In which: Obama holidays in Hawaii while the US waits for a stop-gap solution, someone calls for the corporate death penalty for UBS, the race for resources and its emerging market investment implication…

Good morning

The headlines:

  1. There’s not much time left.

    Link: is Obama in Hawaii?

    As of today, there are 6 days left. And thus far, nothing. Obama is on holiday in Hawaii (although he gets back today); and Paul Krugman is continuing to scoff at anyone and everyone that thinks that this could be a problem (see here)*.

    Will something happen when Congress re-convenes tomorrow? Probably not. Because most politicians are electively-incentivised to be cowards. Controversial decisions lose elections; and if you’ve made your career in politics – why on earth would you risk that by stepping out on a limb? That’s career suicide. And I’d say that it’s the key flaw in democracy, especially the American version (which seems to have an election year every 2 years). That, and the fact that it’s one dollar, one vote**.

    The best we can hope for is a stop-gap story where Congress agrees to delay the consequences until they can make a decision (ie. “let’s try leave it to the next Congress”).

    In a perfect world: the Americans would get a short-term technocrat à la Mr Monti (who, fortunately enough, is back in the job market) to make some hardcore unpopular decisions. Awkwardly, I think that particular hope is more likely than Congress actually drafting a legitimate bipartisan agreement.

    *Paul Krugman’s main point seems to be “I’m right, and I’ve been right all along, and the rest of y’all are blindly arrogant”. Of course – his message demonstrates just the kind of blindness that he’s accusing his debate opponents of – but what’s a little hypocrisy when it comes from a New Keynesian. In fact, from what I’ve read about Keynes, blind arrogance is about the closest that New Keynesianism comes to reflecting his ideals.

    **It reminds me of a Christmas joke: “pretty soon, everyone’s going to realise that Santa loves the rich kids more…”

  2. UBS Libor.

    Link: death penalty.

    This opinion piece made me laugh. UBS has been caught – and the situation is far too serious to allow for just some fining – so the SEC ought to introduce the corporate death penalty. If corporations have Supreme Court approval to do some natural-person things, then they should get some natural-person punishments.

    Like capital punishment.

    Which has a nice double-entendre ring to it, don’t you think?

  3. Looking forward.

    Link: emerging from the gloom.

    The clear winners for 2012 (with the exception of that massive 84%/85% return on Greek bonds…) were the lesser-known Emerging Markets. Like Turkey, the Philippines, Indonesia and Thailand.

    We know that they’ve been talked about in the investment space for years: the Tigers of Asia, the Pumas of Latin America, the Lions of Africa… But a lot of attention has been given to the BRIC countries, which really only have the distinction of being the largest emerging markets, not necessarily the fastest-growing.

    But this does, in part, answer the question of “where do I put my money?” if the US and Europe are in crisis and commodities make you uncomfortable:

    Productive assets in growing markets with some commitment to market reform and large, relatively-untapped domestic demand. And you go with the boring stuff: building stocks (infrastructure investment) and low-cost retailers (someone needs to feed the masses). And mining, I guess.

    The race for natural resources is on; and it will be the source of much of our conflict going forward. In fact, it is already. Always remembering that China has a population of 1.3 billion people (about 19% of the world’s population), and only 7% of the world’s arable land and 6% of the world’s water resources… That’s a structural demand issue that makes any natural resource/commodity trader look like a good bet.

That’s all for now.

Have a good day.