Comparison

What makes people feel happier? My answer is comparison. When people are comparing the present with the past and comparing themselves with others, if they find they are better, they are highly likely to be happier. If my belief is true, then people living in a imaginary ideal society where everyone is equal and the living standards are good and stable may not be happy because they do not feel they are better than the past or others, so this ideal society may not be ideal.

Comparison is an important motivation for the society to develop. When people are comparing themselves with the past or others, they are trying to make themselves better than others or their past; when everyone in the society is doing the same, the society is pushed to move forward. However, this does not make we should make the differences within the society wider. A too wide gap may make people feel hopeless; when they making comparisons, they find the gaps become wider and wider, they will certainly feel unhappy. Such unhappiness in the beginning may make people work harder, but if they find they are nowhere near to close this gap, the unhappiness will make them pessimistic and loss incentives to work hard.

However, it is difficult to fully manage people's comparison, because people can make comparison from too many angles and aspects. For example, they may live better than the past, but they compare their improving rate with the previous generations and find the rate is much slowers, so they still feel unhappy (or unsatisfied).

Comparison makes people jealous, but comparison may be the foundmental motivation for many of our activities.

Brexit updates

Theresa May plans to delay Brexit if the Parliament fails to pass the revised Brexit deal; however, more than 100 Conservative MPs refused to back the PM on this delay. The Prime Minister never has her party's full support on Brexit since Day 1. The Labour Party's alternative Brexit plan was defeated by 323 votes to 240 on Wednesday; after the defeat, the Labour Party is now committed to backing a second Brexit referendum.

If there is a second Brexit referendum, the 'Stay' campaign I think is more likely to win the referendum than the 'Leave' campaign, given the current chaotic situation. However, many 'Leave' politicians will try their best to block this second Brexit referendum. Their political careers are depending of Brexit that their careers will end if Britain stays in the EU eventually. Furthermore, I do not believe that the Tory Party will support a second referendum in general. The last referendum was proposed by the Tory Party; once there is another referendum, it will prove the failure of the first one, so the Tory Party will not be pleased to see another referendum happening.

Overall, Brexit is now getting more dramatic, and the uncertainty surrounding this matter is increasing every day.

The delay of Brexit

So far Brexit is quite a mess that there is not a single voice which can direct the UK to leave the EU in a way pleasing most people. The UK Prime Minister, Theresa May, admitted that Brexit could be delayed if the Parliament could not pass the revised Brexit plan next month. The delay is not a piece of bad news.

Currently, the UK is not ready for Brexit that the country has been divided by Brexit. The British people including politicians have not agreed with how to make Britain leave the EU; moreover, some people actually want Brexit to messy enough so Brexit becomes unpopular to be processed eventually. Delaying Brexit can buy more time for the British people, especially the politicians, to think what the UK wants and does not want from the EU.

However, the delay may not be a good thing for businesses. The longer it takes, more uncertainties the businesses have to face, because time itself can produce more uncertainties. The delay is very likely to increase the costs of the businesses significantly.

Overall, the delay may be create a better future for the UK in the long run, but it could increase uncertainties for the businesses in the short run, causing short run economic losses.

The US-China trade

Chinese stocks rose to bull market territory on Monday after the US president Trump said that he would delay a rise in US tariffs on Chinese goods. The delay of US tariffs provided a relief on the US-China trade tension; previously, Trump also softened his tone on Huawei as well. A series of stories are showing the trade issue between China and the US might be possible to be resolved in the very near future. The Chinese economy is still dependent of exporting; actually all countries want to export as many goods and services as possible, as increasing exports can help to increase GDP. The trade tension between China and the US definitely raised concerns about the future performances of these two economies, especially the Chinese economy; the relief of the trade tension will increase people's expectations about the performances of these two economies. Therefore, it is not surprising to see the Chinese stock market rising.

