Two Images of China

The Olympic torch's journey has set the western media ablaze, giving it the opportunity to rake China over the coals for its policies on Tibet and human rights. The most vigorous protests, in London and Paris, were played out for prime-time newscasts. The more the police, motorcycle outriders and Chinese guards closed ranks, the more protesters clashed with them for the benefit of the cameras. In San Francisco the mayor had to change the torch route at the last moment to avoid assembled protesters. China's image in the West is poor.

On May 12 a devastating earthquake hit Sichuan Province, killing more than 55,000 people and leaving 25,000 missing and 5 million homeless. Government response was swift. Vivid scenes of the devastation and suffering, with a tearful Premier Wen Jiabao hugging children and babies and assuring people in his soft manner that they would receive help in rebuilding their lives and homes, changed the world's mood toward China. President Hu Jintao and other top leaders went to the sites to bring relief and lend support. In stark contrast, Myanmar's leaders were passive and rejected foreign aid for many weeks while their people suffered. China mobilized all its resources; appealed to the world for tents; accepted help from Japan, Russia, the U.S. and others; and collected donations from its people. Hundreds of millions of Chinese across this vast land and in their embassies abroad observed three minutes of silence on May 19, the first of three days of mourning. The national solidarity, discipline, organization and capability have been impressive. The world has seen a China never seen before.

But this moment of world sympathy will pass, and concerns over China's future role will remain. The West is uncertain whether this huge nation will be good or bad for the world. This tension will only be resolved when both sides approximate each other's worldviews and accept that they will never have identical cultural values.

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Market Wisdom from Bernard Baruch

• Don't underestimate the power of thinking. "During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think."
• If your stocks are keeping you awake a night worrying about them, you should sell them to a "sleeping point."
• Never take stock tips from others. Self-reliance and "doing one's own thinking" is a must.
• The stock market does not determine the health of the economy but "rather reflects it." The ability to understand this is an important skill.
• "There is no investment which does not involve some risk and is not something of a gamble." Moreover, "what we can try to do perhaps is to come to a better understanding of how to reduce the element of risk in whatever we undertake."
• "Better to have a few stocks and to watch them carefully."
• Having a "good supply of cash on hand at all times in reserve is important" to take advantage of market declines and major crashes.
• No one could be an expert at too many things. He liked to focus on "one thing at a time, perfect it, and do it well."
• What drives stock prices are human reactions. Ironically, the key to successful speculation is to remove our decisions from our emotions. "Without control over your emotions, there is very little chance for profitable success in the stock market."
• Baruch often described the market as a thermometer and the economic environment as the fever. "The market does not cause economic cycles but merely reflects them and the judgments of what traders believe business and the future will be like."
• "Don't try to buy at the bottom and sell at the top. It can't be done except by liars."
• "It is much harder to sell stocks correctly than to buy them correctly." Because of the emotional aspect of trading, if a "stock went up, the average investor would hold because he wants more gains - he's exhibiting greed. If the stock declines, he also holds on and hopes the stock will come back so he can at least sell and break even - he's hoping against hope."
• "Do not blame anybody for your mistakes and failures."
• It is important to "follow what the market is currently doing as opposed to following what one might personally think the market should do." As he said, "Every man has a right to his opinion, but no man has a right to be wrong in his facts."
• Knowing your biases and weakness are important. "Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions, and prejudices so you can separate them from what you see."
• "The main purpose of the stock market is to make fools of as many men as possible."

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Buffett's big bet

Will a collection of hedge funds, carefully selected by experts, return more to investors over the next 10 years than the S&P 500?

That question is now the subject of a bet between Warren Buffett, the CEO of Berkshire Hathaway, and Protégé Partners LLC, a New York City money management firm that runs funds of hedge funds - in other words, a firm whose existence rests on its ability to put its clients' money into the best hedge funds and keep it out of the underperformers.

You can guess which party is taking which side.

Protégé has placed its bet on five funds of hedge funds - specifically, the averaged returns that those vehicles deliver net of all fees, costs, and expenses.

On the other side, Buffett, who has long argued that the fees that such "helpers" as hedge funds and funds of funds command are onerous and to be avoided has bet that the returns from a low-cost S&P 500 index fund sold by Vanguard will beat the results delivered by the five funds that Protégé has selected.

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Nassim Nicholas Taleb: the prophet of boom and doom

Taleb's top life tips

1 Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.

2 Go to parties. You can’t even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.

3 It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.

4 Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can’t control outcomes, you can control the elegance of your behaviour. You will always have the last word.

5 Don’t disturb complicated systems that have been around for a very long time. We don’t understand their logic. Don’t pollute the planet. Leave it the way we found it, regardless of scientific ‘evidence’.

6 Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.

7 Avoid losers. If you hear someone use the words ‘impossible’, ‘never’, ‘too difficult’ too often, drop him or her from your social network. Never take ‘no’ for an answer (conversely, take most ‘yeses’ as ‘most probably’).

8 Don’t read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants... or (again) parties.

9 Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.

10 Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.

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People vs. Dinosaurs

Question: What do America’s premier investor, Warren Buffett, and Iran’s toxic president, Mahmoud Ahmadinejad, have in common? Answer: They’ve both made a bet about Israel’s future.

Ahmadinejad declared on Monday that Israel “has reached its final phase and will soon be wiped out from the geographic scene.”

By coincidence, I heard the Iranian leader’s statement on Israel Radio just as I was leaving the headquarters of Iscar, Israel’s famous precision tool company, headquartered in the Western Galilee, near the Lebanon border. Iscar is known for many things, most of all for being the first enterprise that Buffett bought overseas for his holding company, Berkshire Hathaway.

Buffett paid $4 billion for 80 percent of Iscar and the deal just happened to close a few days before Hezbollah, a key part of Iran’s holding company, attacked Israel in July 2006, triggering a monthlong war. I asked Iscar’s chairman, Eitan Wertheimer, what was Buffett’s reaction when he found out that he had just paid $4 billion for an Israeli company and a few days later Hezbollah rockets were landing outside its parking lot.

Buffett just brushed it off with a wave, recalled Wertheimer: “He said, ‘I’m not interested in the next quarter. I’m interested in the next 20 years.’ ” Wertheimer repaid that confidence by telling half his employees to stay home during the war and using the other half to keep the factory from not missing a day of work and setting a production record for the month. It helps when many of your “employees” are robots that move around the buildings, beeping humans out of the way.

So who would you put your money on? Buffett or Ahmadinejad? I’d short Ahmadinejad and go long Warren Buffett.

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