China surprised with its first quarter GDP number- coming in at 11.1% when consensus had been at 10.4%. The Chinese government had been trying to “cool” the economy in the last several months, including hiking interest rates at least once.

They are failing.

Economists should have been noticing the trend in commodities the past several months- which was nearly straight up. Only if the Chinese economy was still hot could copper rise nearly 50% in that time period.

There is no sign of it abating.

The Chinese CPI was also hotter than expected. It came in at 3.3% for March, which was above the “comfort zone” of 3.0%. In 2006, it was only 1.5%.

But apparently, if you strip out food and energy things don’t look too bad (where have we heard that before?). From CBSMarketwatch:

“It’s above the comfort range, but as far as we can tell it is mainly driven by food prices and international commodity trends, rather than anything specifically Chinese,” Morgan said of the latest CPI.

You might think that 11% growth would be welcomed, but it is certainly near the overheating number. A country can only grow so fast before some structural strains begin to show (shortages in supplies, shortages in workers, price inflation etc.). From Forbes:

“If this type of fast growth continues, there is the possibility of shifting from fast growth to overheating. There is that risk,” Li Xiaochao, spokesman for the National Bureau of Statistics, told a news conference.

How do they contain the growth? The consensus is that they will move to immediately raise interest rates. From Forbes:

A statement posted on the council’s Web site following a meeting chaired by Premier Wen Jiabao said the government will work to “reduce the country’s large trade surplus, limit rapid growth in house prices and maintain basic price stability.”

Beijing has already raised interest rates three times in the past year and imposed investment curbs on real estate, the auto industry and other fields.

Li, the bureau spokesman, said the government will take “appropriate” macro-adjustments. He also said first-quarter investment in real estate development was up 26.9 percent over the same period last year.

The sizzle!

Want to know why copper is in short supply even though the U.S. housing market is tanking? China is a building machine.

It is also why US multi-national companies, who do a large portion of their business overseas now, are thriving even when the US economy appears to be slowing. For American companies like Coach, Yum Brands, Starbucks and McDonalds- the opportunities are still there for the taking.

Watch for great quarterly numbers from those doing business in China. And watch for everyone else to soon be trying to get into Shanghai.

The year was 1981. Ronald Reagan had just taken office. Unemployment was over 8%. The country was in a “malaise.” Interest rates were at 18%. And the Chicago Tribune Company bought itself a baseball team for $20.5 million.

At the time, Wrigley Field was hallow ground, but it was crumbling. Only day games were allowed. The team rarely sold out games. Many times there would be only 5,000 fans in the stands. The neighborhood near the ballpark wasn’t that safe. The team kept on losing. They hired a guy with thick plastic glasses named Harry Carey to do play by play. What was there to like?

Then, the Cubs actually won their division in 1984. Harry became a national phenomenon as WGN Superstation branched out across the country due to cable tv. The Cubs got lights and night games. Bars and restaurants started opening up in the neighborhood, transforming it into a yuppie mecca. In the 1990s there was the Sammy home run chase. In 2003 Cubs fans got their wish when the Cubs actually won a playoff series, before losing the pennant.

The return for buying cheap and holding all those years? Anywhere from $500 million to $1 billion. That’s what you call in stock talk- a “twenty five bagger.”

But what about today’s buyer? What will be the return on his investment?

The Cubs are no longer a value play. No one laughs about their attendance or revenue anymore. To me, they are now selling for a premium on the market. Let’s look at some of their competition.

The Milwaukee Brewers were sold two years ago. From the Business Journal of Milwaukee:

Mark Attanasio is no stranger to high-risk investments. For that matter, the likely new owner of the Milwaukee Brewers also has extensive experience with distressed businesses.

That would appear to be perfect training for Attanasio, 47, as he takes the risk of investing in Milwaukee’s long-suffering Major League Baseball team. Attanasio, of Los Angeles, has spent almost 20 years making junk bond and other high-yield investments, most recently with Trust Co. of the West.

The Brewers carried $133.2 million in debt into the 2004 season, although that is now reportedly around $100 million as Attanasio prepares to close on the sale. The Brewers’ board of directors has accepted Attanasio’s reported $220 million offer to buy the team. Major League Baseball still must approve the transaction.

“Given their financial track record, somebody who is not afraid to invest in a financially challenged company would be a good potential buyer,” said Rich Silverthorn, co-chair of the corporate practice group for Whyte Hirschboeck Dudek S.C., a Milwaukee law firm. Attanasio “is not afraid to play in that arena.”

