Barbarians in love

Private equity in China
私募基金在中国

Barbarians in love
热恋中的野蛮人

Global private-equity firms are seduced by the China dream
中国梦正在吸引着全球的私募基金公司
Nov 25th 2010 | HONG KONG AND NEW YORK | from PRINT EDITION




SO MANY conferences are held in Hong Kong that it is hard to believe one could ever be full. Yet in mid-November the Asian Venture Capital Journal (AVCJ) was forced, with regret, to turn away customers from its private-equity meeting. There was simply no room for the hordes of European and American investors stopping in Hong Kong on their way to China.

最近在香港召开的会议多到不可思议。然而在11月中旬召开的私募股权投资基金（下文简称PE）会议上，亚洲创业投资期刊集团(Asian Venture Capital Journal) 还是被迫惋惜地拒绝了许多顾客，因为已经没有门票提供给那些蜂拥在香港以期进入中国大陆的欧美投资者了。



Three widely held opinions about China (it's big, expanding and filled with entrepreneurs) and some spectacular returns on deals mean many buy-out big-shots are reinventing themselves as China hands. Capital-raising, trivial a decade ago, is booming after a blip in 2009 (see chart). So far this year China-focused funds have accounted for more than 9% of global fund-raising, up from 1% in 2007, according to Thomson Reuters, an information firm.

关于中国市场的三个主流看法（巨大，正在扩张且到处都是企业家）加上巨大的投资回报使得许多并购巨头正在以中国通的形象重新示人。十年前几乎还是空白的PE领域，在经历2009年的短暂低谷后正在急速发展（见图表）。根据一家名为汤森路透（Thomson Reuters）的情报信息提供商的数据，投资于中国的基金已经超过了世界总资金募集量的9%，而2007年时仅占1%。

The usual suspects, including Carlyle, TPG, KKR and Blackstone, have set up China-related operations. All told, there are 167 registered foreign managers of private-equity funds in China and 265 domestic ones, according to Asia Private Equity Research, up from almost none a decade ago. Estimates of China's unregistered firms bounce from 3,000 to 10,000 and above. Many prominent local and Western firms are populated by the children of China's leaders, who bring powerful connections and a degree of political protection.

包括凯雷集团（Carlyle），德克萨斯太平洋集团（TPG），科尔伯格・克拉维斯集团（KKR）和黑石集团（Blackstone）这些江湖老大们都已经开始运作与中国有关的项目。根据亚洲私募股权投资基金调查（Asia Private Equity Research）的结果显示。在中国总计有167个注册的由外国人管理的PE基金，由中国人管理的则有265个，在十年前这个数字几乎还是零。中国未注册PE公司的数量估计已从3000个增长到了10000个以上。许多在一定区域较突出的公司和西方公司都有中国领导人的孩子在其中任职，他们能为公司带来强大的人际关系网和一定程度的政治保护。

There is a gap in China's financial system that private equity can fill. Most capital is channelled through state-controlled banks that offer low returns on deposits and cheap loans to state-controlled companies. Both savers, who want better returns on their investments, and entrepreneurs, who need capital, should be keen on bypassing the state-bank system.

PE基金能够填补中国的金融系统中的一个缺口。因为大多数资金在国有银行渠道中流动，为存款提供低回报并为国有公司提供低息贷款。所以那些期望在投资上有高回报的存款者们和需要资金的企业家们可能都乐于绕过国有银行系统。

China is also particularly seductive for Western buy-out firms. They are keen to find new deals there, now that the boom in leveraged buy-outs in rich countries is over. They also want to ensure that the companies they already own do more business in the Middle Kingdom. Blackstone recently held a gathering in China for 33 chief executives of its portfolio companies to discuss, among other things, how to expand their activities there.

中国也引诱着那些西方的并购公司们。如今杠杆收购在富裕国家已不再风靡，这些公司热衷于在这里寻找新的买卖。他们也希望确保自己已经持有的公司能在这个中央王国多做一些生意，黑石集团（Blackstone）最近将其在中国所投资33家公司的首席执行官召集在了一起，在会议中便涉及了如何在中国扩张他们的公司。

Western private-equity firms are also keen to raise new capital from China. Yuan-denominated funds, recently made available to non-Chinese firms, face less red tape and enable private-equity outfits to team up with local governments to raise money and help locate deals. The largest American firms are all keen on developing such vehicles.

西方PE公司也对从中国募集新的资金充满兴趣。外国公司在最近已经接受了以人民币基金，人民币基金不用再面对繁琐的程序，同时PE团队能与地方政府携手集资并推动交易的产生。那些美国的公司巨头们对此充满期待。




To the extent that aggregate records for private-equity returns exist, results in China are strong (see table). At best, however, these are only vague indicators. Since the industry is new, the sample of deals is pretty small. Because of the pervasive opacity of China, failures are quietly buried. And concern about criticism from Marxist die-hards means that even successes are often hidden.

就已有的PE收益记录来看，中国的成绩是非常好的（见表）。然而这些记录充其量只是一些模糊的指标，由于这是一个新生行业，样本容量非常之小。因为中国在各方面还不够透明，很多失败的交易都被掩盖了。而且考虑到来自马克思主义顽固分子的批评，甚至连许多成功的交易也经常会被掩盖。

Those deals that do get attention tend to be big, successful and involve foreign firms. In June TPG sold a controlling stake in Shenzhen Development Bank for many times its original investment. On a percentage basis, Baring Private Equity is thought to have made even more on an investment in Hidili Industry, a coal producer that was recently refinanced. TPG will probably make another fortune if, as planned, a public offering goes through for Grand Auto, a car-dealership chain in second-tier cities. Carlyle got a rare opportunity to invest in a leading insurance company, China Pacific Life, and made a killing when the insurer listed in Hong Kong last year.

那些的确得到关注的交易往往庞大，成功而且有外国公司参与其中。在六月份，德州太平洋集团（TPG）以高出原始投资很多倍的价格卖出了它在深圳发展银行所持有的控股股份。在百分比的基础上，霸菱投资（Baring Private Equity）被认为在最近一次投资中赚得甚至更多，投资对象是恒鼎实业（Hidili Industry）,一家刚刚进行再融资的煤炭生产商。如果TPG为广汇汽车（Grand Auto）设计的公开募股顺利的话，它还有可能再赚一笔，后者是一家二线城市的连锁汽车经销商。凯雷集团（Carlyle）则得到了一个少有的机会，它得以向太平洋人寿（China Pacific Life）――一家主要的保险公司投资，并在其去年香港上市的过程中大赚了一笔。

A further relaxation of capital-raising rules is another boon. In August officials lifted a restriction on registered insurance companies placing money with private-equity firms: they may now invest up to 5% of their assets this way. And yuan-denominated funds may eventually be opened to non-Chinese investors.

对融资监管条例的进一步放宽是另一利好消息。8月份，官方解除了对注册保险公司投资于PE公司的限制：保险公司最高可将其总资产的5%投资于PE公司。同时人民币基金可能最终允许向外国投资者开放。

No one does indiscriminate bullishness better than the private-equity industry. Yet for all the buzz, the reality of operating in China is likely to test even its professional optimists. For a start, three of the techniques buy-out shops often use in the West―dismemberment, leverage and tax avoidance―are unfeasible in China.

人们对PE行业的信心正无可比拟。但在这一片嘈杂之中，中国的PE运作现状可能要考验那些即使是持乐观观点的从业者。作为一个开始，分割、杠杆收购、避税这三项西方并购公司经常使用的手段在中国仍是很难实施的。


There ain't no RJR Nabiscos here

这里可没有雷诺兹-纳贝斯克

Gaining control of acquired companies, which is usually deemed essential for buy-outs, is also difficult. Many industries are considered "strategic" and therefore off limits, or open to investment only in exceptional cases, such as finance. Across all sectors a typical Chinese private-equity investment is a non-controlling stake of 15-40% in an operating company, with the money intended (but not always used) as growth capital. For dollar-based funds, which had been the norm until yuan-denominated ones took off, laborious government approvals are required to close deals. These can take months or even years. Those who have attempted to take a majority stake in a company, as Carlyle did in 2005 when it tried to buy 85% of Xugong Group Construction Machinery, China's largest maker of building machinery, have tended to fail.

