Archive - Mar 2014

If there is a new cold war with Russia, many observers believe the U.S. is losing it. First under President George W. Bush and now under President Obama, the U.S. and Vladimir Putin’s Russia have engaged in a series of foreign policy battles — and Putin has repeatedly got his way. The Russian president’s objective is clear. He wants to reassert Russia’s influence in Eastern Europe while preventing NATO’s further expansion toward Russia. Lawmakers and experts across the political sphere warn that if the Obama administration and its western allies are not effective in dealing with Putin this time, it could have serious consequences going forward. And the dangers go beyond Putin.

1-800-TaylorMade or 1-900-Vladimir? You decide...

For the past few weeks we have seen stock markets surge as macro-economic data has collapsed around the world. The 'excuse' given for this apparent dichotomy - weather. But now it seems "weather" is to blame for other problems in the world too. As Russia Today reports, in its latest Quadrennial Defense Review, the US Department of Defense (DoD), stressed threats to global stability and American hegemony posed by climate change warning that that an erratic climate will likely cause increased “terrorist activity,” among other impacts..."The pressures caused by climate change will influence resource competition while placing additional burdens on economies, societies, and governance institutions around the world...these effects are threat multipliers."

The promise that each generation will be better off than the last is a fundamental tenet of modern society. By and large, most advanced economies have fulfilled this promise, with living standards rising over recent generations, despite setbacks from wars and financial crises. So far, every prediction in the modern era that mankind's lot will worsen, from Thomas Malthus to Karl Marx, has turned out to be spectacularly wrong. Technological progress has trumped obstacles to economic growth. Periodic political rebalancing, sometimes peaceful, sometimes not, has ensured most people have benefited, albeit some far more than others. But past growth performance is no guarantee that a broadly similar trajectory can be maintained throughout this century.

Did somebody say de-escalation?

When one studies history, all events seem to revolve around the applications and degenerations of war. Great feats of human understanding, realization and enlightenment barely register in the mental footnotes of the average person. War is what we remember, idealize and aggrandize, which is why war is the tool most often exploited by oligarchy to distract the masses while it centralizes power. With the exception of a few revolutions, most wars are instigated and controlled by financial elites, manipulating governments on both sides of the game to produce a preconceived result. Every major international crisis for the past century or more has ended with an even greater consolidation of world power into the hands of the few, and this is no accident.

According to Goldman, the median company’s EV/sales ratio is now the highest in 35 years, surpassing even the dot com bubble.

Wall Street can clean up junk well enough, but it can't make it go away.

The dismal news overnight that a Malaysian Airlines jet, carrying over 200 passengers and crew, had "gone missing" appears to have become considerably more troublesome. News this morning of pools of oil off the Vietnam coast - suggestive of a crash - are dreadful but, as NBC News reports, perhaps more crucially, U.S. officials told NBC News on Saturday they are investigating terrorism concerns after two people listed as passengers on the missing Malaysia Airlines jet turned out not to be on the plane and had reported their passports stolen (while in Thailand).

Perhaps it is time to finally admit that anyone who thought Putin's Tuesday press conference, which the market so jubilantly assumed was a case of "blinking" and de-escalating tensions with the west, was wrong. If there is still any confusion, following yesterday's news that Gazprom officially threatened Ukraine with cutting off its gas supplies, as well as the storming of a Ukraine base by Russian troops - luckily with no shots fired so far - then today's developments should any remaining doubts. Moments ago AP reported that as the latest, third in a row, group of OSCE inspectors tried to enter Ukraine, they were not only barred from doing so, but warnings shots were fired to emphasize the point by pro-Russian forces.

A near-term outlook for the dollar against the major foreign currencies.  

Plenty of excuses out there for this evening's collosal miss in Chinese exports (-18.1% YoY vs an expectation of a 7.5% rise) mainly based on timing issues over the Lunar New Year (but didn't the 45 economists who forecast this data know the dates before they forecast?) This is a 6-sigma miss and plunges China's trade balance to its biggest miss on record and 2nd largest deficit on record. Combining Jan and Feb data (i.e. smoothing over the holiday), exports are still down 1.6% YoY - not good for the much-heralded global recovery. Exports to the rest of the BRICs were all down over 20% but no there is no contagion from an emerging market crisis.

For Obama to claim that a public vote in Crimea would violate the Constitution of Ukraine and International Law is really just as absurd that the same argument put forth by Putin that nothing in Kiev was legal because it was not signed by Yanukovych. There should be a vote, but it should be monitored independently to ensure it is real. To argue that no state may move to secede from a federal government is ridiculous...

"After digesting all the hyperbole and the pessimism, my biggest concern is not that Bitcoin will fail, but that it or one of its many virtual currency competitors will one day succeed."

The U.S. government and the Russian government have both been forced into positions where neither one of them can afford to back down.  If Barack Obama backs down, he will be greatly criticized for being "weak" and for having been beaten by Vladimir Putin once again.  If Putin backs down, he will be greatly criticized for being "weak" and for abandoning the Russians that live in Crimea.  In essence, Obama and Putin find themselves trapped in a macho game of "chicken" and critics on both sides stand ready to pounce on the one who backs down.  But this is not just an innocent game of "chicken" from a fifties movie.  This is the real deal, and if nobody backs down the entire world will pay the price.