Good morning

The headlines:

1. India is paralysed. Link: Even Lakshmi thinks so.

   Indian policy moves notoriously slowly. Among the examples given in the link are Posco )the world’s third largest steelmaker) that waited 7 years to obtain building permission for a mill, only to have it revoked a short while later by an Environmental Commission; and Lakshmi Mittal’s Arcelormittal, which has been waiting six years for land for projects. Mobile operators lose their operating licences in corruption probes* and foreign retailer attempts to take stakes in local retail chains are repeatedly blocked.

   So here is this prime opportunity, when the world is looking for places to put its capital, and the Indian system is going to lose its capital flows because it looks Greek in its administration. And the rupee tumbles to its new record lows.

   Such a pity.

2. Gill Marcus says the South African Reserve Bank’s mandate brings challenges. Link: Shame Gill, would you like your job to be a bit easier?

   Sorry – couldn’t resist the sarcasm there. The SARB is trying to support economic growth while maintaining price stability. Which is an awkwardly-conflicting goal, mainly because the sole mandate is meant to be “inflation-targeting”. According to Gill, this is the “flexible” version.

   But what is one to do in these troubling times? A weakening rand could cause inflation; a Europe crisis could stifle growth. But at the same time, the weakening rand is being caused (for the most part) by the Europe crisis as investors move away from emerging market currencies. Let’s hope for an off-set.

3. In a London Whale update, it seems that the CIO was pricing the credit strategies differently to the rest of JP Morgan. Link: Unfamiliarity breeds missed-content.

   Apparently, the Central Investment Office (CIO) was valuing some of its trades differently to the rest of the bank. The real question is: how? Because when your policy is to mark-to-market, you take the position and multiply it by the quoted price at the end of the day.

   That said – if I’m big enough to move the market because I have such a large position in the trade – how do you mark-to-market when you know that the price that you mark it to is never going to be the price that you would settle at? I would say that marking-to-market would be understating the loss and/or overstating the gain. Telling me that the positions are “marked to market” would give me no comfort at all.

   Let’s hope that the real reason for the losses is that someone in the JPM risk division realised that and started making loss provisions for the estimated difference. If that’s not the case, and the loss was simply as a result of marking to market correctly – then those Volker rule proponents are probably going to get some more fuel for their fire.

4. The perils of the ETF and the ETN**. Link: “If you make it available to the masses, watch out, because the masses might buy them”.

   What is our human obsession with buying things that we don’t understand? Exchange-traded Funds and Exchange-Traded Notes were initially invented to provide risk exposures and such for large institutions making short-term tactical trades. And the retail investors went “ooh” and started playing with loaded guns.

   But whatever. Financial evolution for the win – if you want to play with loaded guns, you’ll remove yourself from the game sooner rather than later. I think that we should set up a Darwin award for finance. We can call it the London Whale Dugong Award***.

5. Google’s Thai webmaster convicted of insulting the Thai Monarch. Link: Worship the king.

   The Thai constitution includes a clause that the king “shall be enthroned in a position of revered worship and shall not be violated”. Apparently, he was violated by the Google Thai Webmaster when she failed to remove something insulting quickly enough.

   Attention all dictators – if you were looking for phrasing inspiration, refer above. I myself plan to be enthroned in a position of revered worship as, you know, a constitutional thing. Take over the world, etc.

6. RIM investors want to sell. Link: The Blackberry Takeover.

   It seems that the investors would like an outright sale. And despite my disdain, Blackberry does have core strengths that make it highly appealing to its core market: corporates. The security and network provided by RIM are something that Apple and Android don’t offer.

   If I’m honest, that doesn’t really make it a Facebook fit – but possibly a fit with Microsoft or (even) Apple…

   RIM isn’t dead yet. It’s just dead in the water.

7. The US places a 71% import duty on Daewoo Washing Machines. Link: After the Koreans fail to come clean.

   I just find it funny that while LG and Samsung got, like, points of a percent in duties; Daewoo got whacked for not co-operating! This comes after a US government probe into Korean subsidies for the electronic companies, which would be a violation of international trade law.

That’s all for now.

Have a good day.

*A travesty. I understand corruption probes in a country that has rare cases of corruption – but when it happens in an openly-corrupt, incredibly-inefficient governance system – “corruption” is just necessary economic grease. Without it, everyone would be worse off. 

**Collectively known as ETPs (Exchange-Traded Products).

***Or we can have the financial version of the Raspberries. We’ll call it the “Blackberries”.