想要获得所投资公司的控制权也很困难，而这对并购公司来说却通常是非常重要的。许多行业被认为是"战略性"的，因此被禁止进入，或者如金融界那样仅在例外的情况下允许投资。典型的中国PE投资是这样的：在一家公司中持有15%-40%的非控制性股份，所投资金预计用以发展（但并不一定会被使用）。花上数月甚至是数年的功夫以获得政府许可来达成交易，这在人民币基金蓬勃发展之前，对于美元基金来说是家常便饭。那些试图获得某家公司多数股权的努力则往往面临失败的结局，比如凯雷集团在2005年曾试图购买徐工工程机械集团85%的股份，这是中国最大的工程机械制造商，结果不言而喻。

Given these hurdles, finding suitable investments is hard. KKR raised a $4 billion Asian fund in 2007 that, at the time, was supposed to be largely focused on China, but it is widely believed that only a fraction of the money has been spent. Since 2005 private-equity firms have raised more than $57 billion for investment in China, according to Preqin, a research firm, but much of that is thought not to have been deployed.

在有这些障碍的情况下，想找到合适的投资是困难的。科尔伯格・克拉维斯集团（KKR）曾在2007年建立了一个40亿美元的亚洲基金，在当时被认为其会将主要精力集中于中国，但该基金目前只用掉了很小一部分的资金。来自调查公司Preqin的数据显示，从2005年起，PE公司们以在中国投资为目的而募集的资金超过570亿美元，但其中大多数被认为并没有得到有效利用。

As a result, too many firms are chasing too few deals. One executive at a leading American buy-out firm says that, more than any potential regulatory issue in China, he is concerned about the "intense amount of competition" from local firms, which outmanoeuvre Western firms on deals and also poach their staff.

因此，想做生意的公司太多，而能做的买卖又太少。美国某主要并购公司的一位执行官说道，比起中国潜在的监管问题，他更担心来自本土公司的"过度竞争"，因为本土公司在交易中总能胜过西方公司一筹，而且会使用挖墙脚这样的手段。

Faced with the problem of finding suitable private targets, many of the bigger firms have turned to PIPE deals: the acronym stands for "private investments in public equity". These typically involve buying a large slice of a Hong Kong-listed company. That avoids the drudgery of sorting out a private firm, but makes it rather hard to justify large fees. The alternative is gruelling: doling out stakes of $5m-10m and certainly no more than $100m, and only after painstaking due diligence.

面对无法找到合适的私有公司作为投资目标的困境，许多大公司转而寻求PIPE交易，即私人股权投资已上市公司股份。这类交易通常需要购买在香港上市公司的大量股权，这虽免除了整治所投公司方面所需的冗长繁杂的工作，但却需要付出庞大的费用。另一种选择则会让人受尽折磨：施舍出5百万到1千万美元的股份（当然不能超过1亿美元），并且先得付出大量细致的辛勤工作。

Victoria Capital, a small firm whose managers have a long history in China, invests only after reconstructing a target company's financial statements using original receipts. Arc China, another small firm with experienced managers, invests only in companies which collect revenues in an obviously verifiable way, such as a retail company that receives fees from franchisees at a single point, rather than from a string of wholly owned stores.

Victoria Capital是一家小型投资公司，其负责人对中国的情况非常了解，这家公司只投资那些能够使用收条正本重建财务报表的公司。Arc China这家小公司也拥有经验丰富的管理者，他们只投资那些有清晰且可证实的盈利模式的公司，比如能够依靠特许经营权盈利的零售公司，而不会投资于一堆全线自有的直营商店。

Steven Barnes, managing director of Bain Capital, a private-equity firm, told attendees at the AVCJ conference that it takes twice as many people to manage investments in China as in the West. That may be optimistic. What is more, one of the most important parts of private-equity investing can barely be managed at all. Since firms typically hold only a minority stake, their ability to realise money for their holdings is limited. Recent returns have been almost entirely the result of a strong market for initial public offerings in Asia, which has allowed insiders to receive large payouts. Citigroup reckons that 30% of the recent offerings were backed by private-equity firms, with China heavily represented. If the market flags, that door will shut and the next round of successful conferences in Hong Kong may have less to do with tips on getting into China than with advice on getting out.

PE公司Bain Capital的常务董事Steven Barnes在亚洲创业投资期刊集团（AVCJ）的会议上说道，比起在西方的情况，在中国需要花上两倍的人力去管理投资，这可能还是乐观的看法。更让人担心的是，PE投资最重要的部分之一在这里却几乎无法进行管理。由于PE公司通常只持有少数股权，他们出售手中股份的权力受到限制。最近的回报几乎全是亚洲IPO强势市场的功劳,这让那些内部人士收益颇丰。花旗集团（Citigroup）认为近期的募股有30%都是由PE公司在后支撑，中国的情况尤为突出。如果市场转弱，通往中国的那扇大门就会关上，到了那时，下一轮在香港召开的会议恐怕就不会再讨论如何进入中国，而该为如何逃出中国而出谋划策了。

Commodity speculators do more good than harm

Commodity traders
投机商

Know your onions
了解你的洋葱

Commodity speculators do more good than harm
投机商的存在利大于弊

Nov 11th 2010



THE image of the market-rigging commodity speculator of modern folklore lies somewhere between moustache-twirling pantomime villain and James Bond's evil nemesis ("When I press this button the price of molybdenum will treble, the world will be destroyed and I will be rich, rich, rich!"). Measures are afoot to contain the speculators blamed by buyers, NGOs and politicians for spikes in oil, wheat, corn and other prices and supposedly bring order and harmony to commodity prices. Nicolas Sarkozy, who is taking over the presidency of the G20, is set to use the role to champion measures to bring commodity investors to heel. （首段有点难了，生词过多）

坊间传说的控制市场的商品投机者的形象（某种程度上是）介于长着小胡子的戏剧中的恶棍和詹姆斯邦德的邪恶复仇者之间（"当我按下这个按钮，钼的价格就会翻三倍，世界将会被毁灭，我也会变得很有钱、很有钱！"）。由于石油、小麦、玉米及其他（商品的）价格不断升高，（有关）措施正在筹备以容忍这些受到消费者、NGO和政治官员的责备的投机者，据推测这些措施会使商品价格恢复正常秩序和水平。马上就要接任G20主席的萨科奇打算通过自己的角色来支持这些措施从而使商品投机者就范。

Those naturally inclined to dismiss any French efforts to regulate financial markets should note that Angela Merkel, Germany's chancellor, is on his side too. And American regulatory reforms include the introduction of mandatory position limits on trading in energy, metals and agricultural commodities early next year.
那些自然地倾向于无视任何法国调整金融市场的努力的人们应该注意到，德国总理默克尔也站在了萨科奇的一边。美国的整顿改革包括了明年年初对能源、金属和农产品交易的强制性持仓限额。

More boring than bad
（仅仅是）更加让人心烦而不是更坏

Institutional investors and hedge-fund bosses do not deserve the attention they are getting. They are far duller folk than their caricatures and the offences they are accused of crumble on closer examination. There is almost no evidence to connect speculators to the commodity-price spikes that they are routinely blamed for creating (see article). And what little distortion speculators may cause is soundly trumped by the service they provide. In particular, they supply liquidity and price information that makes futures markets more efficient. Speculators plug the gap when the hedging requirements of raw-material producers and buyers do not coincide, offering a counterparty for trades that might otherwise have no takers.（本段后几句也有点难，但不影响理解）

机构投资者和对冲基金老板不该受到目前这么多的关注。他们要远比由于crumble on closer examination（所受到）的讽刺和冒犯反应更加迟钝。几乎没有证据证明投机者与商品价格暴涨有关，而商品价格的暴涨则是他们平日里受到责备的原因。并且投机商引起的微不足道的价格失真必然会由他们所提供的服务超过。尤其，他们提供了使未来市场更加有效的流动性和价格信息。当原材料生产商和买家的避险需要不一致时，投机商通过提供买家或者卖家来填补他们之间的缝隙。

The suggestion that speculators deliberately manipulate markets to earn profits through bubbles and busts simply does not hold water. The explanation for the sudden spikes in the prices of many commodities in recent years lies in nothing more sinister than the laws of supply and demand. A ravenous China, underinvestment in mining and agriculture, tight markets and unexpected disruptions to production are usually to blame for rapid price movements. When supply is tight, a small increase in demand can have a disproportionately large effect on price. Even if speculators do sometimes push prices out of kilter the fundamentals soon regain the upper hand.

