Good morning

The headlines:

  1. The Facebook IPO Roadshow could begin as early as next week. This is the same roadshow that is causing scandal because Markie Mark Zucksabit is impolitely not attending. All the institutional investors are up in a huff and threatening to not invest. Personally, I think that not investing is the intelligent choice – but I’d probably go just to find out what it is that they plan to do with the money (after all, lest we forget – the primary point of equity listings should be to raise capital for expansion – not cash-in for current shareholders). Link: Facebook hits the road.
  2. LVMH Moet Hennessy Louis Vuitton are raising their prices to make up for bad business. Just pause on that thought for a moment. Raising prices. Because business is bad. Brain freeze. But the key point is that they’re only raising prices outside of China. While it always feels like the cheaper stuff comes from China, the luxury items cost more there (who knew?). So there’s a pricing disparity, which exploits a segregated customer/demand base – if the Chinese are willing to pay more that the Europeans, it makes sense to charge higher prices in China (Sidebar: is it any wonder then that so much of the fake stuff comes from there?). But now, weaker demand out of China is causing a price hike in Europe. As a result of currency shifts in the first quarter of 2012, the price differential between Europe and China grew to around 47%. So what happened? Well – the Chinese went shopping in Europe. If the prices rise in Europe, the Chinese won’t make the trip. At least, that’s the theory. Link: Buy the goods in your own country.
  3. Alan Greenspan says US stocks are cheap. He’s citing low PE ratios. It pains me to agree with Alan Greenspan – but I’m on his side, if not for quite the same reason. Unless the US does something about its deficit, its only option is going to be to print a little money, have a little inflation, and monetize some of its debt burden. What’s the best hedge against inflation? Stocks. Link: Does a Greenspan opinion count?
  4. US Manufacturing is growing at its fastest pace in a year. I sound like a stuck record – but this is not a good enough indicator in and of itself. Higher manufacturing that’s just resulting in higher inventories, or higher sales on credit that is unlikely to be paid back, well that’s just temporary good news. Link: Manufacturing is the US bright-spot.
  5. Bolivia nationalises its power grid. It’s entertaining when you watch the anti-free market argument in reverse. Bolivia is taking over the Bolivian assets of Spain’s Red Electrica Corp. because it feels that the free-market operator is under-investing. The other argument is that energy is a strategic investment that should be in government hands. Can a Bolivian government do it better? I guess we’ll find out. Link: Latin American Expropriation of Assets.
That’s all for now.
Have a good day.