Saturday, November 22, 2014

Geopolitical Risk Theater Links: Thailand’s Hunger Games, ISIS Expansion, US 500th Drone Strike, Terror Not Excuse for Foreign Wars and more…

1 Hunger Games Thailand edition? : When Life Imitates 'The Hunger Games' in Thailand, the Atlantic November 21, 2014

3 The nuclear race is ON: China's Nuclear Weapons Are Getting Bigger And More Destructive Business Insider November 20,2014

4 Hasn’t it been obvious? A Russia-China Military Alliance May Not Be As Far-Fetched As Many Think Business Insider November 21,2014 They are already part of the Shanghai Cooperation Organization which according to Wikipedia “is a Eurasian political, economic and military organization”

5 Like stocks, ISIS momentum keeps rollin’: ISIS Has An Important Iraqi City Surrounded Business Insider November 21, 2014

6 ISIS draws criticism from peer (ally?) Al Qaeda in Yemen rebukes ISIS November 21, 2014 

7 If ISIS has international recruits, so does the Kurdish forces: Canadian veterans join Kurdish battle against ISIS November 22, 2014 

8 US government’s favorite assassin: America’s 500th Drone Strike Launched in Pakistan Six 'Suspects' Killed in Latest Attack November 21, 2014 Question is who gets killed; militants or innocent bystanders labeled as militants? 

9 Oops, developing cracks on Western Sanctions against Russia? Serbia won’t join anti-Russian sanctions club despite EU pressure - Nikolic November 20, 2014 
Serbia is not planning to impose sanctions on Russia, said its President Tomislav Nikolic after meeting EU Commissioner Johannes Hahn. The latter said the EU expects Serbia to bring its policy in line with the European one if it seeks to enter the union.

Nikolic said that Serbia is not planning to introduce sanctions at the moment, though admitting the country is seeking EU membership which implies an obligation to pursue common policies, including foreign.
10 More beating of the war drums: Russia warns US against supplying ‘lethal defensive aid’ to Ukraine November 21, 2014
Moscow has warned Washington a potential policy shift from supplying Kiev with “non-lethal aid” to “defensive lethal weapons”, mulled as US Vice President visits Ukraine, would be a direct violation of all international agreements.

A Russian Foreign Ministry spokesperson said that reports of possible deliveries of American “defensive weapons” to Ukraine would be viewed by Russia as a “very serious signal.”
11 More testing of tolerance limits: NATO scrambles jets 400 times in 2014 as Russian air activity jumps November 21, 2014

12 The slippery slope to totalitariansism: Terror Is Also Not a Reason or Argument for Foreign Wars Michael S. Rozeff Lew Rockwell Blog November 21,2014

Writes Michael Rozeff
But terror and terrorists cannot possibly justify such wars, and preventive wars at that. Terrorists are a problem that is unsettling, but it also has limited and sporadic sources, even if they can inflict great damage at times. The problem requires identification and location of terrorists. How can war, which is such a blunt instrument, an instrument of mass destruction, be justified against such a threat? How can the U.S. possibly use terrorist threats to justify the unseating and destroying of entire governments, the destroying of whole infrastructures, the throwing of countries and societies into massive turmoil, and the killing and wounding of innocent civilians in large numbers? How can the U.S. justify exacerbating religious and ethnic differences, ruining landmarks and turning countries into armed camps engaged in internecine warfare? There is absolutely no excuse for this. Terror, terrorism, terrorists and terror events provide absolutely no excuse for such huge human rights violations. 9/11 doesn’t justify this. Nothing can be brought forward that justifies it. There is zero moral justification for what America has done in the name of fighting terror.

Here at home, the federal government has militarized every force within all of its many agencies that do any kind of policing. Not only have local police forces become militarized, but so have every possible arm of the federal government. The Department of Homeland Security is but one umbrella for these many forces. By one count there are now more than 70 such militarized federal agencies. 

The government has used terror and terrorism as an excuse or pretext for militarizing itself and arming itself to the teeth. These forces stand ready to dominate Americans at every turn and create a nightmare police state in this country. Any excuse from a bomb threat to a hurricane can be used to mobilize one or more of these forces. One vindictive word or one phone call can unleash a number of SWAT teams against some innocent person or get them detained or get their names placed on a no-fly list or some other list.

