Posts of August 2015

Minting Gold Coins: The Monies of ISIS

♠ Posted by Emmanuel in Currencies,Middle East at 8/31/2015 01:30:00 AM

Coming soon to an antiques dealer near you? Awaiting ISIS currency. Recent gyrations in global markets have demonstrated to some observers the idea of gold as a safe haven doesn't hold. As investors the world over were gripped in fear, the price of the gold went...precisely nowhere fast. So much for seeking the safety of gold: Gold is still well above the more than five-year closing low of $1,084 struck August 5 but the safe haven buying amid the panic on markets did not materialize to the extent many bulls had hoped. Georgette Boele of ABN Amro in a Thursday research note argues that gold did not enjoy a stronger...

Novelty Acts: Western Hedge Funds in China

♠ Posted by Emmanuel in Casino Capitalism,China at 8/28/2015 12:12:00 PM

Cushy whitefella hedge fund types are prolly right in avoiding possible PRC re-education for speculation. As I write, I am listening to the debut album of Col. Bruce Hampton (Ret.) and the Aquarium Rescue Unit. Pop completists will know about this novelty act, whose musical chops did not get in the way of stage antics like having some guy mini-putt golf throughout the show. Antics aside, this is a well-drilled band, and live numbers such as "Yield Not to Temptation," "Working on a Building," and "Basically Frightened" are oddly apt for today's post. Sample lyrics: I'm basically frightened / Of politicians with no hobbies. For,...

Hong Kong's Stocks: Now Cheaper Than Pakistan's

♠ Posted by Emmanuel in Casino Capitalism,China at 8/27/2015 12:51:00 PM

Islamabad or bust: HK stocks can now be bought more cheaply than Pakistan's. Having a powerful economy in your orbit, Big Brother style, has its benefits and drawbacks. For the longest time, the Hong Kong Stock Exchange (HKSE) has benefited from riding China's slipstream: Late last year, mainland China overtook Japan in terms of market capitalization to become the second-largest stock market in the world. Then, with the Chinese stock market gathering momentum, Hong Kong's was poised to become the third largest stock exchange after the mainland's. However, you know what has transpired since: the PRC-inflated stock market...

You Pretend to Work, Putin Pretends to Pay You

♠ Posted by Emmanuel in Russia,Socialism at 8/25/2015 01:30:00 AM

The "resilient" Russian job market. The self-deprecating joke among the lumpenproletariat in the USSR near its end was that they pretended to work, while the Soviet Union pretended to pay them. I suppose that not much has changed with the supposed end of the Communist era: as oil and commodities prices have fallen, so too have the fortunes of today's Russia. Then, as now, there remains an urge to put on a brave face in front of the [insert your choice of usually foreign villains here] who are blamed for its misfortunes. Hence the curious case of rosy employment figures in today's Russia amid a commodities bust: Soviet...

Meet the New S&P 500 Catholic Values Index

♠ Posted by Emmanuel in CSR,Religion at 8/23/2015 09:40:00 PM

Is Catholic capitalism an oxymoron? Let the fund managers and investors decide. Ah, more of the economics of popery. Lovely stuff to contemplate, methinks. Despite being Catholic, I am not entirely sure what the religion's impact is on the wider world. For instance, Pope Francis' recent economically- and environmentally-focused encyclical has largely fallen upon deaf ears in the United States--even those who are Catholic: Pope Francis released a 180-page indictment of capitalism and climate change that has fallen, for the most part, on deaf ears in the U.S. Just 31 percent of Americans know that the pope has made...

Depreciating Currencies: What Follows Kazakh Tenge?

♠ Posted by Emmanuel in Currencies at 8/21/2015 01:30:00 AM

Another commodity currency under pressure: the Kazakh tenge. Are we having an Asian financial crisis flashback? It certainly seems so to me with emerging markets being rocked on an almost-daily basis. We certainly look to have the ingredients in place: falling stocks, falling currencies, and falling bonds. The Chinese giving in to the temptations of depreciation--something it didn't do during the aforementioned Asian financial crisis--may be exacerbating matters. So, who's next in line? Of all countries, Kazakhstan devalued its tenge just yesterday, adding to the negative sentiment on minor currencies. Or,...

