Thursday, April 23, 2015

A small reminder...

of what totalitarian rule decays into.  The border mark delineates North Korea, in all its spendor.

The great rate compression...

...continues its march, just in time to be completely misunderstood by some of the more mainstream economists. Note the conspicuous absence of Central Bank QE activities in this article.  Also note the misapplication of traditional financing terms to Sovereign Currency Issuers.

The answer... the question of "Why does China not spend more of a portion of GDP on defense?" has always been "why would we give Billions to generals who may be in the unenviable positon of preventing revolution...and expecting them to simply return to the status quo.

Having found themselves shut out of local bond and loan markets seven years ago, a band of developers began looking elsewhere for funds. First an initial public offering, and then a dollar bond sale. It became a well-trodden path. By 2010, a core group of four -- Kaisa Group Holdings Ltd., Fantasia Holdings Group Co., Renhe Commercial Holdings Co., Glorious Property Holdings Ltd. -- raised a total of $5.6 billion. On Monday, Kaisa buckled under $10.5 billion of debt and defaulted.
China’s home builders became the single biggest source of dollar junk debt in Asia amid government measures to prevent a property bubble. Developers already funneled $78.8 billion from international equity and bond markets into an industry that’s grown to account for one third of the world’s second-biggest economy. Most of the first rush of dollar offerings, in 2010, falls due in the next two years.
“It was an unintended consequence of the Chinese government that property developers are selling equity and debt to offshore investors,” said Ben Sy, a Hong Kong-based managing director in JPMorgan Chase & Co.’s private banking division. “There happened to be huge demand from international investors in the past few years driven by the intense search for yield.”

Monday, April 20, 2015

This relationship...

...clearly has several levels of trust throughout the decades.  Forget the pollyanic notions of global unity or similar theories of peace based on commercial ties or the like.  It all reduces to military capability...and the more U.S. military assets one purchases, the more likely continued "support" is forthcoming.

WASHINGTON — To wage war in Yemen, Saudi Arabia is using F-15 fighter jets bought fromBoeing. Pilots from the United Arab Emirates are flying Lockheed Martin’s F-16 to bomb both Yemen and Syria. Soon, the Emirates are expected to complete a deal with General Atomics for a fleet of Predator drones to run spying missions in their neighborhood.
As the Middle East descends into proxy wars, sectarian conflicts and battles against terrorist networks, countries in the region that have stockpiled American military hardware are now actually using it and wanting more. The result is a boom for American defense contractors looking for foreign business in an era of shrinking Pentagon budgets — but also the prospect of a dangerous new arms race in a region where the map of alliances has been sharply redrawn.

Thursday, April 16, 2015

Here we go...

A small but noticeable attempt at new country formation.  Given the geological limitations and difficulties, micro-countries seem very attractive.

In accordance with international law, a group of Czech citizens, gathered in a Preparatory Committee, decided to declare a new state, Free Republic of Liberland, in the territory defined by the coordinates below.

Its total area of about 6 square kilometres makes Liberland the third smallest sovereign state, after the Vatican and Monaco. Liberland is located along the Danube River between Croatia and the Republic of Serbia. The territory is not claimed by either of these two states. It was a no man's land - terra nullius – as defined by international conventions.

Wednesday, April 08, 2015

Dudley understands...

...that wage pressure is "the game".  And here is where the causality chicken and egg game begins and why Fed watching is an infuriating avocation.  Do anticipated Fed actions cause market fluctuations (yes), or is the opposite more true?

But, he added, the U.S. central bank will need to "determine whether the softness in the March labor market report ... foreshadows a more substantial slowing in the labor market than I currently anticipate."

The job market had been a lone bright spot in the world's largest economy. But it has ebbed and then slowed sharply last month, reinforcing the notion the Fed would delay an initial rate hike until later in 2015 or even 2016.

Tuesday, April 07, 2015


Recall that the entire world was predicting a massive rise in U.S. rates coupled with every economist's preferred bogeyman: INFLATION!

The opportunity set for massively scalable businesses is closing.  We have not seen "any" pressure on labor rates in the previous seven years...and yet the Fed has sent trial balloons indicating a possible rate hike.

It appears the markets are put it mildly.

Still the only... in town...

The trend is likely to continue as oil prices stay low and growth in emerging markets remains weak, reducing the dollar inflows that central banks used to build reserves, according to Deutsche Bank AG.     Such a development is detrimental to the euro, which had benefited from purchases in recent years by central banks seeking to diversify their reserves, according to George Saravelos, co-head of foreign-exchange research at Deutsche Bank.     The euro’s share of global reserves dropped to 22 percent in 2014, the lowest since 2002, while the dollar’s rose to a five-year high of 63 percent, the International Monetary Fund reported March 31.     “The Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years,” Saravelos wrote in a note. The central banks there “need to sell euros,” he said.     The euro has declined against 29 of 31 major currencies this year as the European Central Bank stepped up monetary stimulus to avert deflation. The currency tumbled to a 12-year low of $1.0458 on March 16, before rebounding to $1.0990...

Wednesday, April 01, 2015

Very interesting...

...timing on both the agreement and the announcement of the project.

The growing economic alliance between Israel and China is moving forward with a $2 billion, 300 kilometer freight rail link connecting Eilat, on the Red Sea, with Ashdod Port, on the Mediterranean, Germany’s Deutsche Wellenews magazine reported on Monday.
The project, nicknamed the ‘Red-Med,’ was greenlit by Israel Prime Minister Benjamin Netanyahu’s cabinet, and construction, which is expected to take five years, will begin within the year.
About the link, Netanyahu said, “It’s the first time we’d be able to assist the countries in Europe and Asia to make sure they always have an open connection between Europe and Asia and between Asia and Europe.” For Netanyahu, the rail link also has a civilian use, doubling as a line for a two-hour passenger ride between Tel Aviv and Eilat, DW said.