Wednesday, September 22, 2021

"Here's How to Tell Within 5 Minutes If Someone Isn't as Smart as They Think"

Question no.1: Are they a fund manager?

If yes, skip the story, you already have your answer. 

From Inc.: 

Science says people who do one thing tend to be less intelligent. And less competent.

I ordered a turkey sandwich and asked for double meat. The guy behind me said, "You shouldn't eat meat." I turned and shrugged. 

"Seriously," he said, his voice getting louder. "Meat is bad for you."

"Maybe so," I said. "But I like meat." 

Evidently that was not the right response. "A friend turned me on to a vegan diet," he said. "Only fools eat meat. Meat is terrible for you. There's not a single reason to eat meat. The science is irrefutable." Then he paused and moved closer, narrowing his eyes to stare intently into mine.

"It's changed my life," he said.

"I'm not sure all meat is bad," I said. "But that's really cool how being a vegan has worked out for you. How long have you been doing it?"

"This is my second day," he said.


The Dunning-Kruger Effect....


Question no.2: Do they prattle on endlessly about Dunning-Kruger?

The Dunning-Kruger Effect Is Probably Not Real 

Question no.3: ...ahhh screw it....

FT Alphaville Can No Longer Stay Silent

"...Out-of-touch - or downright callous - economists like Kaminska - she's hardly alone -
are lost in models and assumptions that have little if any connection to the real world of real people..."

Umm...that may be the wrong snippet. Unless there is a coup d'état in progress.

Here, read this while I find out where that's from.

GMO, the Boston-based asset manager, has a storied reputation for equity research and commentary. Names like James Montier, Ben Inker and co-founder Jeremy Grantham are well-known for both their bearish takes and eloquent prose. A heady mix for a media often starved of decent quotes.....


Ah ha! That was a reader comment on one of Izzy's 2013 posts which garnered our headline:

Help, I May Be Having A Stroke 

So carry on, no uprising among the ink pixel stained wretches.

But if patient reader is interested, we too have thought about Mr. Grantham over the years: 

"Bubbles, bubbles everywhere: Jeremy Grantham on the bust ahead"

The Federal Reserve Bank Of Cleveland Is Still "Nowcasting" Inflation At A 6% Annualized Rate In the 3rd Quarter

From the Cleveland Fed (updated daily) the September CPI will be released October 13:

Inflation Nowcasting

  • Background: “Nowcasts” are estimates or forecasts of the present.
  • Description: We provide daily nowcasts of inflation for two popular price indexes, the price index for personal consumption expenditures (PCE) and the consumer price index (CPI).

Monthly Inflation Nowcasting

  Inflation, month-over-month percent change  
Month CPI Core CPI PCE Core PCE Updated
September 20210.360.330.300.2809/21
August 2021

  Inflation, year-over-year percent change  
Month CPI Core CPI PCE Core PCE Updated
September 20215.404.184.233.5509/21
August 2021


Note: If the cell is blank, it implies that the actual data corresponding to the month for that inflation measure have already been released.

Quarterly Inflation Nowcasting

  Quarterly annualized percent change  
Quarter CPI Core CPI PCE Core PCE Updated

Note: If the cell is blank, it implies that the actual data corresponding to the quarter for that inflation measure have already been released.



Capital Markets: Will the FOMC Put An End To Fear, Uncertainty, Doubt? (FUD)

Of course not. Can you imagine how boring that would be?

From Marc to Market:

What to Expect When You are Expecting

Overview: The markets have stabilized since Monday's panic attack but have not made much headway. China and Taiwan returned from the extended holiday weekend. Mainland shares were mixed. Shanghai rose by about 0.4%, while Shenzhen fell by around 0.25%. Taiwan got tagged for 2%, and Japan's Topix was off 1%. Hong Kong and South Korean markets were closed. Europe's Dow Jones Stoxx 600 is firmer for the second day but is still lower for the week. US indices barely entered the gap left from Monday's sharply lower opening, if at all. The futures are higher today, but the gaps, which appear on the weekly bar charts, are technically important. The bond market is subdued, with the US 10-year yield near 1.33%. European rates are narrowly mixed. The dollar is mostly softer against the majors, with the dollar-bloc and Scandis pushing higher. Sterling and the yen are nursing small losses. The freely accessible emerging market currencies are firm, led by South Africa, Russia, and Mexico. Hungary is the weakest after the central bank delivered a smaller than expected rate hike yesterday. The JP Morgan EM FX index is paring yesterday's 0.3% gain, the largest this month. Gold is consolidating in a narrow range below yesterday's $1781 high. Oil has rebounded, helped by a large drop in US stocks (-6.1 mln barrels. according to API). November WTI fell to around $69.40 yesterday and is more than $2 higher. Iron ore was mixed. China's contract fell. It has risen only once this month. Singapore's contract jumped (~13.6%). Copper is about 2% higher to lead the base metals.

Asia Pacific
Evergrande reportedly indicated that the yuan interest payment due tomorrow has been "resolved."
The details are not clear, and there is a dollar payment due too. There are major concerns. The first is the direct knock-on effects on financial investors and the contagion. This has been what the markets have been focused on. The second is broader and structural. China's property market and its ecosystem are estimated to be nearly a third of China's GDP. Apartments have been used as savings and speculative vehicles. This helps explain the report of ghost buildings, where apartments are owned but unoccupied. It has driven prices higher and made them less accessible to the rising middle class, in a situation that has striking parallels to the surge in house prices in many Anglo-American and northern European countries.

The Bank of Japan held policy steady, as widely anticipated. It lowered its assessment of exports and production while keeping its overall economic view stable. There was one dissent (Kataoka) from maintaining the yield curve settings (-0.1% short-term and 10-year JGB around zero). The BOJ is at the forefront of central bank efforts to fight climate change. It provided more details of its new program that will start in December, giving zero-cost financing for "green" projects, including loans, bonds, sustainability-linked instruments, and climate-transition financing. The program will run until at least 2031. The loans are for one year and can be rolled over. BOJ Governor Kuroda played down the Evergrande contagion, saying that it looks like an individual company and issue for China's real estate market. At this point, he does not see it turning into a global problem....


Tuesday, September 21, 2021

"BIS warns of green asset bubble risk"

We pay attention to the Bank for International Settlements.* Over the years we've found them to be (somewhat surprisingly) forthright.

From Reuters, September 20:

The central bank to the world's central banks, the Bank for International Settlements, has warned of the growing risk of a price bubble in environmentally friendly-focused asset markets.