Lose $51B? No Big Deal for Swiss Central Bank

♠ Posted by Emmanuel in Currencies,Europe at 8/20/2015 01:30:00 AM

Buy euros (EUR) and sell Swiss francs (CHF): that was what the Swiss National Bank (SNB) was doing until early this year when the cost of keeping Swiss exports competitive vis-a-vis those of Europe by effectively pegging CHF to EUR became unsustainably high. Hence, when Switzerland's central bank stopped pushing down the value of the franc to match the euro, the result was a massive loss on its accumulated foreign exchange--mostly euro--holdings. But how much was the loss? Try $51B for size. Even for a wealthy--albeit rather small--country like Switzerland, that's nothing to sneeze at. Still, the effects of such a loss...

The Devil Buys Prada in Brazil Where It's Cheaper

♠ Posted by Emmanuel in Currencies,Latin America at 8/18/2015 03:44:00 PM

Prada é mais barato em São Paulo. Arbitrage in buying luxury goods worldwide is something of an interest of mine--and a global hobby for the well-to-do shopper. Where's the least-expensive option for buying the latest in-demand fashion goods? Chinese mainlanders go to Hong Kong to take advantage of cheaper luxury goods there due to lower duties and taxes. How about in the Americas, though? Apparently, something similar is going on right now as discerning American luxury buyers flock to Brazil of all places to take advantage of the latter's weakening economy, which has resulted in cheaper luxury goods. But wait a minute,...

PRC Sells $180B in US Treasuries; Nearly Nobody Notices

♠ Posted by Emmanuel in China at 8/16/2015 04:50:00 PM

They have trillions worth of these IOUs out there nowadays. About a decade ago, there was all this talk about a "balance of financial terror" coined by former US Treasury Secretary Lawrence Summers. According to this story, export-led Asian countries like China and Japan had no choice but to keep buying dollar-denominated assets since doing otherwise would result in the devaluation of their currencies and their loss of competitiveness. What's more, they couldn't readily "dump" US treasuries since doing so would only result in large losses on their existing holdings of $ assets. Quoting Summers circa 2004 (when the world...

The World Map According to Market Capitalization

♠ Posted by Emmanuel in Hegemony at 8/14/2015 05:02:00 PM

The world according to shares market capitalization. There's good stuff at MarketWatch on how the world would look like if countries were re-sized according to their total stock market capitalization. As with most things, though, there are measurement issues involved with the presentation above. China's A-shares or those which cannot be owned by foreigners are not included, making the mainland appear far smaller than its actual market capitalization if these local-only shares were to be considered as well: Bank of America Merrill Lynch this month published a report transforming many of their investment themes into maps....

If Yuan Blood, You Got Yuan Devaluation

♠ Posted by Emmanuel in China,Currencies at 8/12/2015 08:50:00 PM

1978-vintage AC/DC explains PRC currency moves. Similar to the Swiss unpegging the franc from the euro earlier this year, the Chinese have surprised world markets by allowing their currency the yuan to devalue against the dollar after limiting its movements in recent years. Yes, the Chinese economy has been moribund as demonstrated by the 8.1% drop in July exports, but market participants did not really expect such a drastic move since the PRC wanted to make the yuan more of an international reserve currency, and such drastic moves would generally discourage holding it. After all, why hold a depreciating yuan be considered...

Stockmarket Crash Clash: PRC vs US 'Market Manipulators'

♠ Posted by Emmanuel in Casino Capitalism,China at 8/11/2015 01:30:00 AM

Dazed and confused by PRC stocks...must be those Westerners doing evil things. Here's another news flash from the clash: To no one's real surprise, foreign devils [gweilo] stand accused of dastardly market machinations to profit at the expense of Chinese investors by shorting shares. Nevermind that (a) foreigners are quite limited in their abilities to trade locally-issued shares and (b) Chinese officialdom has implemented the very mechanisms that make it possible to short shares. At any rate, onto these acts of evil: A crackdown on traders in China that included Chicago-based Citadel LLC has shone a light on the few...