Quote of the Day: Understanding the Distribution Effects of New Money (Debt) on Society

I want rising real wage levels, but something about which I get incredibly frustrated is the use of that word “capital”. I have heard economists talk about capital when what they really mean is money, and typically what they mean by money is new bank credit, because 97% of the money supply is bank credit. That is not capital; capital is the means of production… I fear that we have started to label as capital money that has been loaned into existence without any real backing. That might explain why our capital stock has been undermined as we have de-industrialised, and why real wages have dropped. In the end, real wages can rise only if productivity increases, and that means an increase in the real stock of capital. 

To return to where I wanted to go: where did all the money that was created as debt go? The sectoral lending figures show that while some of it went into commercial property, and some into personal loans, credit cards and so on, the rise of lending into real productive businesses excluding the financial sector was relatively moderate. Overwhelmingly, the new debt went into mortgages and the financial sector. Exchange and the distribution of wealth are part of the same social process. If I buy an apple, the distribution of apples and money will change. Money is used to buy houses, and we should not be at all surprised that an increased supply of money into house-buying will boost the price of those homes…

My point is that if a great fountain of new money gushes up into the financial sector, we should not be surprised to find that the banking system is far wealthier than anyone else. We should not be surprised if financing and housing in London and the south-east are far wealthier than anywhere else. Indeed, I remember that when quantitative easing began, house prices started rising in Chiswick and Islington. Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society. It is the primary cause of almost all conflicts revolving around the production of money and around the relations between creditors and debtors.
(bold added)

This excerpt is from a transcript of a speech in a debate by British conservative MP Steve Baker at the UK’s parliament (source Free Banking; hat tip George Selgin)

Unfortunately this very basic concept of money have hardly been understood even by so-called economic 'experts', so they go about worshiping unsustainable bubbles, deny its existence and gets surprised when boom morphs into bust.

Video: A Look at Malaysia’s Savings Retirement Crisis

This video from BBC (via world news) attempts to explain why Malaysians have little savings and are at risk from a ‘retirement crisis’

Interesting but poignant remarks from BBC reporter Jennifer Pak:
Cars are expensive here but Malaysians are enticed to buy them with cheap loans that last up to nine 9 years. It’s one of the reasons household debt is more than 80% of GDP one of the highest in Asia. So it is hard for Malaysians to save… (1:47)
Referring to the mushrooming luxury condos relative to the angst of the middle class;
Malaysia’s middle class can’t afford to plan for the future. For some just getting to tomorrow is hard enough (2:28)

Why Malaysians can’t save? In a word, inflationism—overspending financed by overborrowing from zerobound rates, not only by the private sector but also by government as revealed by sustained deficits and ballooning external debt where both actions has been manifested by soaring money supply that has led to price inflation in assets (housing and stock market) and the real economy (CPI) or the shrinkage of purchasing power.

Since inflationism destabilize prices then ‘planning for the future’ has become murky process whether seen from households to businesses.

I have explained lately that Malaysia’s bubbly housing markets have recently been materially slowing down—where if sustained this will have a feedback loop between credit risks and growth.  

And once the balance sheet ailment known as overleveraging unravels (or the invisible wealth redistribution diminishes), the good news is that Malaysians will be saving again.

The Malaysia’s currency the ringgit has lately been thrashed. 

The USD-Malaysian chart from yahoo reveals of a breakout to a four and a half year high this week from a rounded bottom formation.


Given Malaysia’s highly levered economy, a weak ringgit will hardly be supportive of Malaysia’s asset markets.

Malaysia’s equity benchmark the FTSE KLSE which had been largely unscathed in 2013 taper tantrum and had been the first to break record high among ASEAN peers.

Today the KLSE has now been struggling as shown by the chart from yahoo which exposes a potential bearish head and shoulder formation that paradoxically comes in the face of booming stock markets led by the US—a curious divergence.

Of course, Malaysia’s predicament and risks should not be seen in isolation as the same fundamental economic maladjustments plague the region and the world.