However, it is possible that the market may be too confident about the trade issue between the US and China. The relationship between the US and China has always been very complicated that the two countries often cooperate in some areas but compete with each other in other areas. The current US president is a very unpredictable man who may choose his mind at some point in the future. It is only a delay not a cancellation, which means the tariffs may still be imposed in the future. Moreover, many US politicians see China as the biggest threat to the US's dominating position in the world and they will try their best to impose influence on the US president and direct the US policy in a hostile way towards China. Therefore, there are still many uncertainties ahead of China in terms of its relationship with the US.

It is good to see the delay of the tariffs but I do not think that people should be too optimistic about the current status.

This week’s news

The news this week is generally positive. The trade negotiation between the US and China have made some progress, especially the US President Trump has softened his tone on Huawei. Since Trump softened his tone on Huawei, many of the US allies have announced that they will include Huawei in their 5G projects. Because Huawei offers an opportunity of making the next-generation 5G networks arrive a year earlier, no country wants to miss such opportunity. Besides some relief of the trade tension between the US and China, there is some more positive news. The balance sheet of the US Federal Reserve is very positive and strong, comparing with what the Fed had before the financial crisis. This definitely gives the market more confidence that even if there is a financial crisis coming, the US Fed has the ability to counter the crisis. Furthermore, even the UK has some good news that the UK government received £14.9bn more than it spent in January, which was the largest surplus since 1993.

However, there is some negative news. The British politics has become even more divisive, not only the Tory party has ben divisive, the Labour Party is not any better either that several Labour MPs have chosen to leave the Party.

Can Huawei be left out in the coming 5G generation?

The US is lobbying its allies not to use Huawei technology in their 5G networks, the reason given by the US is that the technology can be used by Beijing for spying, which has no evidence yet. Surprisingly, the US president Trump is softening his tone on the Huawei and wrote on his Tiwitter, ‘I want the United States to win through competition, not by blocking out currently more advanced technologies’. It is undoubted that Huawei is the global leader in the next-generation 5G network technology; if the concerns did not exist, Huawei would have become the first choice of most countries in terms of building their 5G networks.

Some research has shown that without using Huawei technology, building 5G networks could potentially take further 18 months. This is a cost that cannot be ignored. In the 4G world, there have been so many achievements, including mobile payments. Many online services advance their businesses via the coming of the 4G generation. Being 18 months late in the 5G generation can potentially drag down the development significantly, which is a risk that no country is willing to take.

At the moment, no one can fully know what is going to happen in the 5G generation, some expect AR and VR will advance their usages in the 5G generation but no one can be absoultely certain. Being left out in the 5G is a risk that no country wants to take, so they have to use Huawei technology to build their 5G networks as fast as possible.

To what extent can the US influence other countries' policy making?

The US is the world's most powerful country that has great influence over other countries, especially its allies. The US has a long history of influencing its allies' policy making; for example, it persuades its allies to purchase its military defense products instead of other countries' products. Recently, the US is trying to persuade its allies to ban Huawei in their 5G projects. So far, some companies, including Vodafone, have announced that they will reconsider the use of Huawei equipment in their 5G projects. However, there has been no proven evidence showing the Huawei equipment has given the Chinese government the power to spy on other nations as the US government claims. Furthermore, Ciaran Martin, the chief executive of the UK's National Cyber Security Centre, said that strict controls and oversight could offset the risks of Huawei raised by the US intelligence. From the Huawei case, we can see that the US influence definitely works but it cannot completely overturn other countries' policies.

I agree with Putin on one of his statements that no country is completely independent. Countries can always influence each other to some extent; and of course, larger and more powerful countries have great momentum in the global political network. The US has got great momentum in the world politics; however, large countries have great momentum because they can create greater impacts other nations. When countries are making policies, they are doing cost and benefit analysis. Therefore, when a government faces pressure from other nation, including the US, if the government finds cooperation can bring more benefits or less harm, then the government will cooperate, and vice versa.

Therefore, as long as the US can voluntarily create significant influence over other countries, the US government can generate significant influence over other countries in terms of their policy making.

The efforts to stop foreign interference

Twitter announced on Tuesday it was expanding its public ads database to show all political adverts in the European election about their sponsorship and targeted audiences. The European election will take place in 27 EU countries to elect MEPs for the next five years and some parties which have pro-Russia ties are winning the election at the moment.

