SHIPPING MARKET
‘UP SLOWLY’ (EJ, Business Browser)
∙ In an October
26th interview Wei Jiafu, Chairman of China Costco Holdings
Co., one of the world largest container ship operators,
said that “The container market is going up slowly.”
Not a particularly
ringing endorsement by a key figure in an industry that until not long
ago had experienced nearly half a century
of double digit growth.
DR. DOOM FORESEES
MORE BUBBLE TROUBLE ((G&M, Brian Milner)
∙ New York University
professor Nouriel Roubini became famous for his accurate prediction
of the global financial meltdown. He recently told a Capetown, South
Africa audience that a new asset bubble triggered by rock-bottom interest
rates & a disastrous fall in the US dollar could bring on
another financial crisis, saying “The risk is that we are planting
the seeds of the next financial crisis.” For investors everywhere
are borrowing cheap dollars to buy assets of every kind around the world
& driving their prices far beyond that justifiable by economic fundamentals
& growth prospects.” He believes this could prompt “the mother
of all carry trades” & that matters are being made worse by just
about every other major central bank giving away all but free
money. And he received a sort of endorsement from PIMCO’s Bill Gross
dismissing the possibility of a traditional V-shaped recovery &
warning the US faces a “new normal” of tight credit, higher inflation,
slow growth & elevated unemployment levels (a la Japan in the
90’s).
One recent newspaper
headline said “Only economists believe the recession is over”.
STANDOFF OVER FERTILIZER
PRICES IMPERILS WORLD FOOD PRODUCTION
(G&M, Jessica
Leeder)
∙ Farmers are on
a buyers’ strike against skyrocketing fertilizer prices & cutting
their overhead by buying less of it. But Potash Corp’s CEO doesn’t
think they can make it stick much longer; for he told analysts recently
: “Food production is too important to put at risk. Farmers know this
... The question is not if it will happen (i.e. that they will start
buying fertilizer again), but when the rebound will begin.” While
his firm claims that it already has evidence of lower yields in Brazil
& China (the world’s largest potash consumer), soil experts say
a year of lower fertilizer won’t have a dramatic impact on yields.
Bill Doyle
was Canada’s highest-paid CEO in 2007 with total compensation of $430MM
(close to double that of RIM’s founders), most of it, however, due
to the meteoric rise in the value of his, often long-held, stock options
as his company’s share prices soared
over 500% in three years. The credibility of his view is lessened
by his own earlier admission that
he did “a horrible job of forecasting this year”. The declines in
fertilizer prices & fertilizer producers’ earnings have been colossal
: the latter are down by 80% or more YoY, and nitrogen-, phosphate-
& potash prices by 65%, 75% & 55% respectively. But farmers
across the world may be less interested in boosting yields than in keeping
their overhead down (according to one industry insider
“Farmers are still sitting on their wallets”), & more interested
in surviving than in avoiding a world food crisis (especially since
it would result in higher prices). And there are huge differences between
the short-term pickup in yields in response to
any increase in the use of fertilizer : in the case of nitrogen up to
90% of the response thereto shows up in the current & next year’s
crops, but only 20% in the case of phosphate, with
Doyle’s potash somewhere in between.
INSTITUTIONAL INVESTORS
WARY OF RECOVERY (OC, Keith Woolhouse)
∙ TheMarkets.com,
a research entity supported by a majority of North America’s &
Europe’s largest asset managers & hedge funds, surveyed 103 of
its members in 20 countries & found that 73% thought the market’s
had bottomed & 27% didn’t.
Historically the professional
managers’ bull/bear split has been a counter-indicator; in other
words, the more are bullish, the more likely the market is to head South,
and the more are bearish, the more likely it is
to head higher. In any case, the real question is less whether the market
is going to test its March lows (& it might actually be a good thing
if it did), but whether the economy’s path forward will be U-shaped
or L-shaped.
RECESSION OVER?