And history likewise shares to us the insight that the unwinding of imbalances by any country in Asia tends to have a shared dynamic. 

Friday, November 21, 2014

China Cuts Benchmark Rate, Draghi Says Inflation Must Rise ASAP sends Stock Markets to Heaven!

Faced with a massive dread of deflating bubbles, as revealed by the correction last mid-October, central banks of major economies have been frantically juicing up asset markets through verbal persuasion (promises of more steroids) and through policies

We see more of the same with the Chinese government joining the bandwagon today...

From Bloomberg:
The euro weakened and bonds in the region extended gains after Mario Draghi said the European Central Bank must drive inflation higher. Stocks extended gains after China cut interest rates, and the yen strengthened.
Again this validates my theory of the politics of monetary easing policies: I recognize the problem of addiction but a withdrawal syndrome would even be more cataclysmic.


So in the case of China, debt problems must be solved by having more debt! Solve alcohol addiction with even more alcohol!

Wall Street just adores these bailouts having been implicitly directed to them…

European stocks having a sugar high  (as of this writing)


Tape from Bloomberg.
..and so with record US stocks (futures) on already on a quasi vertical ramp (from CNN)

Infographic: Everything You Need to Know About the Swiss Gold Referendum

From Visual Capitalist
Courtesy of: Visual Capitalist

Will the Swiss restore gold's role as money?

Thursday, November 20, 2014

Phisix: Another Fabulous Day of Massaging the Index

Some in the mainstream have called today’s afternoon rally as ‘bargain hunting’.

In my view, it would be delusional to generalize PERs of 30, 40, 50 and etc… and PBVs at 3,4,6,7 as 'bargain'. More so, an intraday decline .5% based on these valuations hardly changes anything.

Instead I would assess today’s activities as another flagrant example of INDEX massaging.

Bulls as I have been saying are territorial. So, index levels for them are the be-all and end-all in their quest for (an asset inflation) nirvana. They bear the illusions that the higher the level, the more invincible they are--where risks are totally ignored.

So for them, the Phisix must NOT fall at all, because they are supposed to reflect on G-R-O-W-T-H. Thus all attempts must be made to prop it up.

While the Phisix has been down the entire day, what makes today another remarkable session has been what I call ‘afternoon delight’ or the after lunch rally punctuated by “marking the close”. (chart colfinancial and

The modus as I previously explained
Nonetheless, the common trait in the massaging the index, either via intraday “pump” or “marking the close” have been to massively push up prices of at least 3 issues with combined market cap weighting of 15-20%. In panic buying episodes, the kernel of these activities transpire after lunch break. 


There had hardly been any ‘bargain hunting’ for the property (upper left) and the holding sector (right) as they had been clearly “pumped up” during the last minute.


Realize that the charts indicated came from losses and had been pushed either to exhibit marginal losses (as in the holding sector) or gains (as in the property sector). (chart from PSE)

Because of the 'afternoon delight' coupled by the end session push, the Phisix down from a low of .5% in the morning session closed the day marginally changed. 

And breadth had been in favor of decliners 98-84 which shows of the generally dour sentiment of the day.


I must add that since today’s biggest major cap decliner has Ayala Corporation (-4.88%), the stock operators had to ensure that downside of the holding sector, which AC has been part of, had to be ably managed. So they fired up on the bids of two key issues to offset the decline.

They buoyed the largest and the third largest market cap weighting of the sector. The combined weight for SM (left) and AEV has been 36.64 % (right; weighting based on today’s close) which offset the second largest AC’s 11.38% share.


How about the last minute spurt in the property sector? Well the operators focused their drive on their all time favorite, ALI. 


I have also noted above that the Financial sector had been part of the massaging, but apparently, the operators must have shifted to other issues as BPI’s momentum faltered. Were the sellers too heavy for them to control?

The actions of BPI mainly reflected on the index, except for the last minute, where gains came from MBT.


The service sector had a quasi afternoon delight + the last minute pump. Given that TEL lumbered through the day, the focus of the pump transferred to ICT.

Such actions don’t look like random events, rather they seem as calculated and well coordinated. And this has not just been a one day affair but a seeming regularity compared to the 2013 counterpart.

