How much more can Russia endure?

US-led sanctions against Russia are producing a budget surplus there. Several factors are in play: 1. Crisis keeps oil prices high. 2. Lower credit rating weakens ruble. 3. Revenues from oil and gas sales buy more rubles. 4. More rubles produce a budget surplus.

From money printing to savings printing

Sleight of Hand: The UN-endorsed 2008 System of National Accounts is being implemented to make international comparisons easier. The new system increased the US saving rate by 1.5% of GDP last year: the “benefits” of defined pensions are booked as “savings” even if not funded, with future “savings” discounted at 5.5%. The UK is going one better. It is assuming that these “savings” will never be lost and discounting them at only 3.2%, which will add 3%-6% per year to the British savings rate.

US companies move abroad

Going abroad to seek their fortunes: Pfizer is moving to London for lower taxes, but they are not alone. Eaton Corp, after 100 years in Cleveland, has moved to the desk drawer of a Dublin law office. A slew of oil service companies, including EASCO, Rowan, Transocean, Noble Corp, and Weatherford, have moved abroad.

Canada: the bond market's darling

Canada has issued a $1.5bn 50-year bond at a yield of 2.96%. Canada is the only industrialized country ranked AAA by all three agencies.

The yield is lower than the US 30-year. Canada is funding long. The US is doing the opposite: 26% of US government debt matures in less than 12 months, 88% in less than 5 years. Is the US profile too risky?

Will there be a negative quarter in China's GDP this year?

Q1 2014 was the worst quarter for Chinese steelmakers since the Asia Crisis.  The industry lost ¥2.3bn, inventories rose 43.5% q/q, and domestic prices dropped 11.3% y/y.

Wise words from an American artist

James Abbott McNeill Whistler (From “Alive to the fingertips” in TLS April 4, 2014)

·         At West Point military academy – to which he was sent, following in his father’s footsteps – he veered from one scrape to the next until finally failing a vital set of exams through “deficiency in chemistry”.  In later life he like to claim, “if Silicon had been a gas I should have been a major-general.”

·         Among his dicta was the assertion that “two and two continue to make four, in spite of the whine of the amateur for three, or the cry of the critic for five.”

·         Whistler was very self-promotional:  Degas, who admired Whistler’s work, said, “Really Whistler you behave as though you have no talent.”

100 Years of Inflation-Adjusted Gold Prices: What's next?