Political parties which need to run election campaigns need to take sponsorship from other groups, including businesses, in order to afford good campaigns. With more money and technical supports, parties can have greater chances to win, this is why some parties are taking Russia-tied support. The online social media has become the new battlefield for politics since Obama’s presidential campaign. Recent years, people are worrying about foreign interference in politics, as the online social media is open and virtually every one could participate in all political campaigns which take place all over the world.

When people are voting, they vote for the political parties which provide more benefits for them. Therefore, Twitter’s move to show the sponsorship may not be as effective as expected that many voters may not care about the groups which back their political parties. Moreover, there is one key issue that policies can be so complicated that only very few people can truly understand the impacts of policies; under such circumstances, the voters can be easily misguided and fail to choose the policies which truly benefit them.

Overall, I think the effectiveness of the actions taken by the online social media platforms might be overestimated.

One paradox in selling assets

Many finance theorists claim that there is a common mistake that people tend to sell their assets which make profits and buy more assets which make losses, these theorists claim that people should sell their assets which makes losses because if tax efficiency. However, when considering what is the best time to sell assets, it is a tricky question. Of course, purely based on the tax efficiency concern, investors should only sell the assets which make losses; however, investors do not invest their money to show they having large numbers on their accounts, for many ordinary people, they want to make money out of their investment in order to afford better living standards.

For many ordinary people, they want to generate more cash out of their investment eventually to afford better lifestyle rather than holding more valuable assets. When individuals make their investment decisions, they are balancing the utility from immediate consumption and the discounted expected utility gained from future consumption. The future has uncertainty; therefore, given individuals are risk averse, it is only reasonable for them to make investment as long as the future expected return is significantly positive. Therefore, people sell their assets which are making profits is not a wrong decision, as when people see their investment’s current utility (value) exceeds their expected discounted future utility, they will sell their assets, and this is completely rational as well, despite it is not tax-efficient. 

The world deal-making

The mergers and acquisitions are highly active at the moment, the dealmaking has hit an 11-year record. The reason for the currently active merger and acquisition dealmaking is caused by companies facing increasing competitions due to the trade tension arising and the uncertainty surrounding Brexit and the economic uncertainty in the global market. Moreover, when the economy is not performing well, more companies are likely to file for bankruptcy, the businesses surrounding bankruptcy, including restructuring, are going to make more profits. From this aspect, the economy's bad performance may not be bad for all businesses.

The dealmkaing businesses do not only perform well when the economy is not performing well, when the economy is in its good shape, these businesses can still make enormous profits. When companies are performing well in the market, they are very likely to expand their businesses, leading to more mergers and acquisitions. However, such dealmaking has its own issue. For example, the most obvious issue is that the dealmaking between China and the US becomes more and more difficult. The barriers between countries become the major issue when it comes to international mergers and acquisitions; however, the international mergers and acquisitions are the most desirable in the business world. A investment firm who can deal well with international mergers and acquisitions will be very profitable; however, when it comes to international mergers and acquisitions, skills and techniques are not the first demanded, social networks (including influence over politics) become the most demanded element in the market.

Great, But

The world's biggest passenger jet was confirmed to be grounded, after producing the pre-ordered 17 jets (14 for Emirates and 3 for ANA), the production line will be closed. To build such a massive passenger jet is a great achievement, it is such a pity for ground such incredible project. Moreover, there are other examples that good projects were abandoned. For example, the supersonic passenger jet, Concorde, was grounded. In addition, although the US has developed its latest fighter, F-35, F-22 which was developed during the Cold War period is still considered to be the best fighter at the moment, but F-22 has stopped production for decades already.

Why are these amazing products grouded? The reason is simple that the cost is too high. Providing additional high technology involves an increasing marginal costs, which means producing a product with one higher technology is much more costly than producing an ordinary product without the high technology. Therefore, even some products having the most advanced technology attracts much media and public attention, they do not meet an accpetable sales target that is able to make possible. Moreover, for the demand side, these high-tech functions seem amazing and fancy, but the reliability has not been proved, also the environment might not have been able to catch up with the latest technology, such as the USB-C port in the PC industry.

