Jim Rogers on Radio 4 - Update

Last week on the 14th Jim Rogers was interviewed on the BBC's Radio 4 Today show. I mentioned it that day in a post. Anyway, for those of you interested in listening to the interview, you can do here. For those of you familiar with the Rogers Shtick, he's not saying much he doesn't usually say. For those of you who are not, it's worth the four minutes.

The Draw of Dubai

The British expats I spoke to believed, without exception, that the Emiratis are utterly useless, corrupt and indolent, and, according to several, some British managers are leaving rather than abide by a new law that requires them to employ a certain percentage of Arabs on every job. They’re simply not up to it, they say. As it is, the locals make up less than one-fifth of the total UAE population, the westerners roughly half that amount. The majority population in Dubai is the criminally low-paid, enchained, abused, dispossessed peasantry from south Asia.

The full article over at The Times. Rather amusing and well worth a read at work.

Reading List

Skin in the game and pain money. SA has a brief post on why this is so important and the principal-agent dilemma. I'd extend the concept from new venture development to active fund managers - co-investing can be a solid interest aligner. The post also touches on stock options generating alignment of interest - though there are inherent issues with this thesis as Whitney Tilson and Chalie Munger have amply discussed here.

I'm a bit late to the party on this one - SA has another solid post on the 'free' business model and the back-and-forth between Malcolm Gladwell, Chris Anderson and Mark Cuban. Well worth reading if like me you haven't been following this. Not surprised to see Chris Anderson gunning for the pro-Free team - a very clever chap, though I've always suspected he's overly idealistic.

Another post from SA on the outlook for investing in Russia and the Russian economy. If the material in the dedicated "Russia's Future" reading list below didn't give Russian investors cause for concern, this detailed post should. The drop in retail sales and GDP is quite something.

For those interested in NZ - there's a good post from Bernard Hickey reporting the review of NZ's tax system and the possible imposition of CGT to target house price inflation. I've written more than once in this blog about the idiocy of NZ retail investors and their unstoppable addiction to investing in housing. Quite pragmatically PM Key is opposed to a CGT regime. Also quite pragmatically he is looking to roll back the Helengrad grip of the Resource Management Act and the Building Act on housing supply. Regulation-driven housing constraint has long been one part of the equation in the rapid house price inflation of the last decade. Those investing in NZ residential real estate have again been warned.

Lundeen's Bear Market Race to the Bottom continues with his latest issue. Though his "Bear's Eye View" chart that tracks the '29 crash seems to have an err.... upticking kink in it. I bet Lundeen has his fingers crossed that this is only temporary with this bear rally's last puff.

Infectious Greed has a repost of an Economist graph detailing car parking rates around the world. These sorts of figures often have suspect accuracy and sources. Perhaps the concept was a PPP spin on the Big Mac Index. I know for sure (from co-authoring a detailed car parking development report) that at least the Moscow rates are way too low for anywhere you would want to park near or in central Moscow.

A great chart from Flowing Data showing why cheap airlines can afford to be so cheap.

Fabrice Grinda has posted an interesting autopsy of a failed NYC fractional art ownership startup. Just goes to show how much long-trending systematic market movements can tip the balance of success or failure.

An interesting article from the Telegraph on an interview with oligarch Alex Lebedev, who he is, whether he's really dying of mercury poisoning, his deal with the Kremlin and his intentions on disrupting British media.

And finally, what may become a landmark case on division of assets in NZ divorce cases. It looks like NZ has just gone one better than the British courts awarding a portion of future earnings. The Cactus has a link to the original story and some frank commentary - well worth a click and read - here's a taste:

The Supreme Court (read Supreme) has decided in favour of a wife not just for value during her marriage, but BEFORE she was even married to the man. . . . . This woman will now be enriched in a lump sum to the tune that most working women would never independently earn in their lifetime. Why be a teacher, cleaner, policewoman, nurse, receptionist or middle manager when you can just do housework? . . . . Housework is now deemed contribution to convert separate property into relationship property. . . . The rot will now set in under New Zealand law and expand on this dramatic break through through obvious judicial activism. Look over time for more stupid decisions, less marriage and relationships, more contracting out and ultimately more poverty stricken women as men hunker down to protect their assets from not just the IRD, but the worst enemy created by the Supreme Court - a housewife.

Reading List: Russia's Future

To anyone who follows Russia's plight, the country faces an increasing number of immediate and longer term economic, financial, geopolitical and social problems.

Two of the more serious longer term problems are demographic (which I mentioned in a recent post) and territorial. Both are becoming more of a threat to Russia's survival as time passes. And while both do not keep the average Russian from sleeping, both are at the forefront of worry for Prime Minister Putin. Both must also be a concern for any longer term investor in Russian capital assets. Especially of the illiquid sort.

Russia's demographic time bomb has been written about for many years. SA published an article last week putting this in an investment context. The article is sobering reading for anyone considering investing outside of St. Petersburg, Moscow or the larger/ more prosperous of the Millioniki. As investors become more aware of the depth of this problem, it will further swell an already bloated country risk premium.

For centuries Russia has faced the monumental task retaining territorial control and integrity. This task is becoming more difficult as both first and second derivative negative population growth increases, and the population centralises to core cities. Territorial threats from the West and the Caucasus have been widely reported in the media for some time. Not so widely reported is the threat posed by China to the East. The Telegraph has a good piece detailing this. It would appear that the population creep across the border has already begun.

