Wolfgang Munchau in last week's FT explains why the markets are in a bubble, why bigger problems lie ahead and whether governments attempt to exit their stimulus packages or stick with them
An interesting article over at Seeking Alpha on India targeting poor consumers and reverse innovation
Another Seeking Alpha article on investing in water and the coming global water shortages. I've written before about potential for increased tensions between China and Russia; the author of this article adds another angle to matters: I’ll go further and speculate that the next horrific war, and the one the United States would be wise not to meddle in, may well be between two superpowers, China and Russia. Here is the amount of Internal Renewable Water Resources (IRWR) that China has per capita: just 2,173 cubic meters IRWR per person. Russia, on the other hand, with 1/5th the population (and declining), has 30,001 cubic meters IRWR per person, nearly 15 times that of China.
Business Insider on why the USD will remain world reserve currency for some time yet and why talk of another currency or basket of currencies taking its place is way too premature
Crossing Wall Street points out a Norwegian tax policy that even Helengrad wouldn't have pushed for - I wonder if Norway could've done this if a full EU member?
Transcript of the FT's George Soros interview from Friday
The world will have to find four Saudi Arabias by 2030 if it wants to maintain its oil dependency, the International Energy Agency says. The article continues at The Epoch Times. Yet another Peak Oil supporter
And Art Cashin being interviewed on CNBC - he gives views on the USD, world economy, China and why he believes in the double dip:
Just what is it that makes a razor better by adding more blades to it? The Guardian investigates
And for something completely different. . . . Pomplamoose covering Beyonce's Single Ladies. This is rather clever. Via Kottke.org
You may ask yourself. . . Placebo with Frank Black of the Pixies Where Is My Mind live:
And an entertaining set of vids from a law professor/ criminal defence lawyer and a cop on why you should never ever ever talk to the cops without your lawyer there. Never. Ever. Even if you're innocent. Well worth watching - and may even keep you out of jail one day.
Email subscribers will have to follow the title link to the web to see the media content in this post.
It's well known that deploying capital in Russia presents a range of difficulties to be overcome and threats to be thwarted to achieve investment success. Regulatory, legal and bureaucratic hassles, and sometimes corrupt officials, are just part of the landscape. Expropriation of control and/ or equity by dubious judicial means and other quasi-state backed strong arm tactics are rarer. They are however still pulled from the quiver when a particularly obstinate investor, Russian or foreign, won't acquiesce to their partners wishes. Prospective investors need look no further than the experiences of Yukos, Telenor, Shell, TNK-BP, and Exxon to realise they can be parted from their equity with a nod from the Kremlin.
Apparently the Kremlin has turned a new leaf and PM Putin is now spreading the love for some new FDI into Russia. In the last week of September, Putin spoke at length at two different forums to reassure prospective foreign investors that Russia was a fine destination for their capital. From the first outing he stated:
"We would like you to consider yourselves participants in our undertaking," Putin told a meeting in Salekhard, the capital of the Yamalo-Nenets region. "The main condition from our side is that partnerships should be stable and long-term."
Yes, he really said this. Of course the problem is precisely that previous partnerships didn't end up being "stable and long-term" because the foreign investors involved were forced to accept 'renegotiated terms' or have their equity expropriated.
“We will continue the line of encouraging private initiative, integration into the global economy and the creation of a favorable investment climate”
There is a reason Russia is lagging far behind the performance of its fellow BRIC members: foreign investment. The way the Russian state and agents of the state have treated foreign investors, Putin's ongoing geopolitical rhetoric with The West, and the invasion of Georgia, have all persuaded foreign investors to look elsewhere and that Russia is not worth the trouble.
Russia desperately needs more FDI to grow. Infrastructure and large commodity assets (oil wells/ mines) are in urgent need of technological upgrade and fresh development. Hence Putin's siren call for new foreign investment - he knows it can't be done without foreign equity.
So have things really changed? Is Russia really now less risky for foreigners to invest in and the aforementioned threats reduced? It doesn't seem like it. A mere few days after he was wooing foreign investors with the words above, Putin gave the following ultimatum to Renault regarding their investment partnership in Russian auto maker Avtovaz:
“Either they (Renault) participate in funding the enterprise or we will have to agree with them on dividing up our stakes”
Which leads me to the ongoing saga of Hermitage Capital and the systematic harassment they have suffered by apparent agents of the Russian state. Hermitage Capital is an active investment manager co-founded by William Browder. Their first fund, "The Hermitage Fund", founded in 1996 was at one time the largest foreign investor in Russia. The story of Hermitage is remarkable. And one where reality really is stranger than fiction. The following three pages published in the July 2008 Hermitage investors newsletter make fascinating reading:
But matters have progressed from over a year ago and the plot has thickened - all whilst Putin has been declaring Russia a great place for foreigners to invest. I was reminded of the Hermitage saga by a recent post over at Zero Hedge. This is what Tyler Durden had to say:
Additionally, after a protracted fight with the Russian government, today an arrest warrant was issued against co-founder William Browder under the pretext of the ever prevalent and Russian favorite allegation of "tax fraud." Recall this is precisely the reason why Yukos founder Mikhail Khodorkovsky is currently serving jail time. Hermitage has prepared the following video explaining the series of fascinating events that have led to the current fallout and today's arrest warrant. And for a more extensive overview of Hermitage's travails under Putin and now Medvedev, these two profiles by the Economist and the NYT are an entertaining read.
Despite the setbacks and the apparent state-backed harassment, Hermitage continue to fight. Clearly this isn't easy in a country with little rule of law and a corrupt judiciary - as the video shows:
So considering returns in Russia are typically a lot less than in other large emerging markets where investing is easier and less risky, does Russia offer risk premia commensurate to the real risks entailed? Probably not. Putin is going to have to do much more than offer words before FDI into Russia returns to levels last seen in 2007.
For those Feedburners who can't see the embedded movie - here is the URL
Pinko alert. Worse: Religious pinko alert. This is one very clever demagogue.
Moore's recently released movie Capitalism: A Love Story is nothing but socialist propaganda for the lowest common denominator. It over-simplifies the issues and is of dubious documentation. And people pay to see this crap. . .
I would spend time illustrating how Moore selectively frames his 'facts' out of context for effect and in insufficient detail. But a decent deconstruction has already been done by Vitaliy Katsenelson over at ContrarianEdge. Here's a sample:
Moore spends the bulk of the film going through our country’s [USA] trash and presenting it as the main course. . . Really, if you want to make a successful propaganda movie, you must evoke emotion and rightly or wrongly direct it at your subject of hate – in Moore’s case, capitalism. . .
. . . Ayn Rand said it well in Atlas Shrugged: “But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy?”. . .
. . . He offers no alternative to our “broken” capitalism system other than let’s have “democracy.” This is laughable, as democracy is not a market system, it is a political system. What he wants is a command-based economy – the Soviet Russia that failed so miserably. He wants Mr. Mouch from Ayn Rand’s Atlas Shrugged, a mediocre bureaucrat who failed at everything in his life, to be put in charge of Mr. Moore’s version of a “democratic” economy (still not sure what that means). Mr. Mouch decided how much everyone produced, at what prices goods were sold, and what “fair” wages everyone got paid. In the end, despite sacrifice after sacrifice, Mr. Mouch’s economy collapses. Mr. Mouch’s visible “fair” hand fails to accomplish what the invisible “impartial” hand of the free market accomplishes so effortlessly.
Katsenelson knows about socialism first hand. He grew up in the USSR.
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