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?

The Crash of 1929, as seen by Paul Cabot in 1930

From the State Street Research and Management 1930 Annual Report. (as quoted in Michael Yogg's Passion for Reality):

"All common stock investors lost, irrespective of the care with which their investments were made or supervised. No amount of research work could have prevented such losses unless it was decided that no equities should be used.

"One has only to review the utterances of leading economists, research organizations, and businessmen during the past eighteen months to discover how small is the amount of real knowledge and understanding concerning problems of major economic importance. In spite of all the research work that has been done on such prolems, it appears that common sense will remain the intelligent investor's most reliable and useful asset." (p. 55)

And yet, common sense is all too uncommon.

Mary Barra's Haiku

Andrew Capon has proposed a haiku for Mary Barra:

Ignition broken
On a side road to nowhere
The future darkens

Can Mary Barra match this?

The FT printed a poem by Li Shufu, chairman of Geely and Volvo, today:

Winter goes, spring arrives.  We quietly bury ourselves in work.
Don't argue, don't make noise.  Support Chinese brands.
Winds from Europe and America, waves from Japan and Korea.
       Why revere foreign things?
Chinese cars fly even higher. Fight bravely for a decade to make great changes.

(translated by Tom Mitchell)