Good morning

The headlines:

  1. Soros speaks.

    Link: the Euro is here to stay.

    Any mention of a currency war and George Soros suddenly becomes the name to drop. And he’s saying that the Euro is here to stay.

    Which makes sense because it’s so difficult for a single country to leave (I refer you to this post), let alone dissolve the union in its entirety.

    Soros also declared that Germany will always do “the minimum” to preserve the Euro.

    When it comes down to currencies, I think that we tend to pay too much attention to the flows of speculator capital – which are almost always short-term in nature. The fact remains that the large institutional investors (such as pension funds, retirement funds, medical aid funds, etc) are required to hold significant portion of their asset base in investment grade bonds. This is sometimes a function of legislation, but always a function of investment mandate. And the world economy does not have many countries that offer investment grade securities that are open to investment (China may be investment grade – but there is limited scope for investment).

    And those investors continue to receive contributions that require investment every month. In many ways, I believe that it is those flows, not speculator flows, that will drive the long-term valuation of the big global currencies. But I stand to be corrected.

    Some statistical support: this OECD report on pensions. In 2011, US pension fund assets were the equivalent of 71% of US GDP. And that is pension funds alone.

  2. Apple expands audits.

    Link: Chinese forgeries? Never!

    Apple is expanding its internal audits of suppliers, after finding some forged documents from one of its labour brokers in China.

    So more cost then? And after a near-flat profit announcement yesterday. The share price:

    I realise that yesterday’s $13 billion profit announcement sounds good on paper. But share prices take into account expectations of future earnings. And, hopefully, the growth of future earnings. If growth was hoped for, and it turns out not to be happening, it implies that the share price should go down.

    And it did. In fact, I believe the word “tanked” is appropriate here.


  3. The Valentino experience.

    Link: changing the way we shop.

    Gucci has decided that $2,195 handbags need to be more than just a handbag. So if you pay more, you can get into one of their celeb events and/or meet Valentino.

    It was only a matter of time before we officialized the concept. At least now you can meet a celebrity without having to go through the pretence of making large political campaign contributions and/or becoming a celebrity yourself.

    But it does show the movement in our consumer trend: away from “products” and toward “experiences” that cement the bond between us and the brand.

    Now if only my bank would adopt that strategy. Because that would make my life less stressful. And it would certainly make life less stressful for the call-centre supervisors that hear from me so often.

That’s all for now.

Have a good day.