Thank you, Federal Reserve, for the easy money

Ethiopia got its first credit rating: Fitch B, S&P B, Moody's B1. The economy is said to be growing at a 10% rate and the country is planning to issue a Eurobond.

Confucius says: “Even the seizure of the largest hydrocarbon resource must begin with a single offshore oil rig.”

China has moved an offshore rig into waters off Vietnam. Vessels of the two countries have been harassing each other. In December China state TV aired an eight part documentary proving it owns the seas within the famous “nine-dash line,” which goes up to the shores of Vietnam, the Philippines, Malaysia, and other countries.

The mouse that prospers: Why is it that small countries are usually more successful than big ones?

I suppose it is because everyone knows what is going on and consequently there is more accountability and efficiency. Take the Isle of Man, which was profiled in the FT recently. The country has had 29 years of continuous economic growth. It’s the 8th richest country in the world, ahead of the UK. It has a comprehensive welfare state for its 85,000 people. During the crisis the UK cut off its customs revenue sharing with Mann so the Manx are balancing their budget entirely on local revenues from the 10% corporate profit tax on banks, property companies and retailers, and a 20% personal income tax capped at £120,000/person.

How does one invest in Mann? Manx Telecom, recently listed in London. MANX. 162.50p. P/E: 500x. Market Cap: £183 million. Revenues £76 million.

Is Internet retailing peaking?

US April retail sales were up +0.1% compared to consensus expectations of +0.4%. Internet down -0.9% while department stores up +1.8%. 

It has been prophesied that the electricity price rapture will precede drought apocalypse in Brazil

Alcoa has stopped aluminum production in Brazil in order to divert power from thermal plants used in smelting to the spot electricity market. It is guessed in the FT that it costs Alcoa $18/megawatt hour to produce power which can now be sold for up to $377/megawatt hour in spot market.   70% of Brazil’s electric power is hydro.  Reservoir levels in the state of Sao Paulo are expected to fall below the outflow mains next month. On the positive side, there’s the World Cup.

The luck of the Irish

Ireland's financing costs have fallen below Britain's for the first time since the crisis. Get out your magnifying glasses: 2.656% (Ireland) vs 2.683% (UK) for 10-year bonds.

Steel yourselves: base metals are looking up

ArcelorMittal reported better results than expected. The first quarter loss was $250 million compared to $345 million last year.  The company is now expecting steel demand to rise to 2%-3% this year. They had been expecting a 1.5%-2.5% only a couple of months ago.   At the same time iron ore prices have fallen to a 20-month low of $102.80 a tonne.  Are we seeing a favorable conjunction with price and volume leverage going forward?  Is the economy approaching escape velocity?