说投机者有意操纵市场在泡沫和萧条中攫取利润完全说不通。最近几年一些商品价格的突然暴涨与其说是因为市场的险恶，不如说是因为供求定理。由于采矿业和农业的投资不足、供不应求的市场以及随时可能中断的生产，贪得无厌的中国才应该对快速的价格运动负责。当供给不足时，需求的一个微小增量就可能对价格造成不成比例的更大的影响。即使投机者确实在某些时候出于平衡推动了价格的上涨，但要不了多久市场规律就会重新占据优势。

And the amount of cash invested is tiny compared with the size of the total commodities market. It seems unlikely that such a small tail could wag such a large dog, especially given that investors almost exclusively trade futures contracts. They rarely take physical delivery of raw materials and have no effect on the actual production and consumption of metal, grain or oil.

另外，投机的那部分资金与整个商品市场的规模相比只是很小的一部分。这么一个小尾巴不大可能拖动那只大狗，更何况这些投机者几乎不准碰期货交易这一块。他们很少进行原材料的实物交割，对金属、谷物或者石油的实际生产和消费没有影响。

The worst that can be said about speculators, then, is that they may add a little to the volatility that anyway characterises commodity markets. Yet even that charge is hard to maintain. An OECD report suggests that there is little difference in volatility between exchange-traded agricultural commodities (such as wheat and corn) and non-exchange-traded ones (such as apples and onions).

因此，最糟糕的情况无非是这些投机商带来了些许的波动，但无论如何这些波动也正是商品市场的特征。但是他们对价格的控制其实很难维持。OECD的一份报告表明，在（价格）波动方面，交易所买卖的农产品（如小麦和玉米）和非交易所买卖的农产品（比如苹果和洋葱）之间并不存在明显的差异。

Commodity speculators make for tempting scapegoats and populist attempts to limit their activities will play well for both Mr Sarkozy and Mrs Merkel as they struggle to regain favour with voters in France and Germany. They come at little cost as neither country is home to much trading. Any restrictions will only serve to hit the centre of European commodity trading, the London Metal Exchange. It is the politicians, not the investors, who risk becoming the real villains in this affair.

商品投机者成了替罪羊，并且那些民粹主义者试图限制他们的（投机）活动，而所有这一切最终会对萨科奇先生和默克尔女士有利，因为他们两人正致力于重新获得各自在法国和德国的选民支持。而这一切来的几乎不需要什么成本，因为整个国家也并不想看到如此多的投机活动。任何限制（措施）只会冲击到作为欧洲商品交易中心的伦敦金属交易所。因此，正是那些政客们而不是投机者，在这个问题上冒着成为坏人的风险行事。

Leaders
领导人

备注：全文都是在肯定投机行为，甚至一度认为存在一定的波动正是市场经济所固有的特性。很明显作者是反对政府干预的，很明显是新右派的思想。这本来无可厚非，因为自由主义与国家干预从来都是各领风骚数30年。我惊异于西方的报纸竟然都如此具有学术水平的同时也不免遗憾。遗憾的是本篇文章甚至将价格的波动归咎于中国的因素，认为中国对市场的规制太多。总之，文章将中国视为一个"贪得无厌者"，我觉得有失该杂志也好报纸也好的客观性，乃至作者存在敌视中国的情绪。说实在的，认真翻译《经济学家》文章的5天以来，我反到对西方世界有了更冷静的认识。要知道，之前我是一个总是抱怨国情的cynic，还好还好。所以我在想，有时候我们国家一味的按和捂，反倒会让人们觉得里面肯定有什么见不得人的东西。看来，果然堵不如疏。放手让大家自己去判断，去甄别。但问题来了，又有多少国民具备这种甄别的能力呢？且不说大众，该报纸在大学生群体中，又有几人阅读？我突然想起了历史学范畴的"新民"，政治学范畴的"公民社会"，甚至包括09诺贝尔经济学奖得主埃莉诺奥斯特罗姆所谓的自主治理理论，或许一切的一切都在于人的素质，在于人首先对自己负责，即我理解的是首先具备辨别真伪的能力，之后自然知善恶与美丑。此所谓"真善美"，"真"因为回答世界是什么，所以必须在逻辑上先于"善美"这些回答世界应该是什么的价值判断。所以，一个不具备独立思考和判断能力的人，他的价值观也必然是混乱和易受到影响的。扯远了。就此打住。欢迎拍砖！

Allergy to wine

Allergy to wine
红酒过敏
The oenophile's lament
酒鬼们的烦恼
An explanation for a most unfortunate condition
这件不幸的事现在有解释了

ONE of life's sadder statistics is that about 8% of people get sneezy and stuffy-headed after drinking wine. This mild allergic reaction is often blamed on preservative chemicals called sulphites, but they are responsible for only an eighth of cases. The reason for the rest is obscure. Giuseppe Palmisano of the University of Southern Denmark, however, thinks he knows the answer.

这世上有一个统计数据令人伤心，那就是大约有8%的人在饮用红酒以后会产生打喷嚏和头昏脑涨的症状。这种轻微过敏反应常常和作为防腐添加剂的亚硫酸盐有关联。但是此类过敏症况只有1/8的情况是由亚硫酸盐造成的，其他7/8的情况一直病因不明。不过南丹麦大学的Giuseppe Palmisano认为他搞明白这是怎么回事了。

As he and his colleagues report in the Journal of Proteome Research, the culprits are glycoproteins―compounds composed, as their name suggests, of sugar and protein. That is not a complete surprise. Glycoproteins are implicated in several other allergies. But Dr Palmisano thinks he has identified the ones specific to wine.

他和他的团队在蛋白组学研究期刊上发表文章称，罪魁祸首是糖蛋白--顾名思义，就是由糖类和蛋白质组成的一类蛋白质。这倒也不算意外。糖蛋白也涉及其他的过敏症。不过Palmisano博士认为他找到了与红酒过敏特定相关的那个糖蛋白。

To do so he started with a cheeky little chardonnay, treated it with ice-cold trichloroacetic acid and ethanol to precipitate any glycoproteins, then digested those glycoproteins into smaller molecules called peptides that can be analysed by mass spectroscopy. He screened the results against a database of known allergenic proteins. Three stood out. One is similar to allergenic proteins found in latex and pears. Another looks like a second latex protein and an olive protein, both known allergens. The third resembles one of the most rampant allergens of them all, a ragweed protein that causes hay fever.

为了找到这个过敏原，Palmisano博士将一些白葡萄酒用冰凉的三氯乙酸和酒精处理以沉淀出所有的糖蛋白，之后将它们消化成叫做多肽的小分子以便用质谱仪分析。他拿检查结果和已知过敏原的数据库对比。有三个糖蛋白引入眼帘，其中一个过敏性蛋白相似，该蛋白可以再乳胶和梨中发现；第二个与另一个乳胶蛋白以及一个橄榄蛋白相似，这两个蛋白也是已知的过敏原；第三个与造成花粉过敏的豚草蛋白类似，该蛋白可说是过敏原里最厉害的一个了。

Whether winemakers will be able to act on this knowledge is moot. But it might be possible to tweak the production process to reduce the presence of the allergens. In any case, you can now blame that stuffy feeling that comes after drinking on glycoproteins, not alcohol. Honest.

酿酒商们会不会因为这个发现而改进产品这未有可知。不过通过调节生产流程来减少过敏原的产生倒是很有可能的。不管怎么说，说真的，下次你又喝红酒头疼的时候就不用怪酒了，应该怪糖蛋白么

No command, and control

No command, and control        
没有指挥，只有控制

Chaos fills battlefields and disaster zones. Artificial intelligence may be better than the natural sort at coping with it
战场和灾区一片混乱。人工智能应对这种局面的能力可能要胜于人类

Nov 25th 2010 | from PRINT EDITION
2010年11月25日|打印版

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ARMIES have always been divided into officers and grunts. The officers give the orders. The grunts carry them out. But what if the grunts took over and tried to decide among themselves on the best course of action? The limits of human psychology, battlefield communications and (cynics might suggest) the brainpower of the average grunt mean this probably would not work in an army of people. It might, though, work in an army of robots.