Increasing urgency to limit global warming and tackle other issues such as racial and social inequality has seen Environmental, Social and Governance (ESG) investing explode in popularity in recent years.

Some estimates indicate ESG-focused assets have soared to a value of $35 trillion and now account for more than a third of all assets professionally managed by banks and investment funds.

A narrower definition including only exchange-traded funds (ETFs) and mutual funds with ESG or socially responsible investment (SRI) mandates points to even faster, tenfold growth, to approximately $2 trillion. This is evidenced in assets such as clean energy and electric car stocks and green bonds, which have soared in recent years.

"There are signs that ESG assets’ valuations may be stretched," the BIS, which holds regular meetings for the world's central banks, said as part of its latest quarterly report.

Claudio Borio, head of its monetary and economic department, referred to it as the "green bubble" risk, highlighting how the surge in ETFs and mutual funds was comparable to parts of the mortgage backed security market in the runup to the global financial crisis.

"You could have too much, too quickly of a good thing," Borio said. "We know valuations are rather rich"....

*In 2011 I tried to communicate my thinking on the BIS, note the dates:
Why You Really, Really Want to Listen to the Bank for International Settlements
On June 26, 2007 (i.e. pre-"Quant-quake", pre-Bear Stearns, pre-ought-eight-near-catastrohe) we posted a short little piece:
"(Off-topic) Banks' banker warns of downturn":
THE risk of a 1930s-style economic slump has been heightened by "euphoric" markets tapping cheap global credit, one of the world's pre-eminent financial institutions has said.
In its annual report, the Bank for International Settlements noted that the conditions that led to the Great Depression of the 1930s and the Asian crises in the 1990s reflected the current environment.
From The Age
On April 28, 2010 it was Greece: "Exposure fears weigh on French, German banks"
From MarketWatch:
Banks with local subsidiaries, government-lending exposure most at risk
Banks in France and Germany have the biggest exposure to Greece of non-Greek lenders are also heavily exposed to other potentially at-risk countries, with those firms that operate local subsidiaries or with big local-authority funding activities likely to face the heaviest losses, analysts said.

The latest figures from the Bank for International Settlements show French banks have $75.2 billion of exposure to Greek borrowers, while the industry in Germany has an exposure of $45 billion. The U.K. trails a relatively distant third, with exposure of $15.1 billion....
There is a reason the BIS is known as the "Central banker's central bank".
Here's their website. I try to visit a couple times per month.
See also:
Dec. 2012
BIS: "Global safe assets"
June 2008
BIS: Don't Worry, Inflation Not a Problem Because Global Economy Will Crash  

China Seems To Have Been Able To Manipulate Iron Ore Prices Lower

Back in July we explained just how difficult it is to manipulate commodities lower just by talking and selling from stockpiles.* In the case of iron ore, China used a few more of the tools from the toolbox.

From the South China Morning Post, September 22:

China’s curbs on steel production, pollution and energy consumption send iron ore prices tumbling 

  • Iron ore prices plummeted to just below US$100 a tonne last week, after hitting a record of US$235 a tonne in May
  • The decline, which reflects efforts by Beijing to rein in raw material prices, has hit miners, investors and traders

Investors are fire-selling mining stocks, iron ore traders are losing money, and smaller miners are pulling back shipments because of falling iron ore prices driven by tumbling Chinese demand.

Even usual seasonal factors, such as lower Chinese steel demand ahead of winter, will have little impact on plunging prices that have sent the iron ore supply chain reeling, as the downward momentum caused by fundamental changes to China’s steel and iron ore demand gets under way, analysts say.

Iron ore, the darling of China’s post-pandemic economic recovery, is facing a reversal of fortunes, with prices sinking to just below US$100 a tonne late last week after scaling record heights of US$233 to $235 a tonne in May.

UBS issued repeated calls last week for investors to sell mining stocks, including those of Australian companies Fortescue and Rio Tinto.

“Prices have fallen more than 50 per cent since peaking in mid-May,” UBS equities analysts said.

“This reflects a sharper than expected slowdown in property activity in China thanks to tightening measures and the Evergrande risk of default impacting confidence.”

The price turnaround reflects Beijing’s success in its broader efforts to influence supply and demand for steel, which determine iron ore prices, as it pushes to reverse high raw material costs that have hurt businesses, especially for small and medium-sized steel producers....

As noted on Monday, Neil Hume has been tracking the decline in iron ore (and its impact on the miners) for weeks. 
*Here's the introduction to that July 12 post: 

The first round of sales sort of fizzled, reminding us that it is not an easy task to manipulate prices.

The three distinct phases of what the Chinese did last time were:

1) Make the decision to sell the metals and experience front-running from some of the comrades at the table

2) Announce the plan to sell some inventory to test how much effect jawboning has

3) Release the metal onto the market

The problem the Chinese had in round I was that prices had already come down fast off the May 10 spike high when they made the announcement so that by the time the metal was put on the market participants were seeing it as a bargain compared to recent prices and absorbed the selling. We did get down to $4.08 but the action that morning looked more like someone getting liquidated by a margin clerk than a bunch of cathodes being offered down.

In some ways what the Chinese are trying to do is similar to a central bank trying to defend its currency: you have a limited amount of ammunition and can't just throw it into the market willy-nilly or you will run out. Just ask Malaysia and the BoE. All the central banks can do is attempt to guide the action that is unfolding. If they can catch the inflection points, the bankers get a magnified effect from their finite resources of foreign exchange. But it is so tricky: too early you waste your reserves, too late and the other side says thank-you for the supply. Just right and at best you amplify and accelerate where the market was going to go anyway. See also Warren Buffet's 1988 letter to the shareholders of Berkshire Hathaway for the denouement of most central bank forex campaigns: "He lied like a Finance Minister on the eve of a devaluation."*

That's enough intro, here's Bloomberg via Creamer's Mining Weekly, July 7:....

Carbon Sucking in Iceland

This story is an opportunity for me to throw an editorial wrapper around a short announcement.

The plant is small and the technology is expensive but this really is the wave of the future.

As to size, a few years ago Sweden's Lund University calculated that Bill Gates' 59 trips on his jets (I think he has four now, two big Airbus' and two big Gulfstreams) produced 1600 tonnes of CO2.

Here's the headline story and then a bit more editorializing. From The Chemical Engineer, September 21:

Climeworks starts up industrial-scale direct air capture facility

CLIMEWORKS has started operations at the world’s largest direct air capture and CO2 storage facility, in Iceland.

