else with better security features like 2014 Maples or new Sunshine rounds, etc...)
Thank you for posting this. There's also a recent article (I think in Barron's?) about Alibaba sellers who purposely ship lots of empty packages when filling orders so they can help their position in search results.
Perhaps in future, people will melt down their purchases, as they purchase, just to be sure. But of course, you can't do that over the net.
(Yes I know about ultrasonic testers, so for all I know, I might be taking it too far. How well do the ultrasonic testers work on small coins?)
Standard ultrasonic inspections (ISO, BS, etc) are problematic bellow 8-5mm thickness, AFAIK.
What if one tests the coin diameter-wise?
Some time fighting with UT inspectors arguing "impossible to test due to difficult access to the piece"...
And the u.s treasury had Bernard Nauthaus (Liberty Dollar) convicted of counterfeiting because his coins were 'round' and poor Americans could not tell the difference.
Called him a monetary terrorist for circulating the pure silver coin. The poor man still has not been sentenced.
What an absolute joke.
Yikes!!! Is there a non-destructive method for testing gold coins/bars?
yep.
put it on table in front of FED.
if bar disapears, it was true gold.
Goldman, Morgan et al are PROPPING MARKET for BABA Payday$$$$, it's fking obvious!
Well Written, Charles.
Where money is to be made, hand over fist, Corruption is a sacrament not a sin.
Soon we will be able to trade cfd's on BABA with the international CFD broker Plus500. They offer 1:20 leverage on the stock.
Never mind these facts, in the mainstream media it's all Putin's/Russia's fault anyway!
I fail to see why so many people here are so positive about China. It's always "China this" and "China that." Do you really think they are so smart and that at some point they will come and save the day? I'm regularly in China for work and I f*cking HATE it! These people are so dumb, passive and obidient, they couldn't organise a piss up in a brewery! Besides, outside the big cities the food is uneatable and the visible air polution horendous. I don't even wanna know about the other polution you can't immediately see... I've seldomly experienced being in such a fascist country!
Alibaba is worth more than Amazon.com. I use Alibaba often to buy things direct from the factory and get around dealers such as Amazon or Walmart. Because Alibaba is closer to the factory, provides a way to compare and meet alternative factories for the same or similar product, and provides a more efficient and lower cost marketing compared to Amazon and other storefronts, Alibaba is worth a great deal. I expect that Alibaba could eliminate Amazon and other US resellers easily at some point in the future.
I don't think Amazon is getting replaced any time soom. Most people go to Amazon to buy one item, not wholesale container lots of 10,000 pieces.
OK, I took a survey and here are the results:
A. The Alibaba IPO is the latest in an unending string of officially sanctioned thievery of the credulous or powerless - 0%
B. The Alibaba IPO is just another snatch-and-grab by U.S. investment banks – 0%
C. A&B – 2%
D. I don’t know because it’s not on Twitter or Facebook – 98%
No Debt +1 for Road Warrior ref.
Here is your Interceptor in that memorable scene
Mad Max 2 Opening ChaseI will admit I have not actually tried to dig through the Alibaba deal.
However, I will challenge anyone to explain exactly what ownership in the company Alibaba is for sale in this IPO. It may well be the most screwed up ownership structure that has ever been released upon the suckers.
oh this is laughable.
Alibaba is far larger than any of you idiots can imagine and if you are trying to rip on it, you have zero clue what you are talking about. It's the #1 ecommerce platform in China, which owns the #1 system for online payments and it crushes the shit out of B2B international platforms as well. I did consulting work for another major B2B platform.. they do not even want to try and compete with alibaba, there's just no point in trying. They also control the largest investment fund in China ($100b+), and have been branching out to dominate just about everything they touch.
I'm gonna say this bluntly, if you short this, you are gonna lose your shirt.
I think this is in the running for headline of the year.
Very amusing.
Thanks Tyler!
Has anyone seen the bottom of page 29 on the F-1.
"In March 2014, it was reported that the PBOC had prepared a further draft of regulations relating to online and mobile payment services. The new draft of the regulations includes a number of proposed provisions relating to account management, security measures and other matters. These provisions would, if adopted, prohibit individuals from using the funds in their online and mobile payment accounts with third-party payment providers such as Alipay to make purchases in excess of RMB5,000 (US$806) in any single transaction or over RMB10,000 (US$1,612) in aggregate purchases per month. In addition, these provisions, if adopted, would limit transfers without any underlying e-commerce transaction from an individual’s account with third-party payment providers to other accounts to RMB1,000 (US$161) per transaction and RMB10,000 (US$1,612) in aggregate transfers per year. If the draft regulations were to be adopted in their current or similar form, or other limits were imposed on the size of transactions that may be processed through Alipay, the ability of buyers to pay for purchases on our marketplaces using Alipay payment accounts could be materially limited. The draft regulations, however, do not affect Alipay’s escrow services. Buyers on our marketplaces could continue to pay for purchases through other means, such as online bank transfers and credit cards, and continue to fund their Alipay escrow accounts. So long as payments are not made outside of the Alipay escrow system, we would continue to collect commissions on such purchases if they were made on marketplaces on which we collect commissions. The PBOC has indicated that the purpose of these provisions and other parts of the draft regulations is prudential and that final regulations, including these provisions, would be subject to public consultation and revision."
http://www.sec.gov/Archives/edgar/data/1577552/000119312514333674/d709111df1a.htm
How could one possibly ignore this? If China adapted these regulations people using Alipay could no longer transfer from bank accounts over these limits. It looks like they are trying to get around this wording by confusing people by saying escrow but if I understand this right escrow simple means the money won't be moved in/out of the Alibaba account. So if I sold something for $1000 on Alibaba and bought something for $1000 on Alibaba that's my escrow account and since the money never went to a bank account I didn't use any of my limited amounts.