Peso volume today was at a hefty Php 21.09 billion, that’s because 65% of these accounted for special block sales mostly from AC.

These activities are hardly good signs. They are, instead, signs of desperation and more attempts to distort market prices. 

They are signs, to re-quote historian Charles Kindleberger, of misconducts:
What matters to us is the revelation of the swindle, fraud, or defalcation. This makes known to the world that things have not been as they should have been, that it is time to stop and see how they truly are. The making known of malfeasance, whether by the arrest or surrender of the miscreant, or by one of those other forms of confession, flight or suicide, is important as a signal that the euphoria has been overdone. The stage of overtrading may well come to an end. The curtain rises on revulsion, and perhaps discredit.
In short, history tell us that the obverse side of every mania and market manipulation has been a crash.

Geopolitical Risk Theater Links: Russian Bombers Threaten Guam, ISIS Success Story?, Japan’s War Hawks, the Ukraine Freedom Support Act and more…

1 It’s a bird. It’s a plane. It’s a UFO? Or has it been a Russian military experiment? Watch mystery explosion that lit up Russian night sky - but nobody knows what caused it November 19, 2014

2 Like stocks, ISIS bullish momentum keeps going: Report: ISIS Takes Control of a Libyan City November 19, 2014

3 Like stocks, could the bandwagon effect be the secret formula behind the ISIS successful streak? : Why ISIS is spreading across Muslim world November 19, 2014

4 Potential peace between US-Iran? : 5 DETAILS TO BE WORKED OUT BY NOV. 24 DEADLINE FOR IRAN NUCLEAR TALKS Wall Street Journal November 19, 2014

5 Doubling down on policy errors: Abenomics PLUS brinkmanship politics;

a) Japan’s War Hawks And Imperial Apologists Are Antagonizing Everyone; Japan's war hawks and imperial apologists are alienating the country’s allies and making a confrontation with its rivals more likely. Foreign Policy in Focus Business Insider November 19, 2014

For a long time, Japan's military force was an exercise in contradiction. The country has ranked among the world's top military spenders, at almost $50 billion in 2013 — despite a constitution that explicitly forbids war (and even the maintenance of "land, sea, and air forces").

But in July, the cabinet of Prime Minister Shinzo Abe approved a reinterpretation of the pacifist clause called Article 9.

Without changing the constitution's wording, Abe made clear that Japan intended to step up its military prerogative in the region, allowing it to come to the aid of an attacked ally, for instance.

The country spends the equivalent of 1% of its GDP on defense, a figure that could grow after a decade of flat-lining; last year Abe's cabinet approved a five-year spending plan on a laundry list of military hardware: Three surveillance drones, stealth aircraft, 52 amphibious troop carriers, 28 next-generation fighter planes (the F-35) and 17 Osprey aircraft units.

The total expenditure from the plan is estimated to reach $232 billion to $240 billion.
Poor Japanese taxpayers, yen holders and uniformed pawns. If a regional war materializes, poor Asians. :(

6 Soliciting for money the geopolitical way: North Korea Is Making New Threats Aimed At The US Business Insider November 19, 2014

7 Reading current performance into the future? Why China won't be Asia's dominant power November 19, 2014
China may be Asia's economic powerhouse but it won't become the region's dominant power, according to a new report.

"In examining the factors that go towards the development of Chinese national power-and its ability to use it to achieve national objectives-predictions about a Chinese superpower with the ability to dominate Asia would be premature, if not improbable," said Paul Dibb and John Lee, authors of the report published by Australian think tank Kokoda Foundation.

The argument that China is already Asia's pre-eminent power based on its growing economic and military capacities is weak, the authors say. They expect the limitations of China's economic might, a lack of close bilateral relationships and weak military capability to keep the country from becoming an advanced political-economy that wields influence in the region anytime soon.
How about financing? After all, military might depends on resources.