Overall, latest technologies seem fancy but because of the environment as well as the marginal cost of providing higher technology, the products with the latest technology are not really desirable in the market.

The Brexit drama

The UK Prime Minister, Theresa May, suffered another defeat in her Brexit battle in the Parliament on Thursday that her Brexit plan B was not popular that she lost by 303 to 258. This PM has suffered maybe too defeats on her Brexit plans, this is so bad that all people do not have any clue what the Brexit will be like eventually, this certainly increases the risk for the economy as well as the market.

Brexit has always been a very divisive topic that many people are having different views from different angles. The referendum already showed that people did not only have diverse opinions about whether the UK should stay in the EU or not, but also had very diverse opinions about how the UK should leave the EU. The 'Leave' campaign at the time had proposed many 'benefits' of leaving the EU; however, they did not propose these 'benefits' existing at the same time, but they would like to achieve many goals by leaving the EU. It is always difficult to achieve many goals at the same time, especially via one project. Moreover, these politicians are actually having opposite goals.

I was optimistic about the Brexit plan vote in the Parliament; however, as time goes by, the PM does not seem to have the power to control the Parliament, not even her own party, even after she has given up her leadership for the next general election.

The disagreement inside the EU

There are more uncertainties ahead of the European Union, despite the Brexit mess. There are three major powers in the European Union, the United Kingdom (which has not left the EU yet), Germany and France; and two of the three are in the Eurozone. However, the European Union have other voices others than these three countries'. The European Commission vetoed the merger between Siemens and Alstom, the German and French train manufacturers. Both Germany and France are unhappy about this decision made by the European Commission, and the French economy minister called this merger a creation of "European industrial champions".

France and Germany have the strongest industries in Europe and when these two countries start to cooperate with each other, including mergers, there will be much less room left for other European Union countries, because they are living in one single market. From the monopoly aspect, this merger should be blocked, because these two train manufacturers' merging will create a train manufacturer with the monopoly power. Other train manufacturers inside the EU simply do not the competitive power to compete with this giant while the train manufacturers outside the EU lose their competitiveness due to the tariffs imposed by the EU. However, from these two companies' aspects, they believe the merger is necessary and urgent. Yes, they probably have the monopoly power in the EU, but their main purpose of the merger is to strengthen their competitiveness in the global market when facing increasing competitions from other countries, especially China.

The disagreement of France and Germany with other European Union countries is that France and Germany want to cooperate with each other and strengthen themselves in order to be more competitive in the global  market but other EU countries do not want more powerful France or Germany as they are afraid of losing more European markets and benefits to France and Germany.

Some pessimistic thoughts on the Chinese New Year

This year’s Chinese New Year had a bad start that the New Year spending growth is the slowest since 2005, but it is not too bad since the spending was still growing. However, I have some pessimistic thoughts on the Chinese New Year from a general angle.

In China, people are still celebrating the Chinese New Year, and have got a “golden week” to spend with their family together. However, more and more people are now complaining about they do not enjoy the Chinese New Year as much as they used to. I think the reason for this is that the Chinese society has been changing rapidly in recent years, in terms of the population structure and the social collabration structure. I am really pessimistic about the future of the Lunar calendar.

The most widely used calendar is the Gregorian calender that most people around the world are working and living based on this calender. In the past, the Chinese people used the Lunar calender; however, in the moder era, the Chinese people has adopted to the Gregorian calender. Other Asian countries which used to use the Lunar calender, such as Korea and Japan, have all adopted to the Gregorian calender. When China participates in more and more global businesses and politics, the importance of adapting to the Gregorian calender becomes more crucial. The most simple example is that if the Chinese companies want to serve their global clients directly, they cannot have a vacation while their clients are not. When a Chinese based financial institution wants to involve a project in the US financial market which is still open during the Lunar New Year, the institution cannot close during the Lunar New Year, otherwise it will lose competitiveness to its foreign competitors.

Though I do not think the Chinese New Year will disappear in the near future, I think that the magic of the Chinese New Year will perish shortly and it will become a pure cultural symbol eventually.  

