“The animals that depend on instinct have an inherent knowledge of the laws of economics and of how to apply them; Man, with his powers of reason, has reduced economics to the level of a farce which is at once funnier and more tragic than Tobacco Road.” – James Thurber

Dinner is later tonight at the American Club, just off the Bund. “Bund,” by the way, is an Indian word for “embankment.” It’s also a German word. But the Indian word makes sense here, because the river makes a big bend and the embankment restrains it.

Tomorrow, I’m going to make it down to the Shanghai gold exchange to see what the fuss is all about. It, too, is right on the Bund. And as a gold investor, I’m curious to see what attitudes the Chinese have toward it. I asked some contacts here if I could stroll down and see someone there . . . that’s what I’ll do if I have to . . . but they seemed to suggest that it would be better if I . . . arranged things.

The business section of the Shanghai daily paper has some interesting stories today:

  • Lula da Silva, the political heartthrob of Latin American leftists, was in town to open a “promising new page” in trade relations between Brazil and China. Brazil has iron ore. China needs iron ore. Lots of it.
  • Brazil has soybeans. China needs soybeans. In fact, another page one article says that The Dalian Commodity Exchange hopes to start trading corn and No. 2 soybeans soon, pending government approval. Homegrown beans (No. 1) are already on the exchange, but China’s growers need a way to hedge against risk. Foreign beans would do the trick. Sounds pretty capitalistic to me.
  • While the U.S. has taken the lead in fighting a global war on terror, the Chinese appear to be busy building bilateral trade agreements with countries that can provide the valuable resources they need. I wonder who’s going to be better off economically when the war is over, if it ever is.
  • The NASDAQ is closing up shop in China. NASDAQ says it needs to focus on the U.S. market. NASDAQ says its departure from China doesn’t have anything to do with the formation of an exchange for high-tech companies and startups in Shenzhen on May 17th. Sure it doesn’t.

There are 16 million people in Shanghai . . . and there’s also a lot of commercial real estate. What everyone seems to agree on is that the country needs more physical infrastructure. I’m on the 43rd floor of the Marriott looking down at the city, with buildings and highways as far as the eye can see. Shanghai is a giant construction site. You can’t help but marvel at the pace and scale, and also wonder if it’s too much too fast. The Chinese I’ve spoken with seem eager to get on with the future.

It’s a pretty rapid transition. Within the space of one generation, you’ve seen what appears to be a total change in thinking. Dinner last night was in a trendy Shanghai neighborhood that translates into New Heaven and Earth. Most of my night was spent talking to a Chinese businessman who grew up when things were a little less heavenly in China and when school kids didn’t pick a career but had one picked for them by the state.

One thing you’ll notice here is that there’s advertising . . . everywhere. One of the first businesses to open up in China was advertising. The government, for whatever reason, didn’t see advertising as a “threat.” That’s odd. You’d think controlling what people see is the kind of thing you’d want to have a monopoly in.

Yet Hong Kong’s harbor and Shanghai’s skyline are dominated by large neon advertisements and bulletin boards. The effect is a commercial consciousness just as powerful as putting up a 10-story picture of your favorite revolutionary leader.

That’s it for now. Tomorrow, I’m off to the Shanghai gold exchange .

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