军队一直都是由军官与士兵所组成。军官发号施令，士兵执行命令。但如果士兵接过了指挥之责，并试图由他们自己商定下一步该干什么，这会出现何种后果？由于人类组成的军队要受到人类心理与战场通信手段的限制，而普通士兵的脑力有限（愤世嫉俗者对此可能要表示反对了），上述原因决定了这样一支军队可能无法遂行其任务。然而，一支由机器人组成的军队却可能以这种方式运作。

Handing battlefield decisions to the collective intelligence of robot soldiers sounds risky, but it is the essence of a research project called ALADDIN. Autonomous Learning Agents for Decentralised Data and Information Networks, to give its full name, is a five-year-old collaboration between BAE Systems, a British defence contractor, the universities of Bristol, Oxford and Southampton, and Imperial College, London. In it, the grunts act as agents, collecting and exchanging information. They then bargain with each other over the best course of action, make a decision and carry it out.

将战场的指挥权交给机器人士兵的集体智慧听起来风险不小，但它正是一个叫做“阿拉丁”的研究项目的核心内容。其全称叫做“分散式数据与信息网络自主学习主体”，按其首字母缩略为ALADDIN（阿拉丁）。这项研究已进行了5年之久，是由英国防务承包商英国宇航系统公司（BAE）与布里斯托大学、牛津大学、南安普敦大学及伦敦大学帝国理工学院合作研发一个项目。在这项研究中，普通士兵担当研究的主体。他们首先收集和交换信息,然后协商讨论最佳的行动方案，做出决定。最后开始行动。

So far, ALADDIN’s researchers have limited themselves to tests that simulate disasters such as earthquakes rather than warfare; saving life, then, rather than taking it. That may make the technology seem less sinister. But disasters are similar to battlefields in their degree of confusion and complexity, and in the consequent unreliability and incompleteness of the information available. What works for disaster relief should therefore also work for conflict. BAE Systems has said that it plans to use some of the results from ALADDIN to improve military logistics, communications and combat-management systems.

到目前为止，“阿拉丁”项目的研究人员只是将他们的试验限制在模拟如发生了地震这类自然灾害上，还没有在模拟战争的情况下进行测试。也就是说试验如何拯救生命，而不是如何夺取生命。从而使这项技术少了几分邪恶的色彩。但自然灾害带来的混乱和复杂局面与战场的情况相差无几，都同样存在难以获得可靠信息与得到的信息支离破碎的问题。用于救灾的有效措施因此也应该适用于战场。英国宇航系统公司表示，它计划将“阿拉丁”项目的部分研究成果应用于改进军队的后勤、通讯和作战管理系统上。

War and peace
战争与和平

ALADDIN’s agents—which might include fire alarms in burning buildings, devices carried by emergency services and drones flying over enemy territory—collect and process data using a range of algorithms that form the core of the project. To develop these algorithms the 60 researchers involved used techniques that include game theory (in which agents have to overcome barriers to collaboration in order to get the best outcome), probabilistic modelling (which is employed to predict missing data and reduce uncertainty) and optimisation techniques (which can provide means of making decisions when communications between agents are limited). A number of the algorithms also employ auctions to allocate resources among competing users.

“阿拉丁”项目的主体可能包括建筑物内的火灾报警器、抢修队携带的设备及飞越敌方领空的无人机等，它们收集信息，并使用构成了研究项目核心的一套算法来处理这些数据。为了开发这套算法，共调用了60名研究人员，使用了包括博弈论（应用这种理论，要求各主体必须消除隔阂，密切合作，以获得最佳的结果）、概率模型（利用这种模型得到的结果来代替无法收集到的数据，减少不确定性）及优化技术（利用这种技术，可以在各主体间通讯联系不畅时提供作出决定的方法）等手段。算法中还大量采用了竞拍的方式在竞争用户间分配资源。

In the case of an earthquake, for instance, the agents bid among themselves to allocate ambulances. This may seem callous, but the bids are based on data about how ill the casualties are at different places. In essence, what is going on is a sophisticated form of triage designed to make best use of the ambulances available. No human egos get in the way. Instead, the groups operating the ambulances loan them to each other on the basis of the bids. The result does seem to be a better allocation of resources than people would make by themselves. In simulations run without the auction, some of the ambulances were left standing idle.

例如在一场地震灾难中，就可以采用各主体竞价的方式来分配救护车。这似乎有些冷酷无情，但出价依据的是各地伤亡严重程度的数据。其实，这一切只是治疗类选法（triage）的一种复杂形式而已，使可调用的救护车得到最佳的利用。人类的利己主义在此就不会来挡道了。分配给各抢救小组的救护车数量完全根据竞标的结果来定。其结果似乎确实比人类自己调配时将资源分配的更合理了一些。在未实施竞标方式的模拟实验中，有些救护车被闲置一旁。

The bidding algorithms can be tweaked to account for changing behaviour and circumstance. Proportional bidding, for instance, allows resources to be shared. If one agent bids twice as much as another for the use of a piece of equipment, the first agent will be given two-thirds of its capability and the second one-third. And, a bit like eBay, deadlines placed on making bids speed the process up.

竞标算法还可以根据作用方式及条件的变化而改进。例如，比例竞标就可以实现资源共享。如为获得某台设备的使用权，一个主体出价是另一个主体的两倍，则第一个主体将获得这台设备全部能力2/3的使用权，而第二个主体只获得1/3。这有点类似于易趣网设置截止时刻以加速竞标进度的做法。

All of which is very life-affirming when ambulances are being sent to help earthquake victims. The real prize, though, is processing battlefield information. Some 7,000 unmanned aerial vehicles, from small hand-launched devices to big robotic aircraft fitted with laser-guided bombs, are now deployed in Iraq and Afghanistan. Their combined video output this year will be so great that it would take one person four decades to watch it. Next year things will be worse. America is about to deploy drones equipped with a surveillance system called Gorgon Stare. This stitches together images from lots of cameras to provide live video of an area as big as a town. Users will be able to zoom in for a closer look at whatever takes their interest: a particular house, say, or a car.

当地震发生，急需救护车前往救助伤员时，上述做法充份显示了其救死扶伤的效果。然而其真正的价值体现在处理战场信息上。目前约有7000架无人飞行器部署在伊拉克和阿富汗，这些飞行器小到可以徒手投掷，大到装备了激光制导炸弹的大型无人机。这些无人飞行器今年拍摄的视频图像合在一起，一个人就是花上40年的时间也难看完。明年这一情况可能会更加严重。美国打算明年部署一种无人机，这型无人机上安装了被称为“戈尔贡凝视”（Gorgon Stare）的一种监视系统。这种系统可以将多台摄影机拍摄的影像进行拼接，合成一幅全城大小的即时影像。使用这些影像的人不论是对地面上的什么发生兴趣（比如一间特定的房屋或是一辆汽车），都可以将画面拉近仔细观看。

Data are also streaming in from other sources: remote sensors operating as fixed sentries, sensors on ground vehicles and sensors on the equipment that soldiers carry around with them (some have cameras on their helmets). On top of this is all the information from radars, satellites, radios and the monitoring of communications. The result, as an American general has put it, is that the armed forces could soon be “swimming in sensors and drowning in data”.

流入的数据也有其它来源，如作为固定岗哨的遥控探头、装在地面车辆上的探头及单兵装备上的传感器（部分士兵的头盔上装有摄像头）。这些还不算什么，数据最大的来源是雷达、卫星、无线电设备和通讯监控系统。其结果就如一位美国将军所言，军人们可能很快就要“在传感器的大海中游泳，淹死在数据的汪洋之中。”

ALADDIN, and systems like it, should help them keep afloat by automating some of the data analysis and the management of robots. Among BAE Systems’ plans, for example, is the co-operative control of drones, which would allow a pilot in a jet to fly with a squadron of the robot aircraft on surveillance or combat missions.

