Saturday, May 17, 2008

What I'm reading

  1. RGE Monitor has an excellent review of commodity price histories. Basically argues that this has been a boom in mineral prices, and not really agricultural related. An interesting trade would be going long the currencies of the major mineral exporters

  2. RGE Monitor: US dollar weakness now and afterwards.
    When inflation becomes the main concern instead of recession, interest rate will be raised and regardless of America’s economic performance, the US Dollar will climb back up.

  3. The Future of Dollar "The situation facing the USD is not irreversible. Although macroeconomic indicators are weak and there is much uncertainty, the USA shows more strength and microeconomic dynamism than many countries. It remains one of the most competitive economies in the world and there are no signals that this is about to change. The USD can take back its strength if the US authorities are prepared to implement the needed reforms. Given the position of the current administration, we will have to wait for the next one to sort this out."

  4. Thinkthoughts with a megatrends prediction.

  5. Microsoft trying to break the Google hegemony:

    Today, when a Web surfer is looking for a car, he might type "Chevrolet" into Google and then click on an ad alongside the search results. Google gets all the money for that click, even though other marketing efforts, both online and off, probably helped persuade that person to conduct the search. Ideally, an advertiser would know about all the ads that a potential customer sees before he makes a purchase. "They're trying to say that Google's getting too much credit, and there's probably a lot of truth to that"

  6. Things are not looking pretty in China.

  7. Jeffrey Sachs on how to save the world.

  8. Top 10 tech trends. I noticed that location based services were a notable omission.
  9. Retail moats: Fact or facade?

  10. Analysis of the recent spinoff of Dr. Pepper-Snapple (NYSE:DPS).

  11. RGE Monitor: The willingness of Asian countries to impose export restrictions on food and commodities to secure domestic supplies and proposals to form a rice cartel have been widely criticized. Creating an OPEC-like cartel could exacerbate global food price increases, create price distortions for farmers and deeply impact the poor consumers at home and abroad. While undermining the Doha trade talks, the food crisis also highlights the need to improve agriculture investment and yields as urban population and incomes rise.

  12. The Absolute Return Letter's May edition is titled Food for Thought. Basically argues that the current food price inflation is mainly driven by US ethanol policy and massive investment inflows into the commodity asset class. Also talks about falling agricultural productivity and the impending water shortages.

    Most investors seem to believe that headline inflation will gradually come back to core inflation levels over the next year or so. Few investors seem to
    think the unthinkable — that core inflation will gradually rise to headline levels.

    Even fewer seem to realise that if oil prices and agricultural prices continue to run amok, the Asian miracle story, upon which so many investors have pinned their hopes for the next few years, may, in fact, turn into a nightmare. The reason is simple enough. Asian countries are large importers of both oil and food staples. Very large!

    My food for thought: What's the impact of commodity inflation on Asian currencies and growth estimates? Indian rupee has declined over 10% in a two week period on the back of food price inflation. What about the current growth rate estimates? The BRICs are a 14 trillion economy on a Purchasing Power Parity basis, but only one-third that on a nominal comparision. I just fear that the PPP-based estimates might be overstating the case.

    Because of where the BRICs are on the utility curve and the inefficiencies in the system, a 5% rise in commodity prices has a much serious impact on the regional economies than in the developed world. I'll also point out to the fact that Indian elections are due next year, and money supply growth is running at a 30%+ rate; definitely not promising indicators on the shape of things to come.

Full Disclosure: No positions