The tax on the super wealthy

In the US, the Democratic party is planning to tax the super wealthy because of the widening inequality in the US society. The total wealth of the top three wealthiest men in the US equals the total wealth of the bottom half of the US population. The Democratic party plans a 70% tax on the super wealthy people and the wealthy people have publicly opposed this plan, including Michael Bloomberg and Howard Schultz.

The main argument of the opposition side against the plan is that this tax plan would push the US to a socialism path. This argument might have had a good market during the Cold War; however, at the moment, such argument may not gain the ground given over 70% of the US population support this tax plan. Heavy progressive taxation usually has one negative impact which is it reduces people's incentives to work harder. However, the tax plan of the Democratic party focuses the super wealthy, such negative impact will not be applied to the majority of the population, apart from the top 5 to 10 per cent of the population. Would this affect those people who want to have great innovations and inventions in order to earn enormous money, maybe and maybe not. People may be affected by the tax plan because they are likely to not earn as much as they expect, but the money they earn from great innovation and invention is still going to be enormous. Moreover, it is possible for the government to make some amendment to the tax plan to make the tax more pro-innovation.

Overall, I think such progressive tax plan can actually be accepted and passed, and it is likely for the US to become a more European like country whose government has a much more progressive tax system and spends enormous expenditures on forming the welfare state.

Why doesn't price work for education?

The number of 18 years old young men who apply for higher education is at a record level, and the growth rate published does not indicate this number would potentially decline in the near future. The demand for higher education in the UK is increasing, despite the £9250 annual tuition fee.

English students used to enjoy free higher education in the past; however, because of the increasing government expenditure caused by the increasing number of English undergraduate students, the government reintroduced the tuition fees and increased the tuition fees several times. The government also pushes apprenticeships and other alternatives to higher education. So far, based on the observation, the government efforts to reduce the demand for higher education have failed. Usually, when we increases one good's price and introduce its substitutes, the demand for this good should drop; however, in the higher education case, this does not work.

Higher education has its uniqueness that makes it impossible to be substituted. Education is a method to break class barriers; moreover, receiving higher educaation has more alternative career paths afterwards including achieving higher in the academic field. Moreover, even if anyone wants to switch to other fields, they can still do so after receiving higher education; however, the other way is relatively more difficult and requires greater efforts. In addition, the current system allows students to borrow student loans to pay their tuition fees, so the increase in the price may not have a very significant impact, especially they are only going to pay back their student loans once their incomes reach a certain level.

Overall, the increase in tuition fees does not create a significant cost increase and higher education is better than other alternatives.

Apple, Google and Facebook

Apple sees itself as a protector of its users’ privacy and blocks the applications which tend to collect users’ private information, including Facebook Research and Google’s Screenwise Meter. Google later announced that it started to work with Apple to protect users’ privacy. Such action could be seen as a compromise by Google. Both Facebook and Google run their businesses largely based on data collection, they use the data collected from their users and use the analysis to improve the effectiveness of their advertising in irder to gain more advertisement businesses. Is it possible for Facebook and Google to continue their previous activities and force Apple to withdraw its privacy protection ambition?

Well, this is possible but has greater potential risk. Although Apple’s iPhone sales were not very impressive, this is caused by more and more people are just using their iPhones for longer and do not upgrade their iPhones as frequently as previously. This means that there are still a significant number of iPhones users existing in the market. If Apple stops providing Google’s and Facebook’s services and applications, these two companies can face the risk of losing their market shares; of course, Apple also has similar risk. However, working with Apple may reduce the effectiveness of these two companies’ data Coll’s ration, but does not the risk of losing market shares. Moreover, though they may not be able to collect their users’ data effectively on iPhones, their users also use other devices other than Apple’s products, they can still effectively collect their users’ data from other devices. Moreover, without collecting very private information, these two companies already gain access to many very crucial data, including social networks and hobbies, which can ensure their positions in the advertising industry.

Overall, from all aspects, fighting with Apple on the privacy issue is not a wide. It will damage their companies’ images, and face potential risk of losing maker shares.