8 More arms flexing by Putin: Russian Bombers Threaten Guam Four Tu-95 Bears circumnavigate Pacific island, site of major U.S. base November 19, 2014

9 During the latest US inspired revolt in Ukraine, who took the Ukraine government’s gold? Ukraine Admits Its Gold Is Gone: "There Is Almost No Gold Left In The Central Bank Vault" Zero Hedge November 18, 2014

10 Russia’s Putin attempts to defuse strains with the US; Putin: Mutual respect, non-interference will improve relations with US November 19, 2014 (italics original)
Putin said that Russia and the US share responsibility for ensuring safety and stability around the globe, and reiterated that Moscow was willing to work with the US following strained relations between the two countries.

Underlining the importance of the two countries’ roles around the world, Putin said, “Russia and the US have a particular responsibility to support safety and stability in the world and to counter global challenges and threats,” according to a transcript of his remarks reported by RIA Novosti.
11 With neocons back in power, so has the risk of World War III been raised. An evolving legal tit for tat by US-Russia on Ukraine that could send both parties to war.

a) Michael Rozeff Ukraine Freedom Support Act of 2014 Lew Rockwell Blog November 19, 2014

Writes Mr. Rozeff (bold mine)
This proposed act is here. Its current co-sponsors are here. Among other provisions that sanction Russia, this Act commits America to reestablish the territorial integrity of Ukraine by providing advanced weapons to Ukraine’s government. This sets America against Russia, which supports Crimea as a Russian federal district. Russia also respects the eastern Ukraine Donbass republics whereas the U.S. does not. 

The U.S. already has committed America to Ukraine in substantial ways. 

A few days ago, President Poroshenko of Ukraine said 

“We are prepared for a scenario of total war… We don’t want war, we want peace and we are fighting for European values. But Russia does not respect any agreement.” 

The proposed legislation deepens the American commitment to Ukraine. It places America a significant step closer to direct confrontation with Russia. It places advanced weapons in the hands of a government that has attacked its own people and whose current leader is more than willing to conduct a “total war”. He sees the earlier fighting in Donbass as a prelude and warmup. He tells us that he has in mind a much deeper and more destructive application of force. The bill before Congress proposes to support him.
b) Michael Rozeff U.S. Is Creating A New Enemy: Russia Lew Rockwell Blog November 19, 2014

The Russian response, writes Mr. Rozeff (bold mine)
Russia will soon publish a revamped military doctrine. Rumor has it that the U.S. and NATO will be designated as threats or adversaries or enemies. This speculation is bolstered by the statements of a senior Russian Defense Ministry General.

Even without an official document having yet been published, we can say now that the U.S. and NATO policies, especially as they have transpired over Ukraine, have caused this hardening of the Russian position. The U.S. is creating a new enemy: Russia. This is purposeful. Only a big enemy like Russia can get Americans to accept the costs of the American military levied upon them. Only a big enemy like Russia can be used to justify a big military establishment. The war on terror no longer provides enough of a justification for a people tired of such losing propositions.

Although Obama conceives that he is in the right over Ukraine and Russia in the wrong, and although he conceives of sanctions as justifiable and measured, he has still nonetheless made Russia into an enemy. Russia is responding in kind. Obama’s sanctions came along with strong NATO rhetoric and a history of broken promises or betrayed understandings about the expansion of NATO. What Obama has done didn’t occur in a vacuum. The anti-Russian policy stance goes back to the end of the Cold War. If Obama wanted a friendly or cooperative Russia, he certainly didn’t achieve it.

13 Chart of the day: from Asia Maritime Transparency Initiative-Center for Strategic and International Studies

Wednesday, November 19, 2014

Vietnam Raises Minimum wages by 15%, Bank of Indonesia Hikes Interest Rates, Thailand’s Parallel Universe

The Vietnamese government mandated a 15% increase in minimum wages a few days back.

Speaking in behalf of Japanese companies whom has expressed concerns over rising input costs, the Nikkei Asia reports
Prime Minister Nguyen Tan Dung approved the wage adjustment proposals made by the National Wage Council without substantial changes. The new minimum wages will become effective on Jan. 1, 2015.

The decision means that Vietnam's minimum pay will post a 17-fold jump from 15 years ago, in keeping with the rapid economic growth during the period. The upward trend of wages is likely to continue as workers stage strikes in demand of higher wages.