Did Obama Kill Coal Industry...or Did (post)Modern Times?

♠ Posted by Emmanuel in Energy,Mining at 8/10/2015 01:30:00 AM

There has been a series of informative articles and op-eds in Bloomberg discussing the plight of the American coal industry [RIP...sort of...read on]. Big Coal is fighting wars on two fronts. The first, obviously, is the environmental one: burning coal generates more carbon dioxide than most other energy sources for the equivalent amount of energy. Speaking of which, natural gas is rapidly supplanting coal as an energy source that's not only cleaner but also cheaper. So, the initial article concerns how coal firms have stopped paying dividends to stockholders, which makes perfect sense in that you need to have earnings in...

TPP: 5 Sticking Points That Remain

♠ Posted by Emmanuel at 8/08/2015 06:31:00 PM

Negotiators, rather than protesters, will actually be more likely to waylay TPP. TIME has an easy-to-read list of issues that remain in order for the Trans-Pacific Partnership (TPP) agreement to be concluded at the international level. Earlier this month, efforts to conclude it came to naught. It's hardly a done deal; I'll believe it when I see a deal. With traditionally FTA-averse countries like Japan in the mix--TPP would be its first plutilateral instead of bilateral arrangement outside the WTO--there are reasons to doubt. Among them are the following: -------------------------- 1. US Big Pharma At issue in TPP negotiations...

The United States' Huge Trade Deficit...with Europe [!]

♠ Posted by Emmanuel in Europe,Trade at 8/06/2015 01:17:00 PM

More US-bound goods than US-originated ones: at the Port of Rotterdam. Unbeknownst to many, the United States is now running a gargantuan trade deficit with yet another trading partner that's quite relaxed about competitive devaluation at the moment with its own version of quantitative easing--Europe. The US running an enormous trade deficit with China and some other Asian nations is old hat. What's weird is that opportunist politicians courting the American labor union vote haven't engaged in more demagoguery against the vile, er, Europeans. The United States in June posted a record trade deficit in goods with the European...

IMF: RMB Not Yet Ready as SDR Currency

♠ Posted by Emmanuel in China,Currencies,IMF at 8/05/2015 02:46:00 PM

IMF says...wait a while longer for RMB SDR inclusion. The PRC has been strongly pushing for the inclusion of the Chinese yuan in the basket of currencies which constitutes the IMF's Special Drawing Rights (SDRs). After all, shouldn't the currency of the world's second-largest economy be included in such as a basket? Unfortunately, just as with Chinese stocks not being included in the MSCI index of emerging market equities, the IMF has deemed China and its currency not quite ready for the primetime. Ho-hum, we've seen this movie before: The International Monetary Fund should put off any move to add the yuan to its benchmark...

The $483B Mystery Man Out to Save PRC Stock Markets

♠ Posted by Emmanuel in Casino Capitalism,China at 8/04/2015 01:30:00 AM

The only picture on file of Nie Qingping, the $483B Man. When I was a wee lad (a young boy in British-speak), I used to watch episodes of The Six Million Dollar Man about an astronaut crippled during a test flight who is subsequently reinvigorated using--you guessed it--$6M worth of bionic implants. They say truth is stranger than fiction, and the Chinese government have their modern-day equivalent: Nie Qingping, an academic largely unknown outside of China, has been given the unenviable task of shoring up the PRC's continuously free-falling stock exchanges, which have shed something on the order of $3.5 trillion since...

Weak Euro? Europe as a Retirement Destination

♠ Posted by Emmanuel in Europe,Travel at 8/03/2015 01:30:00 AM

Affordable living and scenic beauty--the promise of European retirement destinations. With the euro commanding $1.10 as opposed to, say, $1.54 right before the global financial crisis hit, many things European have become affordable. Consider retirement: not so long ago retiring in Europe was thought to be prohibitive by most Americans. Nowadays, it's within reach thanks to the slumping euro. MarketWatch has a neat feature on this new possibility. Yes, we know--the United States' landscape full of fatsos 'n' strip malls is hardly the most attractive place to retire. So, why not go to where the culture is higher (and real)? Consider...