Like any investment, you really have to be buying it when no one else wants it. So, perhaps, Mr. Attanasio got a bargain when he bought the Brewers. The new owner of the Cubs won’t be as lucky. Interest is apparently high, even with the price tag, for the privilege of owning the franchise with the longest losing streak in baseball.

Buying a sports franchise is no different than buying any other asset class. As legendary investor Sir John Templeton has said of his investment philosophy- from Motely Fool UK:

To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.

Are the Cubs a good investment?

I think not.

You have to love marketing. It’s not enough anymore that a beverage could be good for you. It now has to have a lifestyle component - i.e. helping you fight cancer (by drinking antioxidants like berries) or, more importantly, losing weight.

Nestle and Coca-Cola have teamed up with a brilliant new drink called Enviga. Launched in February, it’s a can of green tea that claims, right on the can, to help you lose weight. There is a disclaimer though- you must be between the ages of 22 and 35 to enjoy the full benefits of the weight loss and you must drink several cans a day.

As I read the can myself, all I could think of was: why not just walk a few times around the block instead?

The key is in increasing the metabolism. From the Columbia News Service:

But the beverage has been disappearing off shelves of drugstores since its launch in February. The reason? Claims by manufacturers that that consuming three cans of Enviga a day–at five calories a can–helps burn up to 106 calories.

“I don’t exercise and I try drinking health drinks because they keep you fit,” said one fan, Noelia Ramos, 22.

Coke and Nestle are taking a big risk marketing the drink as an easy way to weight loss. The lawyers have already begun circling:

The Center for Science in the Public Interest (CSPI), a nonprofit consumer group in Washington, has sued the two companies for misleading consumers by making what it says are fraudulent claims.

“The company is being very crafty,” said Ilene Heller, a senior staff attorney with the group.

The Connecticut attorney general, Richard Blumenthal, has also begun an investigation into the company’s assertions, which he calls “voodoo nutrition.”

Coke and Nestle haven’t put Enviga out there without testing the weight loss claims. They’re not THAT dumb.

A CSPI senior nutritionist, David Schardt, questioned what he termed the “misleading” findings of the study conducted by Coke and Nestle to support their claim.

The research in question involved 31 young men and women who ate strict calorie-controlled diets and drank the equivalent of three cans of Enviga each day for three days. They spent the third day in a special chamber that measured how many calories they had burned. The study concluded that most burned slightly more calories after drinking Enviga.

“The findings of the Enviga study are not based on sound science and are deceptive to consumers,” Schardt said. “This study was too short and the research was very preliminary and inconclusive. What happens after three days?” Schardt asked.

European studies conducted earlier have indicated that the calorie-burning effect doesn’t last beyond three days, he added.

But do people care if it lasts only a few days? Apparently not. Americans are transfixed with a quick route to weight loss that doesn’t involve any physical exercise. It goes back to the “you can have it all” mentality. Party hard, eat whatever you want, never exercise and still keep the perfect figure.

For the first time in years, Coke actually has a product that is flying off the shelves. Coke shareholders have to be pleased. Coke will do whatever they can to protect it on the shelves.

But what about green tea in general? Go down the “weight loss” aisle in your local Walgreens. There, next to the slimfast, you will find several manufacturers touting green tea as the cure for weight loss (usually in the form of pills or powders to be mixed with water.)

Sounds like it’s a bunch of hooey.

From Newsweek:

The Food and Drug Administration says there is no scientific evidence that drinking green tea reduces heart disease, and the agency rejected a petition last year that sought to allow the claim on tea labels. The FDA previously said that green tea probably does not reduce the risk of breast, prostate or any other type of cancer.

“Green tea has a lot of wonderful active compounds that may play a role in fighting cancer and heart disease and even protecting the lining of the arteries,” says Dave Grotto, spokesperson for the American Dietetic Association. “But there needs to be a lot more research.”

Despite many claims to the contrary, it probably doesn’t help with weight loss, either. Some studies suggest that green tea’s polyphenols may boost metabolism and help burn fat.

Unfortunately, “there’s nothing magic about green tea,” says Dr. Frank Greenway, head of the outpatient clinic at the Pennington Biomedical Research Center in Baton Rouge, La., who studies herbal supplements and obesity. “I’ll be surprised if it is shown to have any profound effect on weight loss.”