READERS DON’T BELIEVE IT (MSNBC, John W. Schoen)
∙ Larry van Sant
owns a heating & plumbing business in Maryland. His business is
so slow he has had to let 68 of his 168 employees go, while “Normally
we can look and tell it’s over before anyone announced it was over.”
And he is only one of hundreds of readers who sent us emails taking
issue with the view of many mainstream economists that the recession
that started in December 2007 may have run its course over the
summer.
The hoi polloi equate
recovery with growing employment while in reality it is a lagging-,
not a coincident-, indicator, i.e. while they think that when
the recession is declared “over”
unemployment will magically start to decline, in reality that doesn’t
happen until several, sometimes many, months into the recovery when
employers like Larry van Sant star to get better vibes. The concern
for some economists now is if this will
turn out to be a W-shaped recovery, with a couple of good quarters followed
by more dismal ones.
CONSUMER CONFIDENCE
SLIPS UNEXPECTEDLY (AP)
∙ The Conference
Board’s Consumer Confidence Index declined in October to 47.7 from
53.4 in September with the two sub-indices, Present Situation, going
from 23.0 to 20.3 and the Expectations (six months out) down to 65.7
from 73.7.
While almost double
February’s record low of 25.3, it is still a long ways from the 90
that signals a turnaround & the 100 level that signifies strong
growth.
U.S. EXISTING HOME
SALES SPIKE
∙ In September they
were the highest in over two years, up 9.4% MoM to a 5.57MM annual rate,
as first time home buyers sought to beat the November 30th
expiry date for the US$8,000 credit for first-time home buyers.
The Administration
is being pressured to extend this program since it is argued that otherwise
the pre-owned home market will fall off the cliff this winter,
take the new home market with it & limit the ability of banks to
dispose of homes they have foreclosed on.
U.S. AFGHAN PLAN
MOVING TOWARD PROTECTION OF POPULATION CENTRES
(NYT, Thom Shanker
et. al.)
∙ While Obama advisers
say the question is no longer whether or not to send additional troops
to Afghanistan, they are coalescing around a strategy that would seek
to protect 10 major population centres (to which military planners want
to add major agricultural areas), accelerate the training of Afghan
troops, expand economic development, reconcile with less radical components
of the Taliban, and would continue to use drones & Special Forces
to keep the pressure on insurgents in remote regions. But their critics
argue that this will give the Taliban effective control over large swaths
of the country in which it could establish mini-states & al-Qaeda
new training camps.
This is the opposite
of the British ‘boots on the ground’ philosophy that has had good
track record & similar to the US
‘fortified location’ strategy of Vietnam days that didn’t. And
it is contrary to a military maxim that operations should always be
launched with maximum force (which Bush I observed in the First Gulf
War & Bush II didn’t in the Second & in Afghanistan). And
it will likely prove impossible to promote economic development, which
is key to any ‘hearts & minds’ strategy, without control
24/7 of the countryside. In this business half-measures seldom work.
‘CRITICAL HABITAT’
SET ASIDE TO SAVE POLAR BEARS (G&M, Paul Koring)
∙ The Obama Administration
has designated over 500,000 square kilometres, an area larger than the
Yukon, along Alaska’s northern & western coasts as critical habitat
for polar bears.
Surprising that
there has not yet been a reaction from that mighty hunter, Sarah Palin.
COST OF STIMULUS
SPENDING STARTING TO WORRY CANADIANS
(G&M, Campbell
Clark)
∙ A poll by The
Strategic Council found that, while in January 61% of Canadians said
economic recovery was their number one issue, by October that had declined
to 43%, and that, while in January only 1% picked government spending
as the number one issue, & in July still only 3%, by October this
had risen to 8%. Canadians now rank this as the fourth most important
issue (after the overall economy, health care & the environment).
∙ Deficits &
government spending haven’t been much of an issue for Canadians since
the 90's but stimulus spending that officially is expected to
result in a $56BN deficit, but according to non-government sources
could be closer to, or even close in on, $100BN, may be starting
to change that.