“阿拉丁”及其类似的系统可以使部分数据分析及机器人管理工作实现自动化，因而可以成为军人们的“救生圈”。例如，英国宇航系统公司计划开发的项目之一是无人机的联合控制，这项研究一旦成功，一名喷气机驾驶员就能独自驾机带着一队无人机去分别执行侦查及战斗任务。

The university researchers, meanwhile, are continuing to look at civilian applications. The next step, according to Nick Jennings of the University of Southampton, who is one of the project’s leaders, is to examine more closely the interaction between people and agents. The recent earthquake in Haiti, he says, showed there is a lot of valuable information about things such as water, power supplies and blocked roads that can be gathered by “crowdsourcing” data using software agents monitoring social-networking websites. The group will also look at applying their algorithms to electricity grids, to make them work better with environmentally friendly but unreliable sources of power.

与此同时，各大学的研究者们还在继续探寻这一技术在民用领域的应用前景。尼克•詹宁斯（Nick Jennings）来自南安普顿大学，是该项目带头人之一。按照他的说法，下一步工作是更仔细地检验人与各主体之间的互动情况。他说，最近发生在海地的地震救灾过程显示，大量有价值的信息，如有关供水、供电及道路堵塞等信息可以通过“众包”数据的方式进行收集，这种方式依靠各软件主体密切监视社交网站的动态。这个项目的研究人员还打算将他们开发的算法应用到电网管理上，目的是改进稳定性欠佳的环保型电源入网后电网的运行状态。

And for those worried about machines taking over, more research will be carried out into what Dr Jennings calls flexible autonomy. This involves limiting the agents’ new-found freedom by handing some decisions back to people. In a military setting this could mean passing pictures recognised as a convoy of moving vehicles to a person for confirmation before, say, calling down an airstrike.

为打消人们担心机器会完全取代人类的顾虑，更多的研究成果将带有詹宁斯博士称之为“柔性自主”的特点。通过将部分决定权重归人类的办法来限制各主体自行扩大自由行事权。应用在军事中，这意味着如发现一个移动的车队后，无人机在决定是否对其进行打击前，必须先将图片传给一个人加以确认。

Whether that is a good idea is at least open to question. Given the propensity for human error in such circumstances, mechanised grunts might make such calls better than flesh-and-blood officers. The day of the people’s—or, rather, the robots’—army, then, may soon be at hand.

这样做是否妥当至少还有待商榷。但鉴于人类以往在这类情况下常犯错误，与血肉之躯的军官们相比机器人大兵也许更适于指挥这样的行动。一支人民军队（呵呵，还不如说是机器人部队）的出现可能是指日可待了

The fat cat cometh肥猫报到

The fat cat cometh肥猫报到

It is not just human beings that are getting fatter. Animals are, too
不只人类正在变胖，动物亦然

Nov 25th 2010 | from PRINT EDITION



IN THEIR attempts to explain the global epidemic of obesity, researchers have often taken to fingering culprits beyond people’s direct control. It is now believed that increased levels of stress, climate change and even artificial light at night may contribute to expanding waistlines. However, if such factors affect humans, they ought, in principle, to have similarly nefarious effects on other creatures. This should hold especially true for species that are physiologically similar to people and live in proximity to them. Pet owners have long fretted that this may, indeed, be happening.

在试图解释全球流行的肥胖时，研究人员往往指陈人们无法直接控制的元凶。人们现在认为，压力水平上升、气候变化、甚至连夜晚的人工照明都有助于扩大腰围。但是，如果这些因素影响人类，那么按理说它们对其它生物应该有同样的恶果。这种影响对那些在生理上与人类相似且靠近人群生活的物种应该尤其成真。宠物的主人们对此早就苦恼不已，的确这种影响有可能发生。

Of course, anecdotal evidence carries little weight, so a group of researchers led by Yann Klimentidis, of the University of Alabama, decided to check whether animal obesity rates do in fact mirror the worrying trend among people. They published their findings this week in the Proceedings of the Royal Society.

当然，道听途说不足为据，所以美国阿拉巴马大学的一组研究人员在扬•克利曼泰迪斯的领导下，决定核对核对动物的肥胖率是否跟人们的担忧趋势确实相符。他们在本周的《英国皇家学会会刊》上发表了他们的研究结果。

Dr Klimentidis and his team set about their task by scouring online repositories of scientific papers, contacting fellow researchers and even petitioning pet-food companies for data on changes in animals’ bodyweights over the decades. They limited their search to mammals, whose bodies work much like humans’ do—and, specifically, to those mammals living with or around people in the rich world.

克利曼泰迪丝博士和他的小组着手完成任务，他们搜索网上的科学论文库、联系其它同道研究人员、甚至向宠物食品公司请阅近几十年来动物体重的变化数据。他们把搜索锁定在哺乳动物上，因为哺乳动物的身体跟人类的身体功能非常相似——而且特别把搜索锁定在那些富裕国家里与人共同生活或在人周边生活的哺乳动物上。

The trawl threw up information on more than 20,000 animals from 24 distinct populations covering eight species. These included cats, dogs, mice, rats and several types of monkey. Some were bred in highly controlled research environments. Others lived in people’s homes or in the wild. None had their food intake artificially limited or, as with livestock, ramped up.

这次搜罗从24个不同的群落中找出了八个物种2万余只动物的信息。这些物种包括猫、狗、小鼠、大鼠和几种猴。有些是在严格控制的研究环境下饲养的。其它的生活在人的家中或在野外生存。它们的食物摄入量均未人为限制或是象喂牲畜一样加料。

For each population, Dr Klimentidis looked at the animals’ weight at an age corresponding to 35 human years. Middle adulthood was chosen to ensure the data were not fudged by the effects of either early development or old-age withering. Any animals that died within a year of this mid-life physical were also excluded.

对于每个群落，克利曼泰迪斯博士都调查了年纪相当于人类35岁的动物的体重。选择成年中期是为了确保数据既不受早期发育的影响也不受老年萎缩的影响而掺假。任何在这个中期体检年内死亡的动物也被排除。

He then proceeded to calculate each population’s average weight, as well as its obesity rate, for every decade of available data. The obesity rates were based on a bespoke indicator akin to the body-mass index that is used to gauge (roughly) whether a person is too rotund. This ploy permitted comparison between species in which weights have different meanings. (Nutritionists employ similar tricks to establish what is a healthy body-mass index for children in different age groups.)

接着，他计算出每个群落的平均体重以及肥胖率，每十年取一个可用的数据。肥胖率的计算按预定的指标为基础上进行，预定指标类似于用来衡量（大约）一个人是否太圆的身体－质量指数。这项工作允许在体重意义不同的物种之间进行比较。（营养学家采用类似手法来确定不同年龄段儿童的健康身体质量指标是多少。）

Subsequent number-crunching revealed a statistically significant increase in bodyweight in 11 of the 24 populations. The weights of the other 13 rose too, though not to an extent that was significant for any of the individual groups. Nevertheless, the fact that all of these insignificant changes were upward was, itself, statistically significant. Moreover, the obesity-rate indices followed a similar pattern. Dr Klimentidis reckons the odds of his data having come about by chance are about one in 10m for the weight gain and three in 1m for the rise in obesity.

随后的数字处理揭示了24个群落中有11个体重显着增加。其它13个群落的体重也有增加，不过达不到对于任何个别群体来说都显著的程度。然而，这些微不足道的变化是向上增的这一事实本身就很显著。此外，肥胖率指数遵循了类似的模式。克利曼泰迪斯博士估计，他的数据偶然出现的几率在体重增加方面大约是1000万分之一左右，在肥胖率上升方面大约是100万分之三。

Most intriguingly, perhaps, the laboratory animals showed more pronounced gains than those living outside a lab. This is strange because the sorts of lab animals the researchers looked at tend to be given lots of food and left to nibble at leisure. This practice has not changed for decades. That the animals put on weight nonetheless suggests the phenomenon cannot be caused solely by pet owners appeasing their Garfields, or feral rats rummaging through refuse composed of ever larger quantities of calorie-rich processed food. Dr Klimentidis is unable to pinpoint any single mechanism that could account for his results. But this does not stop his data from lending exculpatory explanations for fat tummies more credence.

