Paul Kedrosky's Infectious Greed

Dying Dollar Dings Exporters? Not So Much

pk — Tue, 10 Nov 2009 13:08:53 PST

Pace my Marketplace radio comment on the dollar's decline yesterday, this graph from Bloomberg of the recent stock market outperformance of U.S. exporters is noteworthy.

Uptick in October Trade Data

pk — Tue, 10 Nov 2009 12:58:27 PST

[via Panjiva]

The Edwards Strikes Back

pk — Tue, 10 Nov 2009 00:16:31 PST

The indefatigably bearish SocGen strategist Albert Edwards made some entertainingly grumbling comments in Hong Kong today. Here’s a summary:

Market will hit new lows in 2010 as we go back into recession
Faith in growth stories is a “sick joke”
Japan will fumble into bond sale trouble in 2010 as investor appetite dries up and yields climb

You have to give Edwards credit for having more staying power than most of his bearish brethren. Like Han Solo at the end of The Empire Strikes Back, Edwards is frozen in the bearish equivalent of carbonite – which is part of why we love him so.

More here.

Can Startups Save the World? Startups vs. GDP/Capita

pk — Mon, 09 Nov 2009 14:27:41 PST

For a recent presentation, I graphed gdp/capita against ease of starting a company in more than 100 countries around the world. Here is the result for countries with GDP/capita more than $20k. Note that “ease of use” is a ranking, so big numbers are bad (low ease) and low numbers are good (high ease).

And here is the result for countries with GDP/capita less than $20k:

There are all sorts of issues with measures, dependent and independent, so I wouldn’t make overly much of it, but it’s still interesting stuff.

Readings: The End, IPOs, Biased News, Harry Potter, Species Risk, etc.

pk — Mon, 09 Nov 2009 13:18:57 PST

IEA whistleblower says global oil data exaggerated & incorrect (Guardian)
The great securities delisting machine [ed., more on this later] (Grant Thornton)
Life After the End of History (NYT)
Second Quarter 2009 Cambridge Associates Private Equity and Venture Capital Benchmark Commentaries (PE Hub)
Biased News Has Delayed Impact (M-M)
For “new economics,” look to old economists (Reuters)
H.R. 3962 roughly same length as last Harry Potter book (CLS)
Rick Bookstaber to the SEC (Bookstaber)
Studies 'overstate species risks' (BBC)
AGRITECHNICA 2009 is on: The World’s largest Exhibition of agricultural Machinery (Source)

Weekend Reading: Goldman, Gold, Vegas, Sex, and Commercial Real Estate

pk — Sun, 08 Nov 2009 11:00:35 PST

A few links from my weekly Weekend Reading column:

Just doing God’s work: Inside Lloyd Blankfein’s Goldman Sachs (Times)
Inside the Global Frenzy for Gold (NYT)
Las Vegas construction nears standstill (Las Vegas Sun)
The Technology Behind the Madoff Scam (IDD)
Bank of England says financiers are fuelling an economic 'doom loop' (Telegraph)
U.S. oil reserves down by record amount in 2008 (EIA)
Why this commercial real estate bust is different (BusinessWeek)
First iPhone, now Droid. Who needs Windows? (CNET)
Sex toys sell, even in a recession (S.F. Chronicle)

Checking Gold’s Hotness

pk — Sat, 07 Nov 2009 22:40:51 PST

A daily heatmap of gold performance – as proxied by GLD – over the last four years. Remarkable change in behavior since 2005.

Credit Default Swaps: Proudly the Tool of the Devil Again

pk — Sat, 07 Nov 2009 12:00:17 PST

Lots of people are staking out positions around (and mostly against) investor David Einhorn’s FT-reported anti-CDS musings in his latest investor letter. I agree with David in many ways – and his writing is as fun as usual – but I don’t accept all of David’s reasons (although I agree the ability to so directly influence the path to default can be problematic).

Two of my main CDS issues (which are fixable):

They are congenitally under-reserved , which creates asymmetric risks.
It is possible to write swaps (far) exceeding the notional value of the thing for which you are writing all the swaps. That’s … not good, like being able to create total policies far exceeding the value of a house, thus making it urgent to burn the house down as soon as possible.

Anyway, here is Einhorn’s original, followed by two takes on opposite sides:

Einhorn against credit default swaps (FT)
Ehrenberg: Deal with it Dave (IA)
Yves: First, let’s kill all the credit default swaps (NC)

Feel free to find yet another position to stake out in comments.