While 8% is not a
big number in absolute terms, this could be like the old mariners’
tale about the small cloud on the horizon the size of a fist on the
horizon.
ARCTIC HEAT WAVE
‘UNIQUE IN HISTORY (G&M, Martin Mittelstaedt)
∙ This week’s
on-line version of the Proceedings of the National Academy of Sciences
reported on a study by researchers at five US & Canadian universities
that concluded “the last few decades have been the most ecologically
unique in 200,000 years”. Past tracking of historic climatic conditions
studied ice cores from Greenland going back 120,000 years. But the discovery
of a tiny (one square kilometre), shallow (10 metre deep) lake on Baffin
Island allowed that time frame to be pushed back another 80,000 years.
For in past ice ages the lake’s bottom was frozen solid, and not underneath,
& scoured clean by, moving glaciers. So scientists were able to
analyze the sediment on its bottom, layer by layer, going back
200,000 years (during which there were two ice ages & three warming
periods) & reconstruct life at the site by looking at the fossilized
remains of algae & insects therein. Their conclusion : “The lake
has followed a trajectory through the 20th century towards
increasingly exceptional environmental conditions with no analogues
in the past 200,000 years.”
According to John
Smol, a biologist at Queen’s University in Kingston, Ont.,
“This historical record proves that we are dramatically affecting
the ecosystems on which we depend. We have started uncontrolled experiments
on this planet.”, a conclusion the willfully blind are unlikely to
share.
GROUP : ISRAEL
WITHHOLDS WATER FROM PALESTINIANS (AP)
∙ London-based Amnesty
International on October 27th released a report accusing
Israel of pumping disproportionate amounts of water from an aquifer
it controls in the West Bank & of throwing road blocks in the way
of infrastructure projects that would improve the water situation for
Palestinians in Gaza & the West Bank. Water is a major bone of contention
between the Israelis & Palestinians that must be addressed &
solved before there can be peace. For Israelis consume over 4x as much
water per capita as the Palestinians (whose water consumption is actually
below the WHO-recommended minimum). The aquifer in question is the so-called
Mountain aquifer in the West Bank of which the Israelis use 80% (despite
the fact that, according to the report, Israel has alternate sources
of supply of water & the Palestinians don’t) enabling the 450,000
Israeli settlers in the West Bank & East Jerusalem
to consume more water than the 2.3MM Palestinians.
∙ An Israeli spokesman
called the AI claim “ludicrous” & said Israel holds the legal
right to the aquifer because it discovered & developed it, and produces
from it.
Anyone with any knowledge
of the situation knows that water is a big issue here.
CORRUPTION RATTLES
FRAGILE STATE (NYT, Mark Santora)
∙ Corruption is
pervasive from the top to the lowest security force member on the street,
and the spokesman for the Higher Judicial Council intimated the latter
when, after the Ministry of Justice was carbombed, he said “These
car bombs didn’t come from the sky ... They must have been driven
in the streets until they reached their target. And if there were no
corruption, the attackers wouldn’t risk passing through these checkpoints.”
But it really runs much deeper, endangering the fragile sense of security
in Iraq as US forces are withdrawn & the security forces seem as
more interested in enriching themselves than in protecting the hoi polloi.
A recent report by the Interior Ministry points out that some security
personnel has criminal records, ghost officers are on the payroll, money
budgeted for food disappears in someone’s pocket, officers skim off
part, or all, of lower-ranked soldiers’ pay, and criminals are let
go after bribes are paid & prisoners abused to get their families
to pay protection money.
