I've been plenty sarcastic recently about life, business, and even the arts. Now it's time for my weekly official dose of sarcasm, in one full blast.
Cyprus sort of got its rescue deal. I say "sort of" because the real price it had to pay was the end of its competitive advantage as a haven for Russian hot money and multinational offshore banking. No self-respecting oligarch will ever again keep cash in a Cyprus bank. The troika is taking a big risk but has little choice. The ECB balance sheet has enough Cypriot debt to cause problems for its equity cushion if that island doesn't get a lifeline. The troika is out of ammo for now, so any further deals will be a gift to Gazprom and the Russian government (not that there's much difference between the two). One very important lesson policymakers learned is that any attempt to cram down deposits that are below the threshold of deposit insurance will trigger widespread popular resistance. Future cram-downs now have a template with a sequence of red lines to cross, each with a higher pain threshold than can now be modeled.
BP's stock buyback is not as encouraging as it seems. Any time a company buys back its own stock is a signal that it can't find new projects to generate an NPV high enough to cover its own cost of capital. Other supermajors are investing heavily in new projects in Africa and Southeast Asia, so where's BP drilling? It's also a risky move if BP is assessed a $17B contingent liability for the Macondo blowout. Making a slight adjustment to dividend policy would have been a cheaper way to send a friendly signal to shareholders.
China's new president is touring Africa to promote goodwill. If the West's multinational resource producers don't get on the ball, China will beat them to new resource discoveries in Africa. An old saying about the flag and trade alternately following each other applies here. Trading nations expand militarily to protect their trade interests. The OECD sees only the promise of China, not the threat. If East African nations grant basing rights to the Chinese military, the Indian Ocean will become contested for the first time in centuries and India will face strategic encirclement. Wake up, New Dehli, because you're about to be surrounded.
Bond market investors aren't worried at all now that Cyprus economy's ability to issue bonds has been devastated. Never before in recent memory have Fixed-income portfolio managers been so utterly stupid. They ought to see that this template will be applied in sequence to each of the PIIGS countries and them finally Northern Europe, yet they continue to talk their books. I'm really glad I don't own any European bonds right now or work with people who are dumb enough to do so. I'm also glad not to be downwind of whatever they're smoking.
Here's a hearty shout-out to my legion of new fans from concert halls and recital rooms across the nation. I'll have a lot more to say about alternatives to union strikes very soon. In the meantime, you musically-inclined folks need to go watch some old newsreels of labor unrest in the 1920s and '30s, just to know how lucky you are today.
Cyprus sort of got its rescue deal. I say "sort of" because the real price it had to pay was the end of its competitive advantage as a haven for Russian hot money and multinational offshore banking. No self-respecting oligarch will ever again keep cash in a Cyprus bank. The troika is taking a big risk but has little choice. The ECB balance sheet has enough Cypriot debt to cause problems for its equity cushion if that island doesn't get a lifeline. The troika is out of ammo for now, so any further deals will be a gift to Gazprom and the Russian government (not that there's much difference between the two). One very important lesson policymakers learned is that any attempt to cram down deposits that are below the threshold of deposit insurance will trigger widespread popular resistance. Future cram-downs now have a template with a sequence of red lines to cross, each with a higher pain threshold than can now be modeled.
BP's stock buyback is not as encouraging as it seems. Any time a company buys back its own stock is a signal that it can't find new projects to generate an NPV high enough to cover its own cost of capital. Other supermajors are investing heavily in new projects in Africa and Southeast Asia, so where's BP drilling? It's also a risky move if BP is assessed a $17B contingent liability for the Macondo blowout. Making a slight adjustment to dividend policy would have been a cheaper way to send a friendly signal to shareholders.
China's new president is touring Africa to promote goodwill. If the West's multinational resource producers don't get on the ball, China will beat them to new resource discoveries in Africa. An old saying about the flag and trade alternately following each other applies here. Trading nations expand militarily to protect their trade interests. The OECD sees only the promise of China, not the threat. If East African nations grant basing rights to the Chinese military, the Indian Ocean will become contested for the first time in centuries and India will face strategic encirclement. Wake up, New Dehli, because you're about to be surrounded.
Bond market investors aren't worried at all now that Cyprus economy's ability to issue bonds has been devastated. Never before in recent memory have Fixed-income portfolio managers been so utterly stupid. They ought to see that this template will be applied in sequence to each of the PIIGS countries and them finally Northern Europe, yet they continue to talk their books. I'm really glad I don't own any European bonds right now or work with people who are dumb enough to do so. I'm also glad not to be downwind of whatever they're smoking.
Here's a hearty shout-out to my legion of new fans from concert halls and recital rooms across the nation. I'll have a lot more to say about alternatives to union strikes very soon. In the meantime, you musically-inclined folks need to go watch some old newsreels of labor unrest in the 1920s and '30s, just to know how lucky you are today.