Increased labor costs could have serious repercussions for Japanese companies operating in the country.

The minimum monthly salary in Region 1, which includes urban areas like Hanoi and Ho Chi Minh City, will rise 14.8% from 2014 to 3.1 million dong ($145) in 2015. While Region 2, mostly made up of suburban areas, will rise 14.6% to 2.75 million dong. Provincial Region 3 and the rural Region 4 will increase by 14.3% and 13.2%, respectively, to 2.4 million dong and 2.15 million dong.

The increases for Region 3 and 4 will be 20,000-50,000 dong less than the National Wage Council's August proposals for those regions, which called for pay increases of over 15%. The differences indicate the government's acknowledgment of mounting concerns by foreign companies over labor costs.


Why is this significant? Because simply stated, government’s inflation statistics (from and reality doesn’t match. There won’t be amplified political pressures for wage hikes if not for significant cost of living increases!

This report from a domestic news outfit, reveals of the implied discrepancy (bold mine)
even that salary only covers 69-77 percent of a Vietnamese person's basic living costs, according to the survey, which polled 1,500 workers in 12 cities and provinces during the first half of this year.

Up to 13 percent of workers said their salaries do not cover their basic living costs, 25 percent said they had to spend carefully and 50 percent said their salary only affords the most basic standard of living.

Vietnam's economy, which recorded growth of 5.42 percent last year, is expected to expand 5.8 percent in 2014, in line with a government target. The Southeast Asian country is expected to keep annual inflation at a rate below 5 percent, or about 2 percentage points below a government target.
Why shouldn’t there be increased inflationary pressures in Vietnam's economy?


Vietnam’s government has been on a spending binge as revealed by the huge fiscal deficits (as of 2013). How are these being funded? External borrowing plays a big role in the financing. External debt has been ballooning in nominal terms and as well seen from debt-gdp ratio

So borrowing externally and I would suppose also internally has caused a surge in M2.

Balance of trade has been negative of late even as current account remains positive-–most likely as a result of external borrowings. 

So the Vietnamese (both private and public) has been spending more than they have been producing. Spending which has been financed largely by debt.


Naturally, this entails strains on the domestic currency. The USD-Vietnamese dong has been soaring. The USD-VND now at July milestone highs. All these points to bigger inflation pressures than what has been revealed by government statistics.

Nonetheless like almost elsewhere, Vietnam’s stocks has been at a 5 year high. It has only been in August where the Ho Chi Minh Index has seen some selling pressures in the face of a severely weakening dong.

What Vietnam’s macro fundamentals reveal has not only been inaccurate statistics but importantly structural fragilities making her economy vulnerable to shocks either internally or externally triggered. 

Yes the Vietnamese government have recently posted record foreign exchange reserves but this have been funded by external borrowings.

And ASEAN’s economic troubles keep mounting.

Indonesia has raised interest rates for the sixth time since June 2013 as the government reduced oil subsidies and allowed for a 30% hike in fuel prices.

From Reuters
Indonesia's central bank, moving quickly to contain inflation after the government raised fuel prices more than 30 percent, hiked its benchmark interest rate by 25 basis points to 7.75 percent on Tuesday.

In his first major economic policy decision, President Joko Widodo on Monday night raised subsidised gasoline and diesel prices by more than 30 percent to help fund his reform agenda and tackle the country's budget and current account deficits.
What has adjusting interest rates (a monetary tool) have to do with fuel price increases (real economy)--the latter of which should signify a temporary boost? This relationship has hardly been questioned by the consensus or by media or explained by 'experts'.


Well, the answer can be shown above.  

The Indonesian government has likely been using fuel prices as a pretext to curb runaway private sector credit

Indonesia's political economy used to be the poster child for the ASEAN boom which had been blessed by upgrades by credit rating agencies.

And true enough, credit upgrades got Indonesians to rack up more credit. Yes this applies even to the government where fiscal deficits has widened, which as usual has been financed by a surge in external debt and domestic monetary inflation.


At the end of the day,  Indonesia's credit bubble has inflated both a property and a (signs of deflating?) stock market bubble as seen by the JCI Index (left window) even as the rupiah has been significantly weakening (see right window, now the USD-IDR approaches January 2014 highs). 

