What are things worth? Saturday’s Financial Times had a diagram bundling comparable companies together so their combined stock market capitalization equaled that of just-launched Facebook’s US$100 billion. Thus the biggest telecoms operator in each of Germany, France and the UK total Facebook in value, as do three big UK banks and each of the pairs Eli Lilly-Bristol Myers Squib and Boeing-Caterpillar.
Maybe banks are unpopular and pharmaceuticals companies controversial, but most of us would say that Boeing and Caterpillar make products that have made the world a better place. The idea that something as idiotic as Facebook has the same market value as both equipment manufacturers put together is almost ludicrous. Yet people were paying US$45 for Facebook on Friday, before it ended up at $34 yesterday.
(It probably doesn’t help that I still can’t work out what Facebook is for, or find a reason to obey the emails begging me to visit my own virtually abandoned Facebook page. Recently, I’ve noticed that unrelated websites have started featuring little Facebook panels saying someone I know enjoyed this or that feature, which is annoying, if not almost creepy – as if Mark Zuckerberg’s people are following me around.)
Glorious Tuen Mun has its own version of Facebook: Century Gateway, a Sun Hung Kai Properties residential development. All yours (as of a couple of weeks ago) for HK$13,000 a square foot. Obviously, no-one in their right mind is going to pay that much for a home in one of the less desirable parts of Western New Territories; if you need to live there – someone might – you buy a place for half that, or rent. So the idea here is to lure in suckers who think there is more upside, that more quantitative easing is going to debase the currency, and that people with impoverished imaginations will continue to pour into Hong Kong property regardless of how out of step prices become with other asset classes, from gold to art to farmland to Facebook shares. They might be right; then again, they might be overlooking something, like the deflationary impact of trillions of global debt. But what is an apartment in Tuen Mun worth? What is the value of its economic benefits to humanity, as a badly located and no doubt poorly designed shelter?
We could ask the same about an outdated Scandinavian system for heating homes and cooking food. How much will the Chinese pay for a kitchen range that is always on, and thus uses more energy in a week than a standard oven does in nine months – namely the Aga?
Apparently, the manufacturers are working on models that can be switched off. I can imagine their CEO, William McGrath, slapping the side of his head and saying, “Duh, I wish we’d thought of that before.” I can imagine it because he has plans to sell the huge contraptions in the Mainland and has said: “In China, most standard kitchens just have two big burners in them … That’s a long way away from a western-oriented kitchen, but I think that could be radically changed in the next few years.”
If there were an Ethno-centric Western Businessman of the Year Award, he would win. He thinks Chinese kitchens will triple or quadruple in size in the next few years, while a billion people will throw their woks away and will never stir-fry anything again and start eating only stodgy stewed and baked gwailo food with gravy all over everything. The only possible way to sell Agas in China would be to stress how overpriced, wasteful and pointless they are, so people might brag about having one; the Aga company survives because it managed to position its product as a status symbol among the nouveau-riche in the UK. This brings us to the alternative universe where microeconomic laws of demand yield to psychology, if not biology.
In reality, Agas have no (non-scrap) value to the Chinese because, as this ad man points out, Mainlanders pay a premium for things they consume in public but penny-pinch on household appliances and things others don’t see. Status symbols boost their owners’ sense of self-worth – and try putting a dollar valuation on 
that. The rest of us will see them carrying a pricy item, the theory goes, and we will, to cut a long story short, want to mate and breed with them so their clearly superior DNA will give our rather humdrum self-replicating proteins a free ride to continued existence.
In practice, a highly visible status symbol might impel a prospective mate to run away screaming in terror, clutching his credit cards. Like this thing in the window of Italy Station, the second-hand handbag store. The unique nastiness of the colour scheme, partly day-glow chartreuse, partly puce, grabbed my attention at first. Then I saw the price tag: HK$268,000 – and that’s fixed, so don’t bother haggling. I thought it was a joke or a mistake, but Hong Kong retailers don’t do either. Maybe the colours are misleading, and the item reflects an ancient tradition of exquisite Italian workmanship, but even so: what are you getting for the other 267 grand?
Let’s be charitable: it’s 1,000 shares in Facebook; it’s around a couple of Agas (including what they call ‘commissioning’); it’s probably just about the down-payment for a little second-hand apartment in Tuen Mun. Seen that way, it’s a bargain.
All my handbags look like that. What’s so odd? And 27,000 or whatever it was is just loose change for us money launderers from China. I stood behind one at the Pacific Place branch of HSBC as she fed the machine with endless wads of 10,000s from a large canvas bag. I finally told her it was a quick service machine and looked officious. She scurried off. I guess I should have called a policeman and challenged her to identify the source of the money. Imagine the scene.
If you want to see true horror, go up the escalator at the New World Tower and see the shoe shop on the left. I defy you not to laugh. Or you could go to Admiralty Centre and look at where there used to be a newsagent’s, a Watson’s, a cookie shop and other similarly human types of emporia. The space is now devoted to cosmetics and a line of vending machines selling orange and fluorescent green t-shirts for 300 dollars each.