Protectionism and the Chinese Box of the Renminbi

pk — Sat, 07 Nov 2009 10:24:47 PST

I have a commentary piece on Marketplace this coming week arguing that the U.S. dollar must be allowed by Asian central banks to depreciate against more currencies than the Euro. All of the longstanding trade and flow imbalances cannot be funneled through a single currency pair without creating even more grotesque trade & debt distortions.

And, as Michael Pettis points out, if the exchange shift cannot be made to happen to escape the Chinese box of a renminbi loose peg, the imbalances will end up in political hands with worrying protectionist implications:

In that sense the refusal of Asian central banks to permit the needed appreciation of their currencies against the dollar may end up having the same impact on the adjustment process of the overvalued currencies. The 1930s seemed to show, according to the authors, that when their currencies could not adjust, countries became protectionist. So if the overvalued dollar cannot adjust except against the euro, and if the already overvalued euro has to bear the brunt of any further adjustment, will American and European politicians be forced into the “second-best” option of trade protection? No prizes for guessing what I think.

More here.

QOTD: John McCain’s 15% U.S. GDP Cut

pk — Fri, 06 Nov 2009 18:54:32 PST

No idea how I missed this wonderfully inflammatory Paul Samuelson quote from a few weeks back, but it’s a contentious keeper:

Had John McCain won [the 2008 election], the present G.D.P. in the United States would have been even lower than it is now by more than 15 percent.

More here.

Who Files for Bankruptcies?

pk — Fri, 06 Nov 2009 18:49:48 PST

Books of the Week

pk — Fri, 06 Nov 2009 13:23:40 PST

Some books I’ve been reading during my travels this week and that others might like – an eclectic list.

Scroogenomics. The name more or less says it, but why you shouldn’t buy people presents for the holidays.
The Great Cities in History. A lovely series of essays and meditation on what made great cities great through history.
Boulevard of Broken Dreams. Josh Lerner’s new book on how government and venture capital should be kept far apart.
Lords of Finance. I got stalled half-way through this many months ago, but finally finished it off this week. Probably my favorite book of 2009, and a lucid history of how central bankers nearly broke the world a hundred years ago.

Readings: Wind, Brazil, Tools, Complexity, and Ship-Tracking

pk — Fri, 06 Nov 2009 11:15:13 PST

How Bernie Madoff made basket cases of his customers’ accounts (SI)
Denmark a global leader in wind power (FP)
Brazil’s rise to agricultural dominance (FT)
Companies lining up for IPOs (E&Y)
Live Ships Map - AIS - Vessel Traffic and Positions (MarineTraffic)
Prezi - The zooming presentation editor (Prezi)
18 truths: The long fail of complexity (ZDNet)

Why is the Boston Marathon More Volatile Than the NYC Marathon?

pk — Thu, 05 Nov 2009 15:26:35 PST

As readers know, I’m fascinated by volatility and our response to it. In capital markets a little volatility is important, and a lot is dangerous – it can result in things flying apart, with unpleasant financial consequences.

In sports it works the other way around. Too little volatility in results and sports is boring. A little makes things more interesting; and a lot can make something compulsively watchable.

I was thinking of this during the recent New York marathon. Yes, an American won, which was a nice change, but the other thing that happened was that result unpredictability continued to fall. The rolling ten-year standard deviation of winning times has been declining for some time, as the following figure shows:

Now, here is the same figure for the Boston Marathon (over a slightly longer period).

The Boston Marathon has consistently had higher volatility in its winning times than the Boston Marathon. Not only that, there has been a recent uptick in the results volatility, with the standard deviation trending up ward since 2004 or so.

We should expect declining standard deviations over time in these events, with the best athletes only differentiated by small-ish amounts of time. And that is, more or less, what is happening in the New York Marathon, but such is not the case – or at least hasn’t recently been the case – in the Boston Marathon.

Why is the Boston Marathon different? Good question. Before positing a few – hillier course, more Kenyans, etc. -- I’ll throw it open. Thoughts?

QOTD: Lawyered Up

pk — Wed, 04 Nov 2009 18:42:20 PST

For a substantial portion of the American business and professional class, a book entitled "Life Without Lawyers" must surely conjure some of the same feelings evoked in faithful readers of the Harlequin romances, a sort of vicarious fantasy filled by the joy of liberation from burdens, strictures, and anxieties that have come to define quotidian existence. Such people are, in my experience, called clients.

Source: Charles N.W. Keckler, “Lawyered Up,” SSRN eLibrary (September 2009), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1467183.