Do people really think the PBOC is going to change their mind on this regulation? When have they ever before?
i started to write up an actual response to this, but deleted it. you have no idea what you are talking about and are fishing for any reason to spread bullshit.
actually, here's the response:
The government drafts shit all the time, then floats it to the public to get a reaction. If there's a backlash, it's torn up. The basis of this is because Alipay ate 51% of Tianhong to offer interest bearing accounts on alipay balances. It's essentially money market accounts which pay out arond 5%. Banks were giving shit interest on non-vested funds and loving it. There's around 100t RMB of non-vested funds just sitting in the Big 4. Alipay ate up around $100b or so of that virtually overnight and the fact that you can use it to pay for shit essentially made them better than a bank. This was backlash from the Big 4, and it was a flop. Escrow just means that you are accessing a credit card or actual bank to pay for shit. Alipay is also an escrow service that holds funds until the transaction has been completed, verified by the seller or timed out after delivery has been confirmed before releasing the funds to the seller.
This happens in every country.
Here in Algeria the elite have spent the last 50 years looting tens, possibly hundreds of billions in oil wealth from the economy.
Yep. Here in Albania too!
-- product design and intellectual property stolen by copycat manufacturers who pirate everything under the sun without paying a yuan of royalties
i have to disagree. while land and other physical capital obeys the simple ethical-economic calculus of PROPERTY RIGHTS.
designs, and intellectual work product simply do not. the ethical-economics calculus holds that a 'property law regime' which designates the protection of private property through public means ( which are paid for enforcement with tax dollars ) is ONLY ETHICAL when the economics are clear that private property distinctions operate in a simple manner to promote the fluid connection between an UNDERLYING INCENTIVE TO WORK with and UNDERLYING INCENTIVE TO PRODUCE AND CONSUME.
intellectual property does not do this . it creates artificial scarcity by it's own right in a manner that can significanlty IMPEDE production by allowing for a confusing morass of property rights in poorly established descriptions and 'claims'.
imagine if you owned physical property and the description of your borders depended on a combination of the position of the sun, the seasons, daily rainfall, and the relationship between the center of your property with respect to a factory location which changed every now and then.
that is 'patent' property in a nutshell. it is outdated and an anachronistic throwback to a time of monopolitic exclusivisity to SELL your products into a king's kingdom. and this property regime is entirely outdated and in fact a massive impediment to future growth.
i don't give a fuck if peasants in china have their intellectual property stolen from them. this article claims that this is a wrong when in fact, most of the people complaining about the wrongs of IP theft are western media companies bitching about copyrighted entertainment content being stolen by chinese and sold in china without royalties.
i am not advocating a royalty cap on copyright. i do not even consider copyright in the same regime as IP and the fact that courts and legislatures and beauracracts are too stupid to solve the copyright-patent separation with respect to a very small conceptual part of the intellectual property schema , THAT BEING SOFTWARE, shows you how regressive and stupidly LAGGING government always is. other examples of the total corruption and regression of our patent system are 'business patents'. as a class, these are pure nonsense. not only do they not comprise 'useful inventions', they are simply legalisms, methods of incorporation tax and accounting structures rolled into a 'patent description'. a patent of a legalism. this is the ultimate example of the complete fosslization vestigial cancerousness of the intellectual property system for supposedly 'useful inventions' of patents.
it is for the people to reimagine PROPERTY. private land property was imagined a long long time ago, and it became the basis for modern agricultural civlization , where land fencing and property rights were foundational in creating the systems that could produce massive amounts of food for people; compared to what had come prior to that.
the future will not easily find an alternative property scheme for land and chattel. however IP is a fossilized set of practices which does not comport with the swarm of humanitities intellectual powers working with ideas and designs and prototyping and attempting to move these conceptual platonic forms into an actual set of goods and services to be used by wholesale and retail.
as a result, some of the best ideas and prototypes are still not disclosed for IP protection but simply kept secret . while there are laws that are used to protect private secrets from being STOLEN, they are rarely effective and essentially just reinforce the default reality which is the LAW OF THE JUNGLE.
if you have an idea or machine, such as a fabric mechanized loom, and it 'escapes' to some far off place because of theft, such as from England to the UNITED STATES. then, your loss! and the worlds gain!
this pattern of 'theft' is repeating with china. and good for them. the world is better off without american protectionists trying to hoard progress under the rubric of 'intellectual property'. there is no easy legal path forward, for the politics of our age, dominate any brave efforts to reconceptualize 'patents' into a system which promotes BRAIN WORK used to create and refine ideas, designs, for the purpose of creating useful inventions.
perhaps one day , under one world govenremtn, the powers that be will have the courage to completely abandon IP to the past civlizations and embrace a new social approach to harvesting and cultivating BRAIN WORK.