New Hotel Projects

Who said luxury consumer spending was dead? And here I was thinking that high-beta, high-octane hotel developers had all crawled back under their rocks. Even the petro-dollar fueled crazies. Looks like I was wrong. The RICS monthly rag has this little spread of hotels due to come online soon. I especially like the Cairo one, by Zaha, pictured above.

Tom Cruise on Jonathan Ross

Jonathan Ross interviewed Tom Cruise on his chat show early this year. It was Ross' come back show after being banished from the BBC.

And what a come back. He ripped Cruise apart. The whole thing is worth watching if you can find it on the web. But this part is especially good. The two other guests seen out the back are Stephen Fry and Lee Evans (who for once doesn't appear to be sweating).

Correlations Continued. . .

Great article posted on SA about the recent evolution of correlations between asset classes. Furthers the theme of the Felix Salmon article in yesterday's Reading List.

Like Salmon, this article posits that as more people diversify into other asset classes, correlation risk increases.

The increase in correlation between asset classes over the last decade has been huge. The article says:

Between 1991 and 1994 the correlations between the S&P 500 and high-yield bonds was ~0.2-0.3; international stocks ~0.3-0.4; REITs ~0.3 and was negligible in commodities.

By early 2008 those numbers looked like: ~0.7-0.8 for high yield bonds; ~0.7-0.8 for international stocks; ~0.6-0.7 for REITs and slightly negative ~-0.2 to -0.3 for commodities.

An Uneven Recovery

Peter Zeihan of STRATFOR gives a good summary of the current global economy and the outlook. Skip the preamble if you wish and head straight to 90 seconds in.

Reading List

Prolific poster Felix Salmon has a good piece here on asset allocation. He also talks about correlation risk and the difficulties of correlation measurement. He writes: Ultimately, I suspect that any investment strategy more sophisticated than “buy low, sell high” is doomed to fail eventually. Good to see that the Margin of Safety thesis is still popular.

Robert Shiller (of Yale, who else?) is interviewed here. Well worth a watch - too many themes to list here.

Lundeen's Bear Market Race to the Bottom continues with his latest release. If you're starting to feel bullish, Lundeen will cool you off.

And for those interested in NZ, it looks like the PM is intending to streamline the tax system. It also looks like there will be a policy shift ahead to encourage productive investment - this should help kill NZ retail investors' addiction to buy-to-let housing.

Man On The Moon. Really?

It's the 40th anniversary of the moon landing. The skeptics are on the case again. Here are the top 10 reasons why there never was any moon landing - it was faked.

What would Fox & Dana think?

EMH: Moving On

Jonathan Davis has written a good piece on his Independent Investor blog about market efficiency here.

Quoting Andrew Lo of MIT:

“Market efficiency” he says “cannot be evaluated in a vacuum, but is highly context dependent and dynamic, just as insect populations advance and decline as a function of the seasons, the number of predators and prey they face, and their abilities to adapt to an ever-changing environment”. What is at work in financial markets, he believes, is a Darwinian process of “survival of the richest”.

Davis points out some of alternatives to the Efficient Market Hypothesis and its failings. Though he notes that these alternatives lack the direct practical application that the EMH has. Worth a read.

Jim Rogers on Radio 4

If anyone was uncertain that Jim Rogers is an Austrian and something pretty close to a Libertarian, his Radio 4 interview comments today should clear this up. Rogers says this about the bailed-out banks:

"I would have let them collapse. . . Throughout history, people have gone bankrupt, new people have taken over the assets and started over. That's the way the world has always worked, that's the way it should work, what they're doing now has not worked and will not work.”

The IC has a piece on the interview here.

Fear the Reaper. . . ?

Not so much in Russia they don't, according to new research published in the Lancet (subscription required):

More than half of all deaths in Russian 15 to 54-year-olds between 1990 and 2001 were due to excessive drinking, the authors say.

The research did source samples from Tomsk, Barnaul and Biysk. These aren't exactly run-of-the-mill millioniki. So whether the sample is representative of Moscow and St. Petersburg is debatable. What is self-evident however, is that the country as a whole has a ethanol/ methanol consumption habit that is doing the labour pool no favours.

Russia has some of the worst demographic refreshment and life expectancy rates outside of the true first-world. Perhaps this is one reason why.

There's a précis of this research here.

Kiwi Retailus Investo-Erectus: Part II

As a follow-up to my earlier Retailus post, (Infometrics economist) Matthew Nolan has just posted an excellent piece here.

Furthering the theme I laid down, Nolan also notes the confusion around risk/ reward trade-offs:

The lack of income growth stemming from this investment suggests that something is amiss – even if New Zealand has not really “over-borrowed” in the strictest sense, it appears we may have invested poorly. This misallocation of investment is the unfortunate result of a policy failure, bad luck, and further misinformation regarding the return/risk to investment.

Let's be clear - there's not only misinformation disseminated by under-educated and shady personal financial advisors/ retail brokers - the much bigger problem is retail investors' lack of understanding and knowledge of sound investing. This is compounded by the laziness in performing due diligence.

And then Nolan goes on to state (in far more polite terms than I did) how stupid NZ retail investors have been with their investment choices:

Ultimately, this implies that it is not even the fact we have accumulated debt that is of concern for New Zealand; it is what we have done with it. And in this sense it appears that New Zealand [retail investors] as a whole has made poor investment decisions. We have collectively whittled away a golden opportunity to improve the New Zealand economy by borrowing to invest in things that offered very little return.