Remember Indonesia has been labeled one of Emerging market's fragile five and currently has been marked as one of the most expensive bourses in the world by the Telegraph!

Finally, Thailand just posted a .6% growth in the 3Q.  

From the Strait Times: Thailand's planning agency on Monday trimmed its economic growth forecast for this year to 1.0 per cent from 1.5-2.0 per cent seen in August, citing weak exports. In 2013, growth was 2.9 per cent. The Thai economy grew a much less-than-expected 0.6 per cent in July-September quarter from the same period a year ago, and expanded 1.1 per cent from the previous three months, the National Economic and Social Development Board, which compiles gross domestic product (GDP) data, said earlier on Monday.

I recently questioned the optimism by Thai authorities who predicted a 1.5% growth for 2014: 2Q GDP of a  marginal +.4 growth in GDP spared the Thai economy from a technical recession (chart from Given the stagnant 1H, it would take about 3% growth for the 2H in order to meet the BoT’s 1.5% target this year. Yet the BoT admits that debt burdened consumers have been marginally improving.

So the Thai economy continues to struggle. Aside from the politics, onerous debt burdens should continue to weigh on the economy.

Yet does the Thai government know that produce 1% GDP for 2014 would require 2.5% growth in 4Q? Have they been dreaming?


Don’t worry be happy, in today's world illusions prevail. Bad economic news has become good news for stocks. The Thai experience of near recession growth or stagnation comes with near milestone high stocks!! 

Parallel universes have now been the fad. As one may notice, regardless of fundamentals, stocks have been foreordained to rise forever!!!

Tuesday, November 18, 2014

Geopolitical Risk Theater Links: Russia joins Arms Race?, ISIS gets Modern Weaponry, A Russia-US arms deal? and more…

1 Russia joins Space arms race? Object 2014-28E – Space junk or Russian satellite killer? Financial Times November 7, 2014
For the past few weeks, amateur astronomers and satellite-trackers in Russia and the west have followed the unusual manoeuvres of Object 2014-28E, watching it guide itself towards other Russian space objects. The pattern appeared to culminate last weekend in a rendezvous with the remains of the rocket stage that launched it.

The object had originally been classed as space debris, propelled into orbit as part of a Russian rocket launch in May to add three Rodnik communications satellites to an existing military constellation. The US military is now tracking it under the Norad designation 39765.

Its purpose is unknown, and could be civilian: a project to hoover up space junk, for example. Or a vehicle to repair or refuel existing satellites. But interest has been piqued because Russia did not declare its launch – and by the object’s peculiar, and very active, precision movements across the skies.
2 Cold war rhetoric deepens: Merkel of Germany Issues Rebuke to Russia, Setting Caution Aside New York Times November 17, 2014
Tit-for-tat expulsions of diplomats. Russian naval ships showing up as world leaders meet in Australia. Chancellor Ang ela Merkel of Germany telling Russia sternly to play by 21st-century rules — and President Vladimir V. Putin practically spitting fury over Western reaction to his annexation of Crimea.

As relations between Russia and the West increasingly resemble the bygone days of the Cold War, Ms. Merkel abandoned her traditionally cautious tone on Monday, castigating Russia for its actions in Ukraine, for intimidating sovereign states in Eastern Europe and for threatening to spread conflict more broadly across Europe.
3 Mounting risk of a nuclear standoff? The nuclear gun is back on the table Financial Times November 17, 2014

FT’s Gideon Rachman expresses his concerns: (bold mine)
Thirty years on and the nuclear peace is still holding. But I am becoming a little less secure in my belief that nukes will never be used.

There are three reasons for my anxiety. First, the spread of nuclear weapons to unstable countries such as Pakistan and North Korea. Second, the growing body of evidence about how close the world has come, at various times, to nuclear conflict. My third reason for worry is more immediate: a significant increase in threatening nuclear talk from Russia…

Mr Putin seems to adhere to what Richard Nixon called the “madman theory” of leadership. The former US president explained: “If the adversary feels that you are unpredictable, even rash, he will be deterred from pressing you too far. The odds that he will fold increase greatly.” President Putin may be right in calculating that, by putting the nuclear gun on the table, he can always out-madman Barack Obama, the coolly rational US president.