或许最有趣的是，实验室动物比非实验室动物表现出更为明显的体重增加。这很奇怪，因为研究人员观察的各种实验室动物往往被给予大量食物，且让它们在闲暇时一点一点蚕食。这种做法几十年来都没有改变。尽管这样动物还在发胖，这说明发胖现象不可能是单由宠物的主人安抚他们的加菲猫引起的，或者单由野生鼠完全不吃大量富含高卡路里的加工食品引起的。克利曼泰迪斯博士无法查明任何一种可以解释其研究结果的单一机制。但是，这并不妨碍借用他的数据对大腹便便作出开脱罪责的解释，而不是把罪责归于餐桌。

Science and Technology

China Jitters: Macro & Micro

By WILLIAM ALPERT | MORE ARTICLES BY AUTHOR

Investors in Chinese stocks were jolted last week by both macro and micro events, including a RINO International sell recommendation.

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Emerging Markets

INVESTORS IN CHINESE STOCKS got spooked last week by events large and small. On a macro scale, government data Thursday showed that China's consumer-price index had jumped 4.4% in October, from the prior-year period. Predictions of inflation-damping moves by the nation's central bank, like an interest-rate hike, seem to have then spurred investors to rake in some winnings from the past few months' run of luck on Chinese bourses. The Shanghai Composite Index slid 5.2% Friday, to 2985, the biggest one-day drop in more than a year. The Hang Seng Index in Hong Kong slipped a couple of percentage points Friday, too.

China stock traders were scared by small things, too. Micro-cap things, in fact. Wednesday, a two-man Hong Kong investment firm called Muddy Waters put out a Strong Sell recommendation on RINO International (ticker: RINO), a Nasdaq-listed maker of pollution-control gear in the northeastern port city of Dalian. The report alleged that RINO's bosses have lied about the company's sales and diverted cash to buy a luxury home in California. By week's end, RINO's stock was some 30% lower, at 11 bucks.

The pall spread over other U.S.-listed China stocks that, like RINO, have arrived on the NYSE and Nasdaq by reverse-merging into an American shell company. That universe of several hundred China reverse-mergers had been recovering from a chill summer punctuated by a sharply critical survey of the stocks in Barron's ("Beware This Chinese Export," Aug. 30). That Barron's story mentioned that RINO had gone through three auditors and four CFOs in four years.

Last week's report by Muddy Waters said regulatory filings in China show RINO reporting $11 million in 2009 revenue, not the $193 million that RINO reports in its filings at the Securities and Exchange Commission. The report said that companies listed as big customers by RINO had told the investment researchers that RINO wasn't their supplier. In a news release, RINO said it was reviewing Muddy Waters' allegations and would respond in its conference call on the September quarter, on Nov. 16.

This is the second time Muddy Waters has stirred China's reverse-merged stocks. "Because of people like Muddy Waters, I'm not inclined to invest in China any longer," grumbles a longtime fan of the reverse-mergers. In July, Muddy Waters alleged that Orient Paper (ONP) overstated its revenue. The papermaker issued a denial and its outside directors commissioned an investigation whose results are expected soon. The paper company's chief executive claimed the Sell recommendation followed his refusal to pay a huge fee demanded by Muddy Waters associates, a charge that the researchers deny.

Carson Block says he started Muddy Waters with factory expert Sean Regan after the pair visited Orient Paper to conduct due diligence for Block's father, Bill Block. The elder Block has a long history of touting terrible stocks like Cott, the 1990s Canadian soft drink disaster, and ACLN, one or the last decade's worst frauds. Companies give him stock for his Strong Buy recommendations. Carson Block was so dismayed by his visit to Orient Paper that he started Muddy Waters, whose name alludes to the Chinese predilection for opacity.

The younger Block says his critical research puts him at odds with his father's optimism. "We have no connection now on a business level," says Carson. "And on a personal level we're both somewhat sad about that."

 

Maybe It's Not Different This Time

By WARREN JACOBS | MORE ARTICLES BY AUTHOR

Seen historically, and not just in the context of the last 20 years, valuation levels of the S&P 500 index may still be very elevated.

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FINANCIAL PROFESSIONALS PROPOSING risky investments are fond of challenging anyone who disagrees with their promise that "this time it's different." While risk may be appropriate for those just beginning their investment journey, twilight investors approaching the day they must live off their savings should be especially interested in asking what will happen if this time it's not different.

Historically, investors have relied on price-to-earnings, price-to-dividends and price-to-book ratios to value the stock market. Based on their lofty levels in the past two decades, many financial professionals have chosen to ignore dividend and book-value ratios. And they have used estimates of future earnings, rather than actual past earnings, in constructing their P/E ratios. These ratios are new and different, even if the underlying accounting is not.

Relevant P/E ratios require reliable company profit levels to compare with the stock index price. Many financial professionals base their recommendations on projections of future earnings for the Standard & Poor's 500 stock index.

I examined the reliability of analysts' 12-month forward S&P 500 earnings projections by comparing Thomson Financial's analyst estimates with the actual S&P profits from Robert Shiller's Website (http://www.econ.yale.edu/~shiller/). Estimates of the next 12 months' earnings from January 1979 through October 2003 ranged from 23% below to 59% above the actual S&P earnings. The 298 Thomson monthly analysts' projections averaged 19% greater than the actual S&P 12 months' earnings. Combined with wide month-to-month swings, P/E projections based on analysts' earnings predictions proved unreliable.

Sobering Picture

Gauged by several ratios, the stock market looks pricey, compared with its valuation during other periods.

Figure 1 shows the comparison of S&P projected earnings to actual earnings over a 298-month period from 1979 through 2003.

Figure 2 shows the price-to-earnings ratio of U.S. nonfinancial stocks, based on actual company profits, as reported by the Federal Reserve.

Today's S&P price-to-earnings ratio of 14, based on Federal Reserve data, is well below its peak of 51, hit in 2001, but is still historically high.

Comparing today's price-to-earnings ratio to those from 1945 through the early 1980s, it's easy to understand why some analysts were concerned about overvaluation soon after the current bull market started in 1982. The question that investors must answer is: What happens if the price-earnings ratio reverts to its pre-1982 range?

Figure 3 shows a semi-log chart of the price-to-book ratio of U.S. nonfinancial stocks since 1945, as reported by the Federal Reserve.

This price-to-book ratio compares the end-of-quarter total dollar value of all U.S. nonfinancial stocks to the Fed's tabulation of the dollar value of company assets for the same periods. It is a simplified version of James Tobin's "q ratio," comparing the stock-market value to the asset value of U.S. companies. While below the 2000 peak levels, the ratio is currently above its level from 1945 through 1994.

Of the three ratios, the price-to-book ratio has historically been the most reliable in valuing the stock market. But at the 2009 stock market lows, the ratio dropped only to its long-term average level. The danger is that this ratio could fall past its long-term average level toward its past historic low, and that would bring a further loss of as much as two-thirds of its current value.

Figure 4 shows the price-to-dividends ratio of the S&P 500 since 1945, computed from Shiller's data.

Before the unprecedented tech boom of the 1990s, investors received a dollar in dividends, on average, at bull-market peaks for each $33.80 worth of the S&P index they owned. At the 2000 peak, an investor needed to own $90.20 of the index to get $1.00 in dividends. Currently, with the S&P around 1200 and a dividend of $23.19, an investor needs $51.75 of the benchmark index to get $1.00 in dividends. While far below 2000 peak levels, the price-to-dividends ratio now is higher than it was in every month from 1872 through 1996.

Taken together, these ratios present a time-tested picture of stock-market valuation levels that an investor should consider when deciding what portion of his or her investments should be allocated to stocks. It's impossible to know if the elevated levels of these three ratios over the past 20 years represent a new normal or an extended bubble that will eventually pop.

Still, investors should ask: "What if this time it's not different, and valuation levels revert to the ranges that prevailed before 1982?"

 

Betting on Beijing

By MICHAEL SHARI | MORE ARTICLES BY AUTHOR

Shanghai-based hedge-fund manager Frederic Durr has turned in stellar results by buying smaller companies in markets the government favors.

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WHEN HEDGE-FUND MANAGER Frederic Durr launched his Maoming Fund in Shanghai with just $8 million in March 2006, he didn't bother to look at China's best-known companies. He figured that large-caps like PetroChina (PTR) or Industrial and Commercial Bank of China (1398.Hong Kong) already were covered by so many analysts that he'd never find a unique investment angle.