The construction of the facility, known as Orca, began in May 2020. It is constructed with advanced modular technology of container-sized units and has a capture capacity of 4,000 t/y of CO2. It is situated next to ON Power’s Hellisheiði Geothermal Power Plant so that it runs entirely on renewable electricity. The captured CO2 will be stored underground by partner Carbfix, which mixes the CO2 with water for rapid underground mineralisation in a process that takes less than two years....


So this plant, currently the world's largest would remove the equivalent of one guy's travel emissions for 2 1/2 years..

Big whoop. However...

Carbon capture and storage is favored at some of the highest political levels and will be used by companies that are so big they see the expense required to get to negative emissions as a competitive advantage against smaller competitors who will be crushed by the costs. This is the same approach multinationals take toward regulation: bring it on and bury the little guys.

There are voices in the control-freak wing of the green coalition that are already howling that this technology will allow "business-as-usual" to continue which is a threat to their wannabe power over people and economies. They will probably be bought off.

One last note: the approach that Carbfix uses, solidifying the CO2 is absolutely the way to go versus pumping CO2 gas into disused caverns or oil and gas fields or under the sea.

Although more expensive initially, it eliminates the threat of carbon dioxide belches that could be, not just counterproductive to the storage effort, but physically dangerous to people in the vicinity. See Cameroon's Lake Nyos for an example.

French VC on track for a record year—but is overshadowed by its neighbors

From PitchBook, September 10:

Government attempts to bolster the startup ecosystem, coupled with unexpected tailwinds created by the pandemic, have created a boom in venture capital activity in France—but it still lags behind other major economies in the region.    

In the first half of the year, venture capital funding for French startups totaled €4.6 billion (about $5.4 billion) across 381 deals, representing over 70% of the total invested in 2020, according to PitchBook data. But by comparison, the UK and Germany saw VC investment soar to new heights in these first six months, beating the previous year’s records—€14.2 billion and €7.7 billion, respectively. 

"The pandemic created a lot of growth in French startups last year. We raised more than expected and what we’re seeing now is more stability," said Xavier Lazarus, co-founder of Elaia Partners. "We’re still raising a lot of money, and we’re not far off the rest of our neighbors." 

Indeed, during the COVID-19 crisis, France saw the most success of the three markets, up over 25% from 2019 to 2020, compared with 1.7% in the UK and 10.9% in Germany. The sheer amount raised by French startups last year may be having an effect on this year’s activity, according to Lazarus, as companies are already well-capitalized. 

And yet, this is the first time in a few years that France’s VC market has grown at a slower pace than Europe's two other big economies, the UK and Germany, despite huge efforts from its government to make the country into a nation of unicorns. 

The French government has sought to promote more late-stage capital from domestic investors. In 2019, President Emmanuel Macron announced a €5 billion fund to support tech investments with €2 billion earmarked to help startups scale up and introduced a new tech visa to help high-growth startups recruit foreign workers. 

Macron also set a goal of having at least 25 billion-dollar-plus companies in France by 2025—it currently has 13. This year has welcomed new entrants to the stable including insurtech Alan, which was valued at €1.4 billion in April with a Coatue-led Series D, and blockchain security startup Ledger. The latter raised $380 million in a June round led by 10T Holdings, valuing it at over $1.5 billion....


Electric Vehicles: "Michigan State Police to begin testing Ford Mach-E Interceptors"

If you want acceleration, electric is where you want to be.

The downside is that police cruisers get in car crashes and I don't think you want to be in one during a PIT maneuver gone bad.

From TechCrunch:

The next time you get pulled over in Michigan, it could be by a cop in an electric SUV — at least if Ford has anything to say about it. The American automaker is stepping up its Police Interceptor program, which modifies existing models for use by law enforcement, typically with beefed up suspensions, brakes and added horsepower.

The company has pitched the idea to law enforcement agencies in the UK, while the city of Ann Arbor, MI already has two such vehicles on order. On Friday, Ford announced that it, in short order, will deliver one of its Mustang Mach-E Interceptor prototypes — which appears to be based on the Mach-E GT variant — to the Michigan State Police...


With the Opening Of the United Nations General Assembly: "Attention Journalists: "'How to write about pointless international organisations'"

Last seen in 2018's "Belgium to charge journalists €100 a year for EU summit coverage":

The Financial Times' Alan Beattie wrote this bit of brilliance last year for the G8 meeting. His friend Gideon Rachman duly posted it on his FT Rachmanblog. I am reposting it in full to bookmark for future reference:
...Alan then forwarded me a generic column on international institutions that he has written. It really says it all - and I think I may simply reproduce it, every year, round about G8 time.
It goes as follows:
By reporters everywhere
An ineffectual international organisation yesterday issued a stark warning about a situation it has absolutely no power to change, the latest in a series of self-serving interventions by toothless intergovernmental bodies. 
“We are seriously concerned about this most serious outbreak of seriousness,” said the head of the institution, either a former minister from a developing country or a mid-level European or American bureaucrat. 
“This is a wake-up call to the world. They must take on board the vital message that my organisation exists.” 
The director of the body, based in one of New York, Washington or an agreeable Western European city, was speaking at its annual conference...

Just brilliant.
Follow the Rachman link for the whole thing. 

note, September 21 2021: The Rachmanblog link seems to have been lost in one of the FT's tech upgrades. It was copied out in full here.

I wish Inner City Press was still accredited to the U.N. but unfortunately his questions cut a little to close to the bone.

Here are his twitter updates from outside the fence.

"Walking Blind Into An Energy Crisis"

From ChartWatchers, September 17:

A theme is emerging in the energy space. Oddly, it is not a theme focused on green energy. At this point, it appears to be a theme focused on the energy squeeze that is right before us. This worldwide issue appears to be coming to a head.

Type in the name of any country with the words "electricity price spike" into your Google search bar. A result pops up. Most countries are experiencing record demand for electricity, but utility companies are not building power stations to match demand. The governments worldwide are quick to mask the problem by announcing green plans. The real problem is the sun and wind are renewable, but the infrastructure to catch that power is not. These plants wear out as fast as a Samsung fridge.

All of a sudden, in the last few weeks, a major surge has shown up.

The Uranium ETF (URA) is soaring. Part of this is apparently due to ETFs, but the other part of it is the chart has been improving for a while. And the chart is on a rocket ship higher.

