The 7 Puzzles Of The Global Economy

JPMorgan's Jan Loeys and others are out with a cool note looking at "seven puzzles" regarding the global economy.

In each case, they lay out a question, and then give their best stab at an answer. The not so humble me will also offer my own take (in colour).

Here's our condenses/summarized version of each one:

• Why haven't Greece or Germany left the Euro yet? Basically, the monetary union was always the first step to full-on political union. Leaving the Euro would be a return to the dark days of a divided Europe. (Greece cannot leave because the alternative is disastrous for Greece, it would have to go back to their drachma, which will see massive higher inflation day to day for a long time; making it near impossible to raise any drachma bonds, thus creating an economy that really runs on black market USD and Euros anyway. Germany can exit but having an undivided Europe is a major platform which they have taken leadership from the start. Its almost come to the point of no return for Germany and France).
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• Why has the Euro currency not collapsed? The region has no external trade deficit, and funding concerns have led to Euro trade repatriations. (It is still the most liquid currency after USD, though not reserve status, its the closest we have to USD).
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• Why are high-grade corporate credit spreads still so high? They're being distorted a bit by financials, which are now permanently seen as riskier in the post-Lehman world. 
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• Why do investors love yieldless Treasuries? Basically, there's still a big appetite for risk-less appetites. Also: Financial repression. (This ties in with th previous question, while central banks have been pumping liquidity, much of it has gone to so called riskless Treasuries and other similar bonds, at the expense of corporate bonds, and only a fraction are finding its way back to equities. This is why there is currently a huge bubble in these type of bonds, as not enough consideration or risk have been allocated to the debasement of all major currencies).
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• Why is there no deflation, given large global output gaps? The output gaps may be overstated. Central banks are doing a good job keeping inflation expectations high. (This is a surprising thing. The gold bugs have been harping on hyperinflation following the deluge of easing, but that did not happen. Now there are people harping on deflation because the real economy may be a lot weaker than anticipated even with the multiple injections of liquidity. Finance experts and economists are a dime a dozen, they can swing from one end to another all within the same analysis - and sound convincing at the same time. Be careful).
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• Why have commodity prices soared despite the mediocre post-crisis recovery? Because commodity project financing evaporated during the crisis, output has been constrained. (This points to the pockets of sustained economic activity that is not in the US or Europe. Not enough attention being paid to the markets in Asia and Latin America, misinformation).
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• Why do Japanese corporates keep buying Japanese Government Bonds, despite sky high government debt? Domestic financial repression, as well as high real yields, given ongoing deflation. (Technically, Japan is the most indebted country and by right the yen should halve their value. But Japan has one thing that most other developed countries don't - a homogeneous society. Call it what you like, to them savings in postal offices and local banks are paramount to safety, a false impression. Do they know that they are funding the enormous debt incurred by the country - maybe, maybe its part of being patriotic. Most other nations would have seen their citizens withdrawing these funds and shoving them in other currencies to mitigate losses. The same goes for most Japanese corporates, they are still repatriating foreign exchange back to yen, thus increasing demand for the yen. Give that to US corporates, they will find ways to mitigate their yen exposure). 

Read more: http://www.businessinsider.com/jpmorgan-solves-7-big-puzzles-about-the-global-economy-2012-4#ixzz1sjaQULhk

Heard Of MetroVocalGroup?

Put a lot of native speakers to shame. They are a pure acapella group, all the sounds, vocals and instrumentation are done aurally.


Metro is a versatile and dynamic vocal group originally hailing from the United States. Now based in Hong Kong, they have performed internationally for the past 13 years. Eric, Kevin, Sean and Michael are supremely talented individuals who present high-energy, uniquely arranged music of the world's most popular tunes. Their songs embrace such genres as Pop, Doo-Wop, Classic Rock, Barbershop, R&B, Broadway and Jazz.


In addition, Metro also serves under the umbrella of the American Vocal Studio, passing on their extensive knowledge to all generations through teaching vocal classes, clinics and master classes.