Nonetheless, even assuming that the Russian nuclear talk is a bluff, it is still dangerous – since to make the bluff intimidating, the Russians have to raise tensions and take risks. Last week, General Philip Breedlove, commander of Nato forces in Europe, said that Russia had “moved forces that are capable of being nuclear” into Crimea. As fighting in Ukraine continues, the danger of Russia and Nato misreading each other’s intentions increases.
I see the danger of brinkmanship geopolitics from one of an accident or a mis-encounter from the current provocative stunts by both parties. From here, one thing may lead to another.

4 Russia in Isolation? : Russia, Turkey Inch Toward Improved Relations November 17, 2014

5 Emerging Markets flex their military muscles?: India-China military exercise begins in Pune Indian November 18, 2014

7 Pawns get hurt while leaders bask in vanity: Paralyzed Iraq War Veteran Tomas Young Has Died – Here’s His Final Letter to George W. Bush and Dick Cheney November 12, 2014

Tomas Young: 
The Iraq War is the largest strategic blunder in U.S. history. It obliterated the balance of power in the Middle East. It installed a corrupt and brutal pro-Iranian government in Baghdad, one cemented in power through the use of torture, death squads and terror. And it has left Iran as the dominant force in the region. On every level—moral, strategic, military and economic—Iraq was a failure. And it was you, Mr. Bush and Mr. Cheney, who started this war. It is you who should pay the consequences.
8 The European participants of ISIS; Briton and Frenchman Tentatively Identified in Islamic State Execution Video New York Times November 17, 2014

9 Using threats to get a better deal in the coming US-Iran nuclear negotiations? : Cleric: Iran Will Use ‘Suicide Operations to Send its Message to the World’ Freebeacon November 17, 2014

10 ISIS gains more sophisticated weaponry for every advance: As ISIS Continues To Gain Ground, Here's What The Militants Have In Their Arsenal Business Insider November 17, 2014

11 A Russia-US nuclear deal? Really? How about all the posturing from both sides? Theatrics for negotiation leverage?: U.S.-Russia Nuclear Cooperation Drawing to a Close Freebeacon November 17, 2014

Japan’s Nikkei: Not Even a Recession Stands In the Way of Flying Stocks!

While I suggested that a recession might trigger a mini boom bust cycle in Japanese stocks, I harbored doubts that this would be the case. As I wrote yesterday
In today’s world, bad news have been seen as good news, as markets continues to expect more and more bailouts which drives market pricing apart from fundamentals, thus entrenching the boom-bust cycles.
From today’s Bloomberg:
Asian stocks rose as investors await a decision by Japanese Prime Minister Shinzo Abe to put off a sales-tax increase, add stimulus and call an election, after data yesterday showed the economy entered recession.

The USD-yen is back at its 116 handle.
If hope has now been the only strategy for Japanese policymakers, hope has also presently anchored the market’s pricing process. This demonstrates how central banks-governments have destroyed the essence—the fundamental discounting and price discovery mechanisms—of capital markets.

UK Prime Minister David Cameron Warns of Looming Global Financial Crash

It’s interesting to see key political agents jump into the bandwagon in issuing warnings of a looming global crisis.

This time UK Prime Minister David Cameron, writing at the Guardian at the close of the G20 meeting, sees red lights flashing for a global financial crash.
Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.

As I met world leaders at the G20 in Brisbane, the problems were plain to see. The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too. Emerging markets, which were the driver of growth in the early stages of the recovery, are now slowing down. Despite the progress in Bali, global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.

The British economy, by contrast, is growing. After the difficult decisions of recent years we are the fastest growing in the G7, with record numbers of new businesses, the largest ever annual fall in unemployment, and employment up 1.75 million in four years: more than in the rest of the EU put together. But the reality is, in our interconnected world, wider problems in the global economy pose a real risk to our recovery at home. We are already seeing that, with the impact of the eurozone slowdown on our manufacturing and our exports.

Don’t worry be happy. Don't you see, stocks are bound to rise forever!