Natural Gas ($NATGAS) has been soaring worldwide as Europe is paying 4x more than North America. The price below is for North America....


CB Insights on Hydrogen

It appears they are bullish.

And have a lot of names they are interested in.

From CB Insights, September 20:

How Hydrogen Will Help Industrials Meet Decarbonization Goals And Leave Fossil Fuels Behind

With funding and industry interest in hydrogen tech reaching record highs, we explain how the element can be used to decarbonize operations — across manufacturing, transportation, and utilities — and address key challenges and opportunities in the space.  

As the manufacturing, transportation, and utility sectors look to reduce their carbon emissions, hydrogen could be the most promising energy source.

But for adoption to catch on broadly, the price of hydrogen needs to drop considerably to compete with fossil fuels. Hydrogen production capacities and distribution networks will also need to ramp up to support higher volumes.

To address these challenges, investors plan to pour about $500B into hydrogen projects globally through 2030. These initiatives are designed to reduce the price of hydrogen — especially green hydrogen — dramatically.

Meanwhile, companies are beginning to power factories, vehicles, and utilities with hydrogen as they work toward their carbon-neutral goals.

Below, we address the following questions:

  • What is hydrogen? How is it produced, distributed, and used? 
  • Why does hydrogen matter?
  • What do manufacturing, transportation, and energy companies need to consider for adoption?
  • What does hydrogen investment activity look like? Who are the key players?
  • What’s ahead?

What is hydrogen? How is it produced, distributed, and used?  

Hydrogen is the most abundant element on earth, and it has a history of being used for energy. In the 1950s, NASA used liquid hydrogen as rocket fuel — and today, the industrial gas is commonly used in petroleum refining and fertilizer production.  

Hydrogen has also recently gained attention for its potential to help decarbonize manufacturing, transportation, and energy. The molecule only emits water vapor when used as a fuel in hydrogen fuel cells, and it does not emit CO2 emissions when combusted.

That said, there are still some risks in using hydrogen for energy. For example, powering production by burning hydrogen creates NOx (nitrogen oxide) — a poisonous gas — so companies that choose to combust hydrogen will still need to implement scrubbers to clean waste gases.

The hydrogen rainbow

There are 3 kinds of hydrogen: gray hydrogen, blue hydrogen, and green hydrogen. The production process and emissions vary by type.

Most hydrogen produced today is gray and made via steam methane reform (SMR), which produces process emissions. 

As companies work towards carbon neutrality goals, they are aiming to use more blue and green hydrogen. This means that more hydrogen will need to be produced via electrolysis — the splitting of water (H2O) into oxygen and hydrogen.

Electrolyzers — the units that induce electrolysis — are key to increasing the green hydrogen supply. Most plants being built employ proton exchange membrane (PEM) electrolyzers, which can produce hydrogen with intermittent renewable energy flow more easily than older electrolyzer types.  

The hydrogen value chain....


I am pretty much au courant with this stuff and see names with which I am unfamiliar. Worth a look for everybody but the most obsessive hydrogen wonk.  And maybe even them.

Monday, September 20, 2021

Chinese State Media Is Extremely Quiet On Evergrande

 A quick check of the big four: 

The outward facing Global Times: nothing.

The inward facing Xinhua: zip

And China Daily nada

Finally, the South China Morning Post which has changed so much as to be indistinguishable from the Communist Party organs, three stories, one of which is a soft-focus "the way we were" look back through the years another, a piece on the reaction of U.S. markets, an article on the competition and an opinion piece "This is not China's Lehman moment"

Whatever the Party/Government is up to, they are not yet saying publicly.

Meanwhile in Afghanistan....The Taliban Are Building A Navy

Land-locked country? Pish-posh.
Where there's a will, there's a way.

Via the New York Post:


Swan boats. They commandeered swan boats.

But no black ones.

"Developer takes billion-dollar hit from Evergrande"

 From AFP via the Asia Times, Sept. 20:

Fortunes wiped over fears that one of China's biggest developers will default on interest payments this week 

The boss of a Shanghai-based property developer lost more than a billion dollars Monday, as fears over the potential collapse of Chinese real estate giant Evergrande sent panic across Hong Kong trading floors.

Zhang Yuanlin, chairman of Sinic Holdings Group, saw his net worth drop from $1.3 billion in the morning to $250.7 million by the afternoon, according to Forbes, when his firm was forced to halt trading in Hong Kong following an 87 percent slump in its share price.

Zhang was featured on Forbes’ Billionaires list of the world’s richest people this year and made his fortune in high-rise apartments – now highly vulnerable as the possible collapse of teetering property giant China Evergrande sparks panic....


Britain: Not Kidding About The CO2 Shortage, Secretary of State for Business, Energy and Industrial Strategy Monitoring "Minute-by-minute"

Following up on Saturday's "As We Approach The Big Climate Conclave In Glasgow, There May Be A Beer Shortage Because Of A Lack Of CO2" we visit Mr. Hume:

Although, to be fair, the Minister is probably more concerned about the poultry and other protein supplies than he is about the beer.

Meanwhile in Europe: Sky-High Energy Prices Imperil Economies

From OilPrice, September 18:

Skyrocketing Energy Prices Could Cripple Europe’s Economy

Surging energy prices in Europe are hurting more than just consumers. The price spikes have started to hit industrial activities, threatening to deal a blow to the post-COVID recovery in European economies with a triple whammy of reduced consumer purchasing power, lower industrial production, and higher operating costs.  

Giant European firms, from chemicals and mining to the food sector, say sky-high gas and electricity prices are hitting their profit margins and forcing some of them to curtail operations. 

Some factories have shut down because of record natural gas prices. More idling of industrial activity across Europe is likely in the coming weeks, analysts say.  

Meanwhile, the record European natural gas prices are sending Asian spot prices of liquefied natural gas (LNG) to record levels for this time of the year—between peak summer demand and ahead of the winter heating season. 

Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices on the continent and power prices in the largest economies to record highs. Almost daily, gas and power prices in Europe surge to fresh records, putting pressure on governments as consumers protest against soaring power bills....