Those
fighting it face an uphill battle &
are sidelined in the security forces & bureaucracy
SHOWDOWN LOOMS
OVER WHO WILL RULE OIL-RICH KIRKUK
(G&M, Patrick
Martin)
∙ A showdown looms
between Arabs & Kurds over oil-rich Kirkuk province. Saddam pushed
an Arabization program there to drown the Kurdish population in a sea
of Arab immigrants. And after the 1991 uprising many Kurds migrated
from Kirkuk to behind the safety of the so-called ‘Green Line’ (where
the Kurds enjoyed the luxury of a US aerial umbrella), leaving the province
under Arab control. But after April 10th, 2003 the Kurds
took back much of their traditional territory beyond the Green Line
& replaced the latter with what they call their “trigger line”
from which they say they won’t withdraw & behind which are most
of the disputed territories. And since the local Kurdish population
has grown by 50+% to over 1.2MM (which the Kurdish head of the regional
council calls “a perfectly normal growth rate ... when you take into
account both natural growth and the return of thousands of families.”)
∙ Local Arab &
Turkoman leaders want a power-sharing arrangement allotting 32% of
the provincial council seats to each of the Kurdish, Arab & Turkoman
ethic groups, and the remaining 4% to small, mostly Christian, minorities
so that “no one feels like a second class citizen.” The province’s
Kurdish leaders say they would happily share power, but only after an
election determined how many seats each group should get, and they want
a referendum to decide whether the province should join the other three
provinces in the semi-autonomous
Kurdistan Regional Government (the outcome of
such a referendum would be a foregone conclusion,
since daily more Kurds are moving in
& Arabs out).
This is as much, if
not more, about oil as about ethnicity. But while possession may be
‘nine points of the law’, oil in the ground is worth
nothing unless it can be moved to markets which in this case would have
to involve pipelines through non-Kurdish territory. So the Kurds hold
a weak hand.
THE MISTRUST BEHIND
PAKISTAN’S CLASH WITH THE TALIBAN
(G&M, Saeed Shah)
∙ The Pakistani
army’s latest offensive against the Taliban in South Waziristan has
failed to convince locals that it is serious; for three times in recent
years did it launch an offensive there only to subsequently cut a “peace
deal” with the Taliban that was followed in short order by bloody
Taliban reprisals against those who has sided with the state. So even
the few local anti-Taliban militias don’t trust the army because,
as their leader said in an interview, “The government has used the
people like toilet paper, used them and thrown them away.”
∙ While the army
argues that never before was it given a solid mandate by the politicians
to rout the Taliban, & that never before had Pakistani public opinion
supported it fighting a movement claiming to act in the name of Islam,
its critics allege that the army, & especially its Inter-Services
Intelligence spy agency, had been happy to have the Taliban guard the
country’s northwestern border.
The army’s argument
doesn’t reflect well on President Bush’s erstwhile key ally in the
region in his War on Terror, General Musharraf.
KARZAI’S BROTHER
SAID TO RECEIVE CIA PAYMENT (NYT, Dexter Filkins et. al)
∙ According to current
& former US officials Ahmed Wali Karzai, a suspected key player
in the country’s opium trade, has been on the CIA’s payroll for
the past eight years, and some say US reliance on him, the most powerful
figure in a large area of Southern Afghanistan where the Taliban is
strongest, undermines the US push to develop an effective central government.
According to Major-General Mike Flynn, the senior US military intelligence
official in Afghanistan, “If we are going to conduct a population-centric
strategy in Afghanistan, and we are perceived as backing thugs ... we
are ... undermining ourselves.”
Ahmed Karzai denies
being in the drug trade & getting money from the CIA (and since
the latter likely involves ‘black money’
there is no way of proving if he did
or didn’t).
ZIMBABWE : UN TORTURE
INVESTIGATOR STOPPED (AP)
∙ Manfred Nowak
was invited to Zimbabwe by Prime Minister Morgan Tsvangirai to investigate
allegations of attacks on his supporters by militants linked to President
Mugabe’s ZANU-PF party. But when he got to Johannesburg he was told
by someone in the Zimbabwean government not to bother going any further;
and when he tried to do so anyway he was turned back by immigration
staff not under control of the Prime Minister.
The unity government idea always was
just a ploy by Mugabe of getting donor money in the door while the ZANU-PF
crowd continues to hold the effective reins of power.