They have just closed down the ‘coffee’ shop in New World Tower – a Starbucks – to make way for another similar museum of modern shoes. More difficult than finding a toilet in Central, finding a cup of coffee has become truly hard work. I used to have a thermos flask. Should we start an expat cooperative of cafes selling real coffee, under-forty-dollars-a-round sandwiches and banning entry to people with dogs, phones or hideous designer handbags and/or shoes? I’ll sell one of my handbags on eBay to start us up.
Long live Capitalism. There is no alternative!
One less Starbucks outlet ? Some people might call that progress.
As someone whose livelihood depends on parasitically purveying “luxury” bags and other pointless trinkets to the swollen ranks of the laundering-class in China, not to mention playing a not insignificant role in driving-up retail rents in our beloved lychee (by agreeing to pay the damned things) it’s a relief to hear someone else question reality. The good news is that sales of over-priced high-margin branded wrongness have tanked rather spectacularly over the past 2 months. One good thing about the luxury industry is that we’re a pretty reliable canary in the mine (I’m seeing a croco-lined birdbath and jewelled platinum anklets). Pretty sure the bubble is about to burst.. A HK house you might want to actually live in will soon be a viable possibility again.
… which guess counts out Tuen Mun!
Facebook will morph into an online remittance system, replacing Western Union
Anything is worth what anyone else is prepared to pay for it. Any other valuation is made by someone who either can’t or won’t pay for it – and thus worthless as a figure. It’s called a free market.
I don’t like it either but until enough of us don’t pay the prices, they will stay up there. I’m not holding my breath!
I also think that presence of trillions of dollars of QE is more likely to be inflationary? More money chasing the same amount of goods usually raises prices – hence housing bubbles all over the world until the crash. At the moment, there’s enough surplus capacity that the effects of QE are not particularly inflationary – but it’s really only matter of time. Having gone through 25% inflation in the UK in the 70s, I’m really not looking forward to it!
From my undergraduate economics there was a word for a good that gave more utility to the purchaser the more they paid for it, but sadly I can’t remember it. The Landmark is full of them. A wonderful thing for the manufacturers and purveyors of them and an endless source of amusement for those not subject to their temptations.
What is Facebook for? As Bill Maher correctly pointed out on last Friday’s New Rules, seeing how fat your ex-girlfriend got. I have to say that was dead on. I saw some of the girls I grew up with and, holy cow, did they ever get huge.
Oddsox, its called a ‘Giffen good’.
I wish that the remaining Starbucks turfed out the squatters staying there for hours armed with an orange juice and a study group. As to the state of our economy, its interesting to see how CWB is going to fast get hit with a time lag with various Mainlander aimed retail developments coming on line just as things get a little frosty spending wise.
Two serious comments ( for once)
1. Much though I detest facebook and all those stoopid updates on my non-friends’ goings-on ( which I think / hope I have finally managed to damn to spam) I must say that Mark Z’s marriage to Dr Chan raised his status in my humble opinion a few notches.
I’m heavily into Chinese females for their inherent pure beauty and total “class” not to mention marriage of course (though beauty – as in all races – is only skin deep) . But I must say objectively that Priscilla Chan is no Chinese “beauty” skin-surface , so full marks to Mark for tying the knot. Guess his wife is pretty deep inside, and if indeed so I wish Mark all the best . Sincerely.
Seems China is really taking over the world, albeit by marriage…
(I’ve sneaking feeling that MZ and facebook may yet play a pivotal role in China a few years hence)
2. Talking of China taking over the world : I’m halfway through Martin Jacques’ “When China Rules The World” . If ever there’s a “China” book that shook me ( and I have read almost every China book that ever came out in the past 25 years) it’s this one.
If I rabbit on you will all dis me and deliberately not read the book
So ’nuff said. Read the book, then objectively review what you have personally seen these past 10 …20 years in China , then think again
Overuse of brackets is a sign of poorly constructed writing, as is their innappropriate use. I expect better of former Mensa members.
Really RTP?
Despite a shared sense of self loathing I wouldn’t have thought an ardent free marketer such as yourself would have given much truck to anything written by the long time editor of Marxism Today. Have you forgotten those dreary strikes, awful school lunches, getting pummeled on the rugby pitch …….?
So out of curiosity, what exactly are Martin’s ‘China’ credentials?
Tuen Mun is not as bad as you paint it to be, sure I would not pay 13k a square foot for a place in Tuen Mun town centre but there are parts with very nice housing near castle peak bay. The location will be very convenient soon when the link to Chek Lap Kok opens, if you have a factory in China and need easy airport access.
No other location in HK will compete, so there is potential there
@ ICAC
Many thanks for the input
I will follow up on what you wrote
(sincere reply to sincere reply to sincere comment)