"As We Approach The Big Climate Conclave In Glasgow, There May Be A Beer Shortage Because Of A Lack Of CO2"
Norwegian Fertilizer Major, Yara, Cuts Ammonia Output As Gas Prices Surge
"Major UK Fertilizer Plants Shuttered Due To Skyrocketing Natural Gas Prices"
"Priciest food since 1970s is a big challenge for governments"

"Putin's party set to win majority in Russian parliamentary election" (plus 'it appears someone Is intruding on the FT's Joseph Cotterill's Turf')

First up, the FT's Moscow Bureau Chief sets the table:

Which naturally enough leads to "How they count the votes" in Russia:

Versus "How they count the votes" in Detroit:

Reminding me of this from the New York Post's Op-Ed editor, a week ago:

Which sounds suspiciously like Mr. Cotterill's "Foreign correspondent reports on the home country" bit, prime examples of which can be found at:  
If interested here's the kickoff to his effort via Medium:

 Long way, I know but the pay-off, I think, is worth it.

"Commodities: the Chinese real estate exposure—What might the fallout from Evergrande mean for demand?"

 From Jamie Powell at FT Alphaville:

In markets, being right early is the same as being wrong. Fortunately for FT Alphaville, the same rule doesn’t apply to journalism.

Back in 2018, FT Alphaville took a look at Evergrande -- China’s largest property developer -- and its ballooning balance sheet, which included 408,000 car parking spaces, a land bank the size of Malta, and a curiously low yield on its rental properties.

Three short years later, Evergrande is facing a liquidity crisis. In a normal economy, this wouldn’t be such a big deal. But in China, where real estate is estimated to account for up to a quarter of GDP, this is slightly more of a concern. It doesn’t help that the property developer also has some $300bn of outstanding obligations to pay. And it’s crunch time: two interest payments on its long-suffering bonds are due Thursday.

So the question now is: how contagious would an Evergrande default be for the global economy? Chinese property stocks have started the week by already taking a battering, with Hong Kong listing Sinic Holdings crashing 87 per cent during trading on Monday, and the bonds of other developers sinking to distressed levels. Via UBS:....


Mr. Powell's compadre-in-bisque (the color of the FT is bisque dammit, not pink, not salmon, bisque) the FT's Natural Resources Editor, Neil Hume, has been flagging the downturn in iron ore (as well as keeping track of a couple dozen other things) for the last few weeks

Capital Markets: "Risk Appetites Didn't Return from the Weekend"

 From Marc to Market:

Overview: Investors' mood did not improve over the weekend, and the lack of risk appetites are rippling through the capital markets today. Equities have tumbled, yields have backed off, and the dollar is well bid. Hong Kong and Australia led the sell-off in the Asia Pacific region, off 3.3% and 2.1%, respectively. Regional losses may have been larger, but Japan, Chinese (mainland), and South Korea markets were on holiday. Europe's Dow Jones Stoxx 600 is off 2%, the most in two months. US futures are pointing to opening losses of 1%+. The carnage is giving the bonds markets a bid. The US 10-year yield is off a couple of basis points, around 1.33%. Europe's benchmarks are mostly 1-2 bp lower. The dollar is extending last week's gains against nearly all the major and emerging market currencies. The yen and the Swiss franc, the other funding currencies, are also firm. The Australian dollar and Scandies are the weakest of the majors, while the Russian ruble holds the dubious distinction among emerging market currencies. The JP Morgan Emerging Market Currency Index is moving lower for the third consecutive session. Gold is not drawing as much support as one might expect from the softer yields and falling equities. It is a little firmer near midday in Europe. Oil's recent gains are being pared, and the November WTI is off 2.2%, its second day of losses, and is approaching $70. Iron ore has continued to fall, and after falling 4.5% last week, copper is off another 2.6% today.

Asia Pacific
The seemingly slow demise of China's Evergrande is weighing on sentiment. However, most of the contagion seems limited to the real estate development sector. Sinic, another property developer, collapsed more than 85% today before trading halted. The next key event in the saga may be an Evergrande interest payment due Thursday on two notes, one of which is trading at 30% of face value.

A top Chinese regulator defended Beijing's actions to a group of Wall Street executives and tried playing down the worrisome implications. First, regulations were strengthened for companies with consumer-facing platforms. Second, data privacy was improved. Third, there were national security gaps that were closed. Fourth, "social anxiety" over education and gaming was addressed. Many investors are unlikely to be persuaded. Even if the one is sympathetic to the ends, the means still rankle investors. It still appears to be the aggrandizement of the state sector and choking the private sector. No rival authority (family, cultural expressions, business) to the CCP is brooked.

This week's BOJ meeting is not drawing much attention. The domestic focus is on next week's LDP leadership contest, where Kono is the favorite and a substantial fiscal policy. The yen is being supported by the risk-off mood. After being rebuffed a little above JPY110, the dollar is trading near JPY109.60. A band of support extends to around JPY109.45, but the key is closer to JPY109.00, where an option for nearly $1.1 bln rolls off today. Falling iron ore prices and weaker miners in Australia saw the stock market tumble to three-month lows today, and the Australian dollar's two-week drop is being extended. It fell to nearly $0.7225 today. A week ago, it was about a cent and a half higher. The next downside target is around $0.7200, and a break could spur a move to the year's low set in late August near $0.7100. With Chinese mainland markets closed, the yuan did not trade onshore. The offshore yuan fell for the third consecutive session, and around CNH6.4835, the greenback is near a three-week high.



Sunday, September 19, 2021

Evergrande, the Cram Course

 Following on "Hong Kong Stocks Crash, Futures Slide As Markets Finally Freak Out About Evergrande Default Contagion", some backstory:


"Hong Kong Stocks Crash, Futures Slide As Markets Finally Freak Out About Evergrande Default Contagion"

Today's word is chaos.

From ZeroHedge:

Well, as we warned, the Evergrande contagion has finally arrived and with China closed for holiday traders are getting out while they can and where they can, and on Monday morning in Asia that means Hong Kong, where Evergrande - which is about to default - has crashed by another 13% this morning and is on track to close at its lowest market cap ever (to be expected ahead of a bankruptcy that will wipe out the equity)...

... and with Evergrande property development peers such as New World Development & Sun Kung Kai Properties both down over 8%, and Sunac China and CK Asset plunging over 7%, the Hang Seng property index has crashed more than 6%, its biggest drop since 2020 to the lowest level since 2016...

... and the broader Hang Seng index is down 3.5% in early trading, to the lowest level since November 2020.

And with traders on edge about the rapidly spreading contagion (as we described earlier) even sectors supposedly immune to China's property woes, such as the Hang Seng Tech Index are plunging, sliding as much as 2.7%.