It’s too bad. I kind of liked the idea of drinking my way to health. But Coke and Nestle know all too well, that a little bit of marketing can go a long way in the new Cola, er, tea, wars.

We know the United States is aging. Not a day goes by that we don’t hear about the Baby Boomers and their march towards retirement and what it means for the American economy. We also nervously await what will happen when all of them are collecting Social Security and Medicare payments through a system that probably won’t be able to support them all.

But the Americans don’t have it nearly as bad as what will happen in Asia- specifically in Japan and China.

Japan has some of the longest life spans in the world, with its average female lifespan over 80. But they have coupled that statistic with one of the lowest birth rates. Japanese women, frankly, aren’t having enough kids. Combined with a nearly 0% immigration rate, and Japan has both a labor and a financial shortage looming. From the Inter Press Service News Agency:

Statistics estimate that Japan’s aging population will demand an increase of 1.5 million home caregivers by 2010, a requirement that cannot be met by its current population growth of 1.3 births per woman.

What are they going to do then? They’ll have to let in some foreign workers. In 2002, Japan signed a Free Trade Act with Singapore. They are close to formalizing similar agreements with Thailand and the Philippines.

Concessions were made — mainly Japan accepting a limited number of Filipino and Thai workers in exchange for scrapping tariffs on Japan’s machinery exports to those countries.

Things will be much worse in China. Imagine 400 million people needing caregivers, assisted living situations, hospitals, medicines and, simply, care? From China Daily:

China faces the problem of aging population more than any other country, with the number of people above 60 expected to cross 400 million by 2045, political advisors warned over the weekend.

China is “already the only country with an aging population of more than 100 million, and their number is growing even faster”, said Zheng Silin, deputy director of the Subcommittee of Population, Resources and Environment of the Chinese People’s Political Consultative Conference (CPPCC) National Committee.

By the end of 2005, there were 144 million people aged 60 and above, or 11 per cent of the total population. This figure is likely to triple in less than 40 years, a process that could take hundreds of years in many other countries.

Retirees in the countryside get little to no financial help from the government. It’s not much better in the cities.

Last year, 46 million senior citizens received pensions worth more than 500 billion yuan ($62.7 billion).

The one child policy has been devastating to the normal familial caregiving situation, especially in the rural areas.

Last year, the country launched a nationwide pension and subsidy scheme for families with one child or two daughters in rural areas because they are not as “lucky” as those with sons to rely on when they get old.

Each of the 1.8 million rural couples received 1,200 yuan ($152) last year. Farmers welcomed the policy because the money often was a relief in areas where people have little income, except for the crops they grow.

Each child now has to take care of, possibly, four aging parents (two each of his own parents plus two each of his spouse’s.) In the United States, conversely, multiple children are usually available to care for aging parents.

The Chinese retirement age is set low right now, specifically to allow room for the next generation to find employment. From the New York Times:

Under the current two-tiered system, the retirement age for blue-collar urban workers is 50 for women and 55 for men, while for higher-grade professionals and government workers it is 55 for women and 60 for men. Obviously, raising the retirement ages would ease a substantial amount of pressure on the pension system. But there are no plans to do so, and raising the retirement ages would present another set of problems for the government, experts here say.

Last year, for example, 4.13 million young Chinese graduated from universities, and fully 30 percent of them are still unemployed. Unemployment is high among those who are not university graduates, as well. Prolonging employment for older workers would make this predicament worse, possibly with volatile consequences.

How do you avoid social unrest among the young, but keep the aging adult population still engaged and working as long as possible to avoid the burden on the state? The outcome is not promising. From the New York Times:

€œI think that most people have not realized how tough the situation will become,€ said Li Shaoguang, director of the Institute of Social Security at the School of Public Administration at Renmin University of China, in Beijing. €œWe€™re already aware that the percentage of old people in our population is large and is growing fast, so in order to pool more people in the system to pay for current retirees, the government is trying to include more migrant workers in the system. This could alleviate pressures now, but it also means that you will have larger pressures to face when the migrant workers grow old.€

By some estimates, at least half a billion mostly rural Chinese are not covered by the state€™s fragmentary social security system at all.

I can barely think that high. Half a billion don’t have any protection at all? That is more than the population of the United States.

China, already struggling in its interior, has a long way to go before their “miracle” is really a miracle for all its citizens.