Instead, this opportunistic, value-oriented Swiss investor has recorded strong returns by roaming China's vast mainland in search of lesser-known companies with midsize market caps of $2 billion to $3 billion. He regards them as the true growth story in the world's largest emerging economy, particularly when they operate in markets favored by Communist central planning. After extensive meetings with management, Durr picks companies that can benefit from Beijing's policies that may seek to, say, reduce carbon emissions, develop renewable energy resources or build new infrastructure in the remote cities. He also likes plays on consumer spending, which is growing fast in China.

This equity fund has a long bias because most Chinese midcaps are not liquid enough to short. When the market turns volatile, Maoming―named for a road that runs through a leafy French colonial expatriate enclave of Shanghai―just cashes in some of its stocks. The fund is currently about 15% in cash.

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Chad Ingraham for Barron's

Swiss hedge-fund manager Frederic Durr looks for businesses that will benefit from government policy

"Where we have an edge is in small companies where we have access to management," says the 32-year-old Durr, who's worked as an Asian equity analyst at Merrill Lynch Investment Managers (now BlackRock) in London and at Lloyd George Management in Shanghai. "It's more a question of preserving capital and making a return every year than trying to be clever and short big names in China."

The strategy seems to be working. Maoming delivered a 22.23% annualized return from March 2006 to Sept. 30 this year, according to BarclayHedge, which tracks hedge-fund performance. In contrast, the MSCI China Index, which invests mainly in large-cap stocks, was up 18.19%, and the Barclay Emerging Market Index gained 11.57%. The Standard & Poor's 500 actually lost 0.57%.

Maoming stood out in the crash of 2008, when it gained 14.57% for the year, while the MSCI China Index was down 50.83%. The fund sold Chinese vegetable-wholesaler Chaoda Modern Agriculture (682.HongKong), the beneficiary of a government tax break, at a 39% gain and Australian miner Fortescue Metals Group (FMG.Australia), which exports iron ore to China, at a 29% profit; it also shorted big Chinese stocks like PetroChina and Bank of China (3988.Hong Kong) that were market proxies.

As a result of such moves, the assets of the Maoming Fund, which is registered in the Cayman Islands, have grown nearly nine-fold since its inception to $70 million, according to BarclayHedge. About three-quarters of the fund's assets are concentrated in about 15 publicly listed stocks, and a quarter are in private equity. In addition, Durr and French co-manager Julien Moulin, a former UBS Global Asset Management equity analyst, oversee about $125 million in a special-purpose vehicle that invests in venture capital, giving them a total of $195 million in assets. The two own about a third of Maoming, which recently closed to new investors as inflows rose. It plans to reopen in 2011.

Unlike the nearly 20 other hedge funds that have set up shop in the emerging financial center of Shanghai, Durr avoids the Shanghai Stock Exchange because commissions are too high for foreigners and the environment too much like a "casino," fueled by rumor. So he buys mostly Hong Kong-, New York-, London- and Singapore-listed companies.

Maoming tries to differentiate itself from other hedge funds by making it easy to bail out when the market turns volatile. Investors, the largest of whom are Swiss, are allowed to withdraw their funds during the first year with a 5% penalty. Otherwise, the fund's terms look pretty standard, with a $50,000 minimum investment, a 2% management fee and a 20% performance fee.

One of Durr's better picks thus far was a play on a government policy to promote the use of natural gas and reduce carbon emissions. In August and November 2009, the fund bought ENN Energy Holdings (2688.Hong Kong), a natural-gas supplier, which closed Nov. 5 at HK$24.80 (US$3.20), a 42% gain.

Maoming scored even bigger with a play on domestic consumption, which is outpacing exports as a growth driver of China's economy. It's Lianhua Supermarket Holdings (0980.Hong Kong), a supermarket chain where shoppers pay in advance by buying prepaid debit cards at a discount. The stock has more than doubled.

WHEN HE WANTED TO BET ON the soaring demand for commodities in China, Durr could not find a public Chinese stock that fit Maoming's strategy. As a substitute, he bought Prosperity Resources (PSP.Australia), a mining company that is based in Perth, Australia, and operates copper and gold mines in Indonesia for export to China. The stock has risen 72% on news of encouraging exploration results.

Not every stock in the portfolio is a winner, of course. Take ChinaTel Group (CHTL.OTCBB), which Durr bought for an average of US55 cents between mid-September and mid-November 2009. Since then, the stock is down 82%, following delayed expansion plans, and it traded at 16 cents on Nov. 4 this year. But Durr expects the stock to climb as ChinaTel builds a new WiMAX wireless internet network in 29 cities in China where the company has a license to use fourth-generation cellular technology.

One of Maoming's largest investments is a play on a government policy to develop renewable energy resources. In a private-equity deal that dates back to an initial investment of $2.5 million in start-up capital in 2007, Maoming now owns a 6.8% stake in Envision, a small company that makes wind turbines using proprietary technology and Danish-designed rotor blades in Jiangjin, northwest of Shanghai. Envision's production is increasing thanks to a partnership with Longyuan Wind Power, the largest wind farm developer in China. As Envision readies to go public, which Durr sees sometime in 2011, he expects the initial investment to deliver a return of 400% to 900%.

Although the recent rally is tapering off, Durr is still optimistic for the year ahead. "I don't see the Chinese market collapsing in the near term," he says. "The rest of the world has an interest in China doing well."  

 

Bullish, but Not a Raging Bull

By LAWRENCE C. STRAUSS | MORE ARTICLES BY AUTHOR

Wells Fargo's John Lynch likes big-caps, emerging markets and Microsoft, Cisco and Oracle. But he sees reasons to be cautious.

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THE STOCK MARKET HAS STAGED a big rally recently. But now what? Stay with the rally? Take some money off the table? For insights, Barron's spoke by telephone last week with John Lynch, chief equity strategist at the Wells Fargo Funds Management Group. Lynch, 47, who is based in Charlotte, N.C., is for the most part upbeat about stocks, though he is concerned that the market is close to getting frothy. He tilts to large-cap stocks over small-caps, and emerging markets over domestic. As for sectors, his Overweight recommendations are technology, energy, materials and industrials. He is underweight consumer discretionary and staples. To learn his reasoning, read on.

Barron's: Let's start with the big picture. What's your assessment of stocks?

Lynch: The equity markets look pretty good. We've gained significant technical strength over these past three months. We had a good July and then, despite all the merger-and-acquisition activity in August, the market really didn't react. It was Federal Reserve Chairman Ben Bernanke's speech in late August that really got us over the hump. Last year, we talked about a 2010 trading range for the S&P 500 of 1050 to 1250. With the S&P 500 above 1200, we are near the upper end of that range, and the technicals look pretty strong.

Could you give a few examples?

The percentage of stocks on the New York Stock Exchange trading above their 200-day moving average looks very good. What is known as the MACD, or moving average convergence-divergence, line looks very good. The VIX index, which measures implied volatility, seems to be behaving, so investors don't seem to be too skittish. I am alarmed, though, at the relative strength index, which looks like we are overbought. So if there is a mixed signal in terms of the technical indicators, it would be that index [which gauges a market's momentum, based on current and past closing prices].

Which of Bernanke's speeches are you referring to?

In late August, he gave a speech at the Jackson Hole conference. That's where he really telegraphed the whole QE2 [quantitative easing, part two]. After he telegraphed that, we had the major September and October rally. That part of it was based on fundamentals. We had better-than-expected earnings. The market rallied around the fact that it was less likely we would have a double-dip recession. The market also priced in the midterm elections, and it turned out the market got it right this time. So you had a confluence of technical and fundamental events supporting the market north of the April highs.

What are your key themes in the equity markets?

It is always about earnings and interest rates, in terms of fundamentals. Corporate earnings growth this year will be up north of 40% from last year. The following year, 2011, we'll transition to earnings growth around 6% or 7%, which is more in line with the historical average. The Fed appears to be stimulative through the middle of next year, at least―and that is not only QE2. When the Fed reopened the currency-swap desk with the European Central Bank last May, that told me we are at near zero on the short end of the curve through the middle of next year.