And speaking of Evergrande's imminent default, we noted earlier that while the company is scheduled to pay $83.5 million of interest on Sept. 23 for its offshore March 2022 bond, and then has another $47.5 million interest payment due on Sept. 29 for March 2024, the day of reckoning may come as soon as Tuesday: that's because Evergrande is scheduled to pay interest on bank loans Monday, with a one-day grace period. In other words, should it fail to arrange an extension, it could be in technical default as soon as Tuesday (for a much more detailed analysis of next steps please see "This Is How Contagion From Evergrande's Default Will Spread To The Rest Of The World".) Spoiler alert: a default is coming because Chinese authorities have already told major lenders not to expect repayment.

Incidentally, as Bloomberg's Mark Cranfield notes, Hong Kong stocks can't blame low liquidity for the meltdown as "trading volumes on the Hang Seng and H shares indexes are running well above the 10-day average on Monday as both drop by ~4%."

There's more: junk-rated Chinese dollar bonds slid by as much as 2 cents, according to credit traders, pushing their yield to just shy of 15%, the highest since 2011.

Other sectors are also getting hammered, such as Ping An Insurance, China’s largest insurer by market value, which plunged 7.3% in Hong Kong.

“Investors may be concerned about highly-geared names and don’t care about valuation nowadays,” said Philip Tse, head of Hong Kong & China Property Research at Bocom International Holdings Co Ltd. “There will be further downside” unless the government gives a clear signal on Evergrande or eases up on its clampdown on the real estate sector, Tse said....


Some of our recent links:

"He lied like a finance minister on the eve of a devaluation"
-Warren Buffett*

Sept. 8
"Evergrande Bonds Tumble After Report Of Technical Default; Contagion Slams China Property Market" (will the Federal Reserve have to help the Chinese?)

The problem with these situations is you don't know how deep the rot goes until the positions start to unwind. That's how a stupid (relatively) little family office, Archegos Capital, came close to causing serious problems, re-re-hypothecated collateral and 100:1 leverage in some of the positions meant no one was really aware of what would happen if the market for the collateral stopped ascending.

In the Evergrande case, if the mess gets into the trillions of US dollar equivalents, the Chinese may need more ammo than they posses to contain the fallout. Hence the question of Fed assistance.

Sept. 7
"Attention: The Black Swan In The Center Of Beijing's Tiananmen Square Meant Nothing, Please Go About Your Business".  

Harvard's Own Ig Nobel Prizes, 31st Annual Awards Ceremony

 First up, a quick overview from The Scientist, September 14:

2021 Ig Nobel Prizes Honor Decongestant Orgasms, Rhino Transport

A full beard can absorb nearly 40 percent of the shock from a punch to the face, according to one winning study.

Science is driven by curiosity. While some topics are more useful to society, such as treating cancer or mitigating climate change, others are less consequential, such as how to best kill cockroaches on a submarine or what bacteria lurk in that piece of chewing gum stuck under a table. The latter group has a chance to shine thanks to the Ig Nobel prizes from the Annals of Improbable Research.

The 31st First Annual (yes, you read that right) Ig Nobel Prize ceremony was held last week (September 9), honoring work representing 10 categories. Because of the ongoing pandemic, the ceremony was held fully online. Winners were sent a PDF file, allowing them to cut out and assemble a gear-shaped trophy, with human teeth as the teeth in the gear, because why not?

See “Frozen Fecal Knives Honored by 2020 Ig Nobel Prizes

Here is the work honored at the ceremony:

Biology: Over several years, a team of Swedish researchers analyzed variations of vocalizations made by domesticated cats and how this “meowsic” is interpreted by people.

Ecology: An international team analyzed the bacteriome of discarded pieces of chewing gum on streets and sidewalks in five countries across Europe. “Our findings have implications for a wide range of disciplines, including forensics, contagious disease control, or bioremediation of wasted chewing gum residues,” the authors write in the study.

Chemistry: In 2008 and 2015, an international team chemically analyzed the air in movie theatres, identifying the volatile organic compounds emitted by the audience, which they found was a reliable indicator of the amount of violence, sex, and profanity contained in the movie.

Economics: A French researcher compared hundreds of photographs of politicians in post-Soviet countries and found that obesity correlated with corruption.....


To date, the University of Manchester's Andre Geim remains the only winner of both a Nobel and an Ig Nobel Prize.

And from the Award's sponsor, The Journal of Improbable Research:

The 31st First Annual Ig Nobel Ceremony

The ceremony itself included these traditional elements:


It appears the winners of the Nobel Prize in Chemistry were seriously overrepresented   among the presenters.

"The Dictatorship of Woke Capital: How Political Correctness Captured Big Business"

For the most part dialectics is just a mind-numbingly boring attempt to manipulate people.

I can't imagine how awful Marxist dialectics must have been when talking with Marx, or Lenin or any of the true believer crowd.

But sometimes, as Hegel well knew, it is the quickest way to clarify an idea.

 From American Affairs Journal:

The Dictatorship of Woke Capital: How Political Correctness Captured Big Business
by Stephen R. Soukup
Encounter, 2021, 196 pages

In 1654, Peter Stuyvesant, director general of New Amsterdam (later New York) barred Jews from entering the colony. Then all progressive hell broke loose. Under pressure from shareholders, the Dutch West India Company reversed Stuyvesant’s decision and gradually “cancelled” him.1 It was an early example of political activism in business.

Stephen R. Soukup argues in The Dictatorship of Woke Capital that the Left today has harnessed the power of business to advance its political ends. Yet “woke capitalism”—meaning capitalism that puts political goals ahead of profit, and where business forever worries about antagonizing public opinion—is nothing new. As the Stuyvesant story suggests, “woke capital” has been around for centuries. Only the ideology behind wokeness has changed.

On some level, Soukup recognizes this. He traces “socially responsible” investing as far back as John Wesley, the eighteenth-century English cleric who founded Methodism, and who told investors to steer clear of businesses that violated God’s law. Even as late as the twentieth century, some conservative investors avoided companies that made alcohol and tobacco. The difference between then and now lies in the nature of today’s wokeness—and its totality. Most major American corporations have joined with academia, elite media, and government bureaucracies to push a progressive cultural agenda.

Soukup’s book reads like an indictment, suggesting a conspiracy at work, almost forgetting that all trades have their seamy side. It brings to mind tracts written in the 1970s that accused the Rockefellers, the Trilateral Commission, and the big banks of trying to take over the world. Yet this is the wrong approach. With so many average Americans today as woke as their corporate leaders, one senses an inexorable “woke” force moving through society, carrying America’s corporate leaders along with it. In fact, that force is capitalism itself.