Be There - Double Take (Roger Wang & Mia Palencia) Concert

The photo on the banner was the standing ovation Double Take got from the vibrant Kota Kinabalu crowd. Come and experience the wonderful talents of Roger Wang and Mia Palencia this Saturday. Have you bought your tickets???

Roger Wang, possibly Malaysia's best guitarist next to Paul Ponnudurai, rehearsing with Mia Palencia at my friend's place today. Have you got your tickets???

KUALA LUMPUR

Date   : Saturday, 21 April 2012
Venue : Bentley Music Auditorium, Mutiara Damansara, The Curve 
            (http://www.bma.com.my/contact.html)
Time   : 3.00pm - 4.30pm (matinee)
            8.00pm - 9.30pm (evening)

RM80 and RM50 admission pass available at www.airasiaredtix.com or call 012-2083790

To book online:
http://www.airasiaredtix.com/

Malaysia’s premier vocal/guitar duo, Double Take, will celebrate their 12 years of musical partnership with this highly anticipated concert.

This will be Double Take’s first public performance since their sold-out 2009 concert at the prestigious Petronas Philharmonic Hall in Kuala Lumpur and will most likely be the only one for 2012. 

Double Take will also be releasing an EP featuring 4 brand new recordings exclusively for this concert.

Special Incentive offered by pop pop music

Those who own a copy of Roger Wang's "Milestones" are entitled to a 10% rebate (RM5 and RM8 respectively). Remember to bring that CD to claim your rebate and get  Roger's autograph as well. Rebate counter will be set up outside the auditorium. 

Those who buy the "Milestones" album at the venue will also be entitled to 10% rebate!   

A Spell Binding Performance

If you managed to catch last night's HK movie awards, you would have also caught a spell binding singing performance by the multi Best Actress awards winner, Deanie Ip Tak Han. Though many music lovers never really appreciate her tone and her style, but her performance in a song tribute to people in the movie industry and to movie lovers, was nothing short of spectacular. It was most moving, emotions tinged, goose bumps all over kind of heartfelt, real rendition. Superb.


Even the normally very staid and laid back crowd woke up and was mesmerised.

Various Investing Methods

After the seminar, someone said that maybe what Koon Yew Yin said about investments and what I said about investing do not quite gel with what Glen Arnold had been talking the whole time.



Well, the seminar was about the gurus of investing, what they did and why they did what they did. Koon Yew Yin shared how he make his investing decisions. They may not be an exact replica of most of the investment methods of the guru but the essence of it remains.


I don't think Mr. Koon or I must follow these methods exactly. We learn from experienced teachers, we take what we think its suitable for ourselves. We may be wrong, so can the gurus. Who is to day Mr. Koon or I may not be able to generate even greater returns than the gurus?


If we were to follow the Fischer or Buffett methods religiously, we might as well just invest in Berkshire Hathaway, why bother learning. Time tested investment methods are tools we can use to our advantage. I do not see Mr. Koon or myself violating much of the principles touted.



Readers of my blog will know I am more of a value-momentum person. Maybe I should write a book, but I do not intend to be a guru. I just write about what I like. If you want me to follow the Grahams and Fischers to the letter, then read their books or invest in funds that religiously do that.


Mr. Koon and I think that it is a good seminar to get more investors to discuss more about the concepts and investment thinking of gurus. You may choose to take as much of it and apply to your investing decisions, and may need to research a bit more diligently.


Nobody is owing anyone a living here. You want to follow what Mr. Koon and I are buying, fine, you don't want to, fine also. You want to be Malaysia's Warren Buffett, go ahead, its all out there the information and tools you need. Good luck to all.

MBA Debate Ignited

Walla said some points which brought another reader, whom I respect and is an avid reader of the blog, to bring forth his views. His views are in blue, pretty solid points. My previous reply to Walla in yellow.

:33 PM

 

 walla said...

It's the old academic-practical question. But there is a difference. The MBA can with observation and mentoring become more street-smart but the street-smart without proper training cannot do the academic things the MBA can.

Kuok was a savvy commodity trader during his days. But if he is to present at an analyst conference today, he won't be able to answer with industry-wide terms the questions they will throw at him.

