Archive - May 2014

We have previously profiled the "holy grail" gas deal between Russia and China on several occasions, and noted last week how it is expected to be signed this week - pending some final price negotiations. It appears that was spot on as Reuters reports, Russian state-run Gazprom said it was still "one digit" away from finalising a 30-year gas supply deal with Beijing which is expected to crown Russian President Vladimir Putin's visit to China next week. On the heels of Russia's de-dollarization meetings, the coming week appears a crucial one for the history books of the US Dollar as reserve currency (or will China leverage Russia's need to diversify from Europe and stall the deal once again?)

Back in November, Cisco stock cratered after the company was forced to reset its future revenue guidance when as a result of crashing Chinese sales, it became clear that some $2 billion in quarterly revenue had been wiped away from the previous trendline.  Since then, Cisco has managed to regain some of the lost market value as investors have readjusted to what now appears to be a far slower growth rate for the company. However, one question remained - what was it that caused the collapse in sales, and especially those targeting the Chinese market. For a long time, the most likely speculated reason for the Chinese revulsion against Cisco and its peers were the factual revelations by Edward Snowden detailing the NSA illicit espionage activities, and the role of corporations such as Cisco in them. Today, this speculation is confirmed, following news that none other than Cisco CEO John Chambers has written a letter to Obama, "warning of a collapse of trust in US technology after evidence emerged showing the National Security Agency breaking into his company’s equipment."

Nearly all of us……well, all except our benevolent dictators, appear to be permanently caught in the first four stages of the Kubler-Ross black hole of loss and grief........

Underappreciated risks to electronic bitcoin and all forms of investments and savings today, including gold, that are held electronically come in the form of modern warfare - involving as it does cyberwarfare and electromagnetic warfare. No electricity and no computer or internet access and you cannot access your savings, investments and money ...

It has taken the US a while to realize that the best way centrally-planned economies "grow" (think China) is by allocating taxpayer funds for capex projects: be it replacing windows (of course), roads, highways, building brand new ghost cities, or in this case bridges. As the newnybridge.com website explains, the $3.9 billion replacement for the Tappan Zee bridge over the Hudson river, built by Tappan Zee Constructors, or TZC, LLC, has begun construction. But the most important entity by far in the construction of the replacement bridge is what is known as the "Left Coast Lifter", or what is said to be the world's largest floating crane. Here, courtesy of Bloomberg, is a look at the monster crane, and it's journey to New York.

Yesterday we provided a detailed breakdown of the cost aspect of a college education, particularly for young people who have no choice but to fund their education with student debt, a key part of the equation that the San Fran Fed in its particular cost-benefit "analysis" of college education avoided. There is much information in the post, but one particular aspect of the Pew analysis that the article was based on bears repeating and highlighting for all those less than "1%" young Americans debating whether a college education is worth the tens if not hundreds of thousands of dollars in student loans: the median net worth of "young" households, those where the head is younger than 40 years old, is $8,700, or 20% less than not college educated households with no student debt.

Dispassionate discussion of the investment climate.  

The mainstream media may have long forgotten about the Fukushima tragedy (as it certainly goes against the far more popular and palatable meme of a Japan "recovery" courtesy of Abenomics) but that does not mean it is fixed or even contained. Quite the contrary. As a rare update from Japan's Jiji news agency reminds us, on Friday radiation at five monitoring points in waters adjacent to the crippled Fukushima No. 1 power station spiked to all-time highs according to the semi-nationalized TEPCO.

Just out from Bloomberg:

• Deutsche Bank preparing a capital increase, aims to raise EU8 billion through new shares by end of June, Handelsblatt says, citing unidentified people in the finance industry.
• Deutsche Bank likely to get new single investor
• Deutsche Bank new investor may hold 5%-8% of shares
• Deutsche Bank declined to comment: Handelsblatt

And the punchline: Bank’s new shares may be sold with 25%-30% discount. In other words, it is liquidity scramble time, and the bank is willing to give anyone with deep enough pockets a 30% discount to market price just to get some additional short-term funding.

One glance at the following chart prepared by the Economist, showcasing the world's largest importers of weapons, and more importantly, exporters, and one could almost imagine why both the US and Russia have an interest in a "contained" (or not so much) regional war...

Rogers tells us he's buying Chinese financials, remains long the yen and thinks gold could be going much lower.

Six months ago, it was this same Switzerland that, contrary to the prerogatives of the pervasive "fairness doctrine" taking the new socialist world by storm, rejected imposing limits on executive pay. Then mere hours ago, in a move that would give president Obama wealth redistribution nightmares for months, a whopping 77% of Swiss voters rejected an initiative for a national minimum wage of 22 francs, or just under $25, per hour, according to projection by Swiss television SRF. And confirming that when it comes to anti-socialism, Switzerland may well be the last bastion, not a single canton supported the measure.

China began evacuating hundreds of its nationals from Vietnam (via at least 2 planes and 5 ships) as the anti-China protests have become increasingly deadly following Beijing's attempt to deploy an oil drill in Vietnamese dispuited waters (detailed here, here, here, and here)...

• *CHINA SENDING 5 SHIPS TO VIETNAM TO EVACUATE CHINESE: XINHUA
• *HUNDREDS OF VIETNAMESE SECURITY IN CENTRAL HO CHI MINH CITY
• *VIETNAM PRIME MINISTER ISSUES DIRECTIVE TO PREVENT PROTESTS
• *VIETNAM GOVT TAKES ACTION TO PREVENT RIOTS: BINH

Hundreds of police and security forces are in central Ho Chi Minh city and the Chinese consulate is under heavy guard. Tensions across the ASEAN region are growung as Taiwan is on "high alert" but the bloc’s inability to craft a united response to Chinese aggression signals a further decline in its regional clout.

If your blue andyou don't know where to go to...

In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as "channel stuffing", of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high. But did you know that when it comes to flat or declining sales and stagnant end demand, channel stuffing is merely the beginning? Presenting... Where the World's Unsold Cars Go To Die