The Dialectics of Woke Capital

Karl Marx has much to say about capitalism, but Soukup overlooks him, tracing wokeness, instead, back to Marx’s missteps. The absence of any revolution in the West along the lines Marx had predicted led to Gramsci’s view that a cultural revolution within institutions needed to precede the economic revolution. This led to Lukács’s position that all of society must first undergo a cultural revolution, which in turn led to Marcuse’s call for a sexual revolution and, later, censorship. The result, says Soukup, is “Cultural Marxism,” which, combined with identity politics, is the ideology of today’s woke. Yet if Soukup had paid more attention to Marx, he might have found a better way to explain “woke capital”—and to fight it. In a supreme irony, those seeking to advance a center-right agenda today could benefit from reading Marx.

Marx thought dialectically. What does this mean? Take a certain social phenomenon: it develops to its utmost limits, makes use of all its potentialities, creates the highest thing it can, and stops. This is called the thesis. Then comes the antithesis, a hostile force. It also unfolds to the very end, and stops. Born out of these two hostile phenomena is a third force, the synthesis, making use of the result achieved by both, and reconciling them. And society moves forward again, always forward, toward the new.

A rough dialectical history of the United States since the end of the Civil War might be said to unfold as follows, with woke capitalism the most recent entry. In 1870, most Americans worked as independent small farmers. Most business firms were also small, with one or two employees besides the owner.2 A culture of individualism and a religious ethos that gently repressed greed complemented this economy. The country prospered, yet the economy’s small scale limited how much it could produce. This was the thesis.

Hostile forces emerged in the form of robber barons who built large corporations, sometimes through deceit and manipulation. A culture of social Darwinism that equated worldly success with spiritual superiority replaced the older, more innocent religious ethos. Many Americans found themselves subject to both the vicissitudes of the market and business chicanery, as large companies undercut their ability to make a living as independent operators. Indeed, one of the most important changes in the U.S. economy during the second half of the nineteenth century was the dramatic increase in the size of the average enterprise, along with a reduction in the number of firms in each sector.3 The new system produced more wealth than before through improved economies of scale, yet its roisterous atmosphere created uncertainty, and it soon reached its productive limits. This was the antithesis.

Corporate America and welfare-state liberalism were the synthesis. In the first half of the twentieth century, the robber barons’ large enterprises became the tamed corporations that promised stable salaried employment, while the robber baron himself morphed into the harmless corporate manager, indeed a business bureaucrat. The old religion that had gently repressed greed returned in a slightly new form called the “social ethic,” which promoted the ideal of company teamwork and repressed outward displays of ambition. Meanwhile, government added another layer of stability in the form of FDIC and Social Security and, later, in the form of welfare payments, Medicare, and Medicaid.

After the Second World War, the American economy found itself launched on a great boom, yet this synthesis soon reached its productive limits. By the 1970s, large corporations promising stability had grown less flexible and innovative. Meanwhile, government spending had increased to one-third of GDP. High tax rates sustained the expanded welfare state, yet they also discouraged investment, while government intervention to increase people’s purchasing power contributed to inflation.

A dialectical analysis explains what happened. From 1950 to 1970, welfare and entitlement programs grew from 9 percent of GDP to 15 percent4 (while military spending trended lower but ticked up during the Vietnam War). Capitalism needed a “floor” to avoid the risk posed by a demoralized and disgruntled workforce. In the form of expanded Social Security benefits, Medicare, Medicaid, federally assisted welfare programs, agricultural subsidies, and a minimum wage, government became an active force for personal income security. A stable political climate—a necessity for business investment—could not exist without this floor, yet the new government spending led to inflation, which discouraged business investment. It was a contradiction.

Inflation had already climbed to 4 percent on average during the late 1960s, and to 6 percent in the early 1970s, before the “oil shocks” in 1973.5 The origins of this inflation ran deeper: the synthesis was unraveling through contradiction. A century before, a spike in oil prices would have more likely caused a depression rather than inflation, as industries would have curtailed their operations and consumers cut back on their spending. A culture that prized “standing on one’s own two feet,” spurned handouts, and one that believed “what goes up must come down” would have discouraged any artificial increase in business or consumer purchasing power through government spending. The synthesis that prevailed during the 1970s, however, encouraged such spending. Its culture embraced entitlements and believed “What goes up today is likely to go up tomorrow,” leading to the kind of behavior that accelerated inflation and hastened the demise of the old synthesis.

Hostile forces—the antithesis—soon emerged in the form of upstart companies such as Microsoft, Sprint, and Apple, which spearheaded innovation. In the case of Microsoft, for example, IBM paid Bill Gates to develop an operating system for PCs almost as an afterthought, overlooking software’s potential, and allowed Gates to retain the intellectual property rights, which would fuel the rise of Microsoft.

One hostile force even carried the word “hostile” in its name. A new merger wave broke out in the 1980s that dwarfed all earlier periods of corporate consolidation, with the “hostile takeover,” once a rarity, increasingly the dominant form.6 The result was another contradiction of capitalism. High interest rates needed to fight inflation depressed the price of corporate shares, while the deregulation needed to boost the economy allowed corporate raiders to buy out these undervalued corporations and sell off their valuable assets. The mergers created new wealth, but also displaced millions of workers and middle managers. Those who kept their jobs often lost the economic security they had enjoyed with the traditional large companies. IRAs and 401(k)s gradually replaced the old company-based defined-benefit pension plans. When U.S. corporations threatened to move production overseas, labor’s influence weakened and private sector union membership began its long decline.

During this period, which spans the Reagan years, a new entrepreneurial culture replaced the old Social Ethic. The notion that “greed is good” justified the new economy, much as the Social Ethic had justified mid-twentieth-century corporate America and social Darwinism had justified the robber barons. Yet the entrepreneurial culture’s belief in the “primacy of economic man” ignored emerging tears in the social fabric, ranging from African Americans marooned in crime-ridden cities to families stressed by the new demand that both spouses work. In the latter case, capitalism not only encouraged women to enter the workforce, but also demanded it, and benefited from it. With businesses paying relatively less to any individual worker, both spouses now had to work to maintain the middle-class lifestyle that a single wage earner could once provide—a point that both social conservatives and economic progressives, including Senator Elizabeth Warren, would later focus on.7 These social strains, along with economic uncertainty, limited how much this economic organization could produce.