John Lynch of Wells Fargo Funds Management Group

What are you looking for the S&P 500 to earn?

Operating earnings for the S&P this year should be $82 or $83, and that is exactly what it did in 2007. Yet in 2007, the S&P traded at 18 or 19 times that number, and we discounted it at 400 basis points [four percentage points] on the short end of the curve. Today, we are at a multiple of 14, 15 times, and we are discounting it at zero. So that's a plus for investors. Looking into next year, however, I am alarmed because expectations are too high from a profitability standpoint. I look at consensus earnings estimates above $95, and I'm not there. I'm in print at $87.50 for 2011, and that may be too conservative. But even if I tweak it, I don't see myself going above $90. We are in a liquidity-driven market, but we should be mindful that there are many fundamental risks that could bring that $95 number down closer to $90.

Presumably, that would put a lid on any upside.

Yes. Again, we are at the top end of my trading range as far as the S&P 500 goes. At the same time, there is a fundamental risk with some corporate profitability for next year. I think the economy will grow in the 2%-2½% range in 2011. We should still have 9% unemployment by the end of 2011. And looking at these sovereign-credit spreads in Europe, it seems that we are just ignoring them right now. It is convenient to ignore, because everything else seems to be going well, with all the positive news we got recently. But investors should be mindful of that going forward.

You sound pretty upbeat, but what's the outlook for housing and employment?

We are in the process of finding a floor in housing and a ceiling on the unemployment rate. And if I had to pick one, I think we will be more successful at finding the ceiling for the unemployment rate. It doesn't appear, with 151,000 jobs created last month, that we are going to see a significant increase in the unemployment rate. So we've pretty much established that ceiling. As for a floor in housing, we are starting to see marginal improvement on a year-over-year basis. But we have not quite fully established the floor. So those are the two key points, and that will obviously have an impact on income growth, which translates to consumption growth, and then we'll see how that can really power gross domestic product higher next year. And I suspect it will be a less spectacular expansion.

You use technical and fundamental analysis. How do you balance the two?

For the first 23 years of my 25-year career, I was an unrepentant fundamentalist, focusing entirely on earnings, interest rates, top-line growth, inflation, price-earnings ratios―you name it. Ever since September 2008, you can call me a battlefield convert. I started checking out the charts. What we try to emphasize to our advisor partners and to our clients is to look at how we've attempted to combat this financial crisis. We've printed tons of liquidity, companies have gone under, and companies have bought back shares. Essentially, we've had more dollars chasing fewer shares, so that's made it a liquidity-driven market.

That makes it important for investors to have a better appreciation for support and resistance. And when I say the top end of the range for the S&P 500 is that 1250 area, a real key number, in my mind, is the 1228 level, which represents what is known as the 62% retracement to the October 2007 high. It's at that 1228 number where a lot of institutions may start pulling out of equities, just as individuals start jumping in. And for those reasons, we have to appreciate the technicals.

Are you more worried about inflation or deflation?

I am sure that Milton Friedman is spinning in his grave, thinking of all the money we've thrown at this problem. And when I see another round of quantitative easing, this one totaling $600 billion, I'm not convinced we really needed that. However, the Fed has done all it could, and I think Bernanke acted admirably. I'm disappointed in the fiscal leadership, though. We've had a year to determine whether tax rates on dividends and capital gains would be extended at current rates of 15% or if they would be extended at, say, 20%. We need the fiscal leadership. If we do get it, I could see myself raising my fair-value estimate for year-end 2011. But it really comes down to that fiscal leadership. As for inflation/deflation, when the unemployment rate doubled and when house prices fell 40% from peak to trough and when the price of oil went from $150 to $50 a barrel, in my mind that was a deflationary experience. But when you throw trillions of dollars at a problem, ultimately there is going to be some inflationary buildup. The Federal Reserve Bank is making a mistake now by focusing on lagging inflationary indicators like the core personal consumer expenditure index. If we just look at what the Treasury yield curve is telling us, we should see slow growth with a potential for a small uptick in inflation over the next 12 to 18 months.

How sustainable is this stock-market rally?

It could get tired real soon. Technical strength could get us to north of 1250. If we get a two-year extension of the existing tax rates on capital gains and dividends�and they are talking more and more about doing that―we could blow through 1300 on the S&P. And that's when I get really scared. I'm in an uncomfortable position of being an equity strategist and being scared, because there would be too much air underneath the market.

So as we get to the top end of this range for the S&P 500, it really comes down to active management. It is not a passive game, and that is something we advise our partner advisors and our clients about�that is, in this environment be tactically strategic or strategically tactical. An active diversification strategy whereby you can take some money off the top and rebalance your portfolio when the S&P 500 is in the 1250 range makes sense. Also, we are still mindful of what is going on in Europe, the high unemployment rate in the U.S. and the deleveraging. The consumer is not done there yet.

What stock sectors look attractive?

I favor a slight overweight of U.S. large- caps, relative to small-caps. Large-caps have the valuation attraction. They also have the international exposure that small-caps don't, and a lot of large companies can fund their future growth internally. Another reason why we see less spectacular economic growth next year is that the credit availability in this cycle is not what it was in previous cycles, when the non-deposit-taking institutions, such as hedge funds, pension funds and some brokerages, were participating. I also think there will be some takeover candidates among some well-run small companies.

Lynch's Sector Picks

Sector	Recommendations
Technology	Overweight
Energy	Overweight
Industrials	Overweight
Materials	Overweight
Utilities	Neutral
Telecom	Neutral
Financial Services	Neutral
Health Care	Neutral
Consumer/discrectionary	Underweight
Consumer/staples	Underweight
Source: Wells Fargo Funds Management

What about growth versus value?

I am agnostic when looking at growth and value on a valuation basis. Growth has really outperformed these past three months and, from a relative value standpoint, we are basically at historical averages. If we had to give a bid, I would take growth over value, purely from a top-line view, and also looking at some of the leading growth companies such as Oracle [ticker: ORCL], Cisco Systems [CSCO] and Microsoft [MSFT]. What do they have in common? They're offering or planning to offer a dividend yield, and I have never said that in 25 years of doing this. For growth to succeed, it is going to be more of a Graham and Dodd type of return, with earnings and income.

In addition, I'd overweight emerging markets, relative to developed markets. First, the developing markets weren't as leveraged to the extent the developed markets were. Emerging markets have growing populations. Some also are resource-rich and have export-driven economic models that are prime beneficiaries of global stimulus plans. They have consumer-utilization rates for a variety of consumer goods at ridiculously low penetration rates. I would be at least 60%-40% in terms of emerging versus developed equities.

What about U.S. sectors?

We are recommending an overweight in technology, which certainly has rallied the past couple of months. But on a year-to-date basis, tech stocks are not where they should be; you have a great earnings-growth opportunity in that sector. And we are still at an overweight for energy. With oil around $85 a barrel, the consensus earnings projections are low for 2011. Also, in line with the global stimulus plans, I suspect you'll see continued gains for industrials and materials.

Which sectors have you underweighted?

The consumer. I think we are overestimating the consumer's ability to continue to drive the economy. On the staples side, I'm concerned about all the price increases in commodities. That is obviously going to chip away at the margins of many classic staples companies, such as Procter & Gamble [PG] and General Mills [GIS], both of which have cited increased commodity costs in their recent earnings and outlooks. As for the discretionary side, we are close to a bottom in housing, but we're not there yet. And if businesses hire along the lines they did in October, that's barely going to be enough to keep in front of population growth.

Which sectors are you neutral on?

I love the cash situation for health-care companies, many of which have strong balance sheets, but I won't overweight them because we are still trying to figure out the impact of the new regulations. The same thing is true with financials. Everybody is still trying to figure out what the new financial legislation will mean for a variety of industries within the sector.

I'm also neutral on utilities and telecom, though I love the dividend opportunity in those sectors. And again, if we can get clarity on fiscal leadership, we could probably see a further pop in those areas. But we have to be mindful that with telecom, for example, you still have regulatory risks. You have the costs of building out bandwidth. As for utilities, it looks like cap-and-trade legislation is off the table. But there still may be some sort of regulatory risks in the utility sector, as well. So you have yield as an attraction for telecom and utilities, but you have some potential legal or regulatory headwinds.

Thanks, John