Tuesday, December 29, 2009

Repudiation risk

Yet more forms of brinksmanship. The full article
mentions a possible defense of inadequate authority
as the company in qustion claims the contracts were
entered "without authorization"...if that is the case
why negotiate at all?

BEIJING, Dec 29 (Reuters) - A small Chinese power generator on Tuesday
rejected demands from a Goldman Sachs unit to pay for nearly $80
million lost on two oil hedging contracts, part of a long-running
dispute over how China deals with derivatives losses.

...So far no legal action has been taken and many lawyers and industry
analysts believe that Chinese firms and their foreign banks are quite
likely to settle their disputes privately or through arbitration,
similar to a handful of previous cases in the mid-1990s.

Saturday, December 19, 2009

The Angular Momentum of History

Philosophical meandering today...and some warnings.

We live in interesting times. For over 60 years the
(developed) world has accepted a limited spectrum of
Governmental power. It is my belief we will see a
regression to more simplistic forms of "legitimacy".

The main issue remains the distribution of power and
What behavior is incentivized by a given form of
Legitimacy. Democracy assigns power to those with
Influence in the rule making process. Totalitarian
states equate power with violence, Monarchy with
Divine edict or genealogy, Communism to party members.

Typically, some sort of appeal to "progress" is cited
by all forms of legitimacy, further ensconcing the status
Quo. Unfortunately, the progress of technology has not
Been matched by a corresponding change in the appetites
and proclivities of man.

But if History has shown us anything, it is the fleeting
Nature of top-down or macro forms of legitimacy.
Geopolitical risk has been conspicuously absent, and
The mean reversion of a prolific balkanization is now
more than just scenario planning fantasy.

Power is not a physical commodity, but certainly has a
pricing system unique to itself. How people choose to
Be governed determines the market for power.

There are many anecdotes one could site. However, the
Important point to note is top down control has never
Worked in the known history of man. I think its
impossible...and the rulers who attempt to fix
Problems thusly are doomed to fail and a waiting angry
public will assign blame accordingly.

Saturday, December 12, 2009


I cannot emphasize enough the dangers of investing into
The current gold bubble. As I have suggested before on
This blog, the purchase AND delivery of physical gold is
A much different animal than investing in paper rights or
In one of the many "innovative" ways to invest in gold
that are conspicuous in their recent proliferation.

Depositing money for future delivery of a physical
that has no yield creates risks subjacent to any
Price volatility.