What has been called “progressive neoliberalism” emerged as the new synthesis, drawing from the two previous historical stages. It reached its high point during the Clinton administration. Capitalism’s rules continued to guide the economy in accordance with the “primacy of economic man.” Under President Clinton, for example, shareholders prospered through lower capital gains taxes and more free trade agreements. Clinton also tried to control the deficit while restricting welfare payments.

Meanwhile, in the culture, specific identity groups were targeted for support to manage tears in the social fabric. It was a variation on the old Social Ethic that had tried to help people “adjust” by attending to their feelings. Women got set-asides, while African Americans got easier access to subprime mortgages. Yet more important was the rhetorical support given to these specific groups, which didn’t hang very heavy on the corporate balance sheet. African Americans, women, Hispanics, and Native Americans gained more attention and recognition—for example, in the form of “hate crime” legislation, postage stamps bearing the face of a marginalized group’s leader, or holidays named after the same—with little financial cost. These were “cultural entitlements” rather than economic entitlements, directed toward helping people feel better about themselves independent of their material condition. George H. W. Bush’s “kinder, gentler conservatism” and George W. Bush’s “compassionate conservatism” operated within this tradition, as these mottos supported capitalism, while also trying to compensate people psychologically—and they did, in some nebulous way.

Yet this neoliberalism soon reached its productive limits, which is where “woke capital” comes in. The neoliberal synthesis accelerated the offshoring of manufacturing, while many of the new tech companies employed fewer people than the old large companies did. Wealth increased, but was concentrated in fewer hands, while the bottom half of the population faced increasing pressures on living standards. After 2000, weaker growth brought lower interest rates, which contributed to real estate and financial bubbles.....


See also yesterday's Schumpeter's opening words are apocalyptic: "Can capitalism survive? No. I do not think it can." for the thoughts of a guy who predicted this in 1942. 

A confession: over the years we've presented Hegel in a favorable light.
On the other hand, back in May 2007: 

International Day of Direct Action Against Climate Change and the G8

....Time to brush up on the Dialectical Materialism (nobody told you this was going to be easy): 

Lenin's elements of dialectics

Lenin made some brief notes outlining three "elements" of logic after reading Hegel's Science of Logic in 1914. They are:

1) The determination of the concept out of itself [the thing itself must be considered in its relations and in its development];

2) the contradictory nature of the thing itself (the other of itself), the contradictory forces and tendencies in each phenomenon;

3) the union of analysis and synthesis.

Such apparently are the elements of dialectics.

— Lenin, Summary of dialectics

Lenin develops these in a further series of notes, and appears to argue that "the transition of quantity into quality and vice versa" is an example of the unity and opposition of opposites expressed tentatively as "not only the unity of opposites, but the transitions of every determination, quality, feature, side, property into every other [into its opposite?]."

Even Wikipedia gets a little confused as to what Lenin is saying, whereas Lenin seems to nail Hegel (which ain't always easy).

"There's battle lines bein' drawn..."

See you June 8th.

For more of our philosophical foundations see "Big Four Accountant Partners: "Does Kant’s definition or Augustine’s and Aquinas’s definition of evil as privatio boni in subjecto...".

Or Schopenauer's "Die Kunst, Recht zu behalten" (The Art Of Controversy) for tips and strategies on not just talking dialectics but WINNING at dialectics:

....Put His Thesis Into Some Odious Category
It Applies in Theory, But Not in Practice
Don't Let Him Off The Hook
Will is More Effective Than Insight
Bewilder Your opponent by Mere Bombast
A Faulty Proof Refutes His Whole Position
Become Personal, Insulting, Rude (the Ultimate Stratagem)

And that, children, is why we study philosophy.
(and watch Monty Python)
Thanks to for keeping the Art of Controversy on the web.

Meanwhile in Shanghai: "China’s Hottest New Rental Service: Men Who Actually Listen"

From Sixth Tone, September 2:

Chinese women are fed up with dating self-absorbed men. Now, “butler cafés” are offering them more attentive male company — for a fee.

SHANGHAI — At 40 years old, Zheng says she’s tired of searching for the perfect man. So she’s decided to hire one instead.

Whenever she feels like some male company, the divorcée heads to a café in central Shanghai named The Promised Land. There, she spends hours being pampered by a handsome young server, who fetches her drinks, watches movies with her, and listens attentively to her anecdotes.

The sessions cost over 400 yuan ($60) each time, but Zheng says they’re worth every cent.

“The butlers respect me and care about my feelings,” she tells Sixth Tone. “Even if you have a boyfriend, he might not be this sweet, right?”

Zheng’s favorite hangout is a “butler café” — a new concept that’s generating enormous buzz on Chinese social media by offering women the kind of male attention they desire.

Originally from Japan, butler cafés allow customers to spend time with a team of dashing young waiters for an hourly fee. They’re a counterpart to the more mainstream “maid cafés,” which feature waitresses dressed in maid costumes serving a primarily male clientele.

Now, the businesses are spreading rapidly in major Chinese cities; the review site Dianping lists dozens of outlets offering “butler” services. Posts about the cafés have frequently gone viral on the Instagram-like social platform Xiaohongshu in recent months.

The outlets have found success by tapping into the frustrations of Chinese women, many of whom feel society remains far too patriarchal. Studies have found that China’s wives are less happy in their relationships than their husbands in all age groups.

Mero, one of The Promised Land’s three female co-founders, says the café aims to give women a space where they have control.

“Our mission is simple: We want to take care of women’s needs as much as possible,” says Mero, who, along with her employees and customers, spoke with Sixth Tone using a pseudonym for privacy reasons.

At the Promised Land, which opened last October, customers can choose which man they want, what activities they’ll do together, and even how he’ll dress (a traditional suit and tie or a Japanese-style school uniform are popular choices). They can also book a butler to accompany them on shopping trips and other errands through the café’s “one-day boyfriend” service.

Most of the clientele are university-educated women, who are more “open-minded,” according to Mero. They spend 600 yuan per visit on average, though some pay as much as 25,000 yuan to become VIP members — giving them access to special parties with the butlers and other perks.

Wang Qian, a 24-year-old student, is a regular visitor to the café. She tells Sixth Tone she enjoys the feeling of empowerment she gets from spending time there.

According to Wang, many of the men she meets in normal life are pu xin nan — a term popularized by the female comedian Yang Li that roughly translates as “men who are so average, yet so confident.” The butlers, however, are considerate and never mansplain anything to her, she says....