The last part of what the blogger wrote to say the street-smart can do this and that ..actually how many nonMBA street-smarts think enough like that to be able to know what to do next to get quantitative answers to acceptable levels of confidence?

Unless what is being pushed here is some zen-like qualitative personal insight seared out of big-time losses rehashed as street-smart wisdom.

But street-smart wisdom is about three chapters; MBA is at least three-hundred. And that's how investors have been looking at proposals since they have to answer on what basis they would plough in billions.

A lot of the success stories is by reverse engineering. Karma, luck, and dogged persistence lead to one big killing out of fifty, and it's success to be reverse engineered into some nice homilies.

In the end, arc knowledge-practice with culture. Then imponderable forces will be the only variable left.

No links, this one.

5:50 PM

 

It's the old academic-practical question. But there is a difference. The MBA can with observation and mentoring become more street-smart but the street-smart without proper training cannot do the academic things the MBA can. Where is the basis for this comment, where is the data to support the supposed fact that the street smart with no proper training cannot do the academic things the MBA can. Whats so difficult, clever and/or unique that the MBA can do because of their academic training that the street smart cannot muster the common sense to master, after all is it not a fact that most of MBAs supposed knowledge and brilliance is simple cut and paste or unoriginal plagiarism. This is a world full of copy cats... ask Steve Jobs, lol.

Kuok was a savvy commodity trader during his days. (Well, MBAs trades on information and knowledge) But if he is to present at an analyst conference today, he won't be able to answer with industry-wide terms the questions they will throw at him (The Kuoks of this world make up the top 1% to 5% of the world population, they do not need to do the presentations themselves. They surround themselves with people with brains to do the work, as Henry Ford once said, " You do not need to have brains to run your business, you can always hire them").It is the brains and killer instinct to build the businesses from scratch that the MBAs lack and would take a lifetime to acquire cos there is such a thing a information overload and over analysing an issue to death before one musters the courage to make the killing before it is too late or someone swoops in.

The last part of what the blogger wrote to say the street-smart can do this and that ..actually how many nonMBA street-smarts think enough like that to be able to know what to do next to get quantitative answers to acceptable levels of confidence? Why dont you provide the answer if you are so smart, and please quantify and support it with solid scientific data from your so called skilled academia schooling.

Unless what is being pushed here is some zen-like qualitative personal insight seared out of big-time losses rehashed as street-smart wisdom. Pompous sounding goobledigook.

But street-smart wisdom is about three chapters; ( the 1% to 5% Kuoks of this world are more focussed on making things happen and creating real emplyment and multiplying wealth and adding value to the world they live in, unlike MBAs who have too much time on hand to wonder how is it they are so brainy and yet they are left behind to ponder what has actually happened, and then with hindsight, write thesis about the art of management and leadership as if they know better than the rest of the world) MBA is at least three-hundred. And that's how investors have been looking at proposals since they have to answer on what basis they would plough in billions.

A lot of the success stories is by reverse engineering. Karma, luck, and dogged persistence lead to one big killing out of fifty, and it's success to be reverse engineered into some nice homilies.In the end, arc knowledge-practice with culture. Then imponderable forces will be the only variable left.No links, this one. (Pompous assertions yet again with no basis and solid scientific data to support, how disappointing coming from a supposed highly trained mind).

Fair comment Walla, (More like smart arse comments to me from a probably very clever guy but a career lifer who has reached the zenith of his profession who doubles up as an expert pedestrian commentator).
I am not into bashing MBAs, its the rote learning of methods that removes the fine art of business dealings. The inability to use their tools for the softer skills required. (Why be defensive, nobody saying you were bashing MBAs. you were only making a statement of fact)

Its true, you probably can find 1 or 2 out of 10 MBAs who are also street smart. You would need 100 street smart personnel to get four or five that can do what an MBA can without getting one. (Ambivalent statement I am not smart enough to comprehend).
True or not, most MBAs end up working for the street smarts. You are spot-on here.

Why MBA Is Not All Good

 Ivan said...

Hello,

What was so important about academic, if MBA is not so call important?

11:23 AM

 

Academic achievement is good provided it is part of an well rounded education. I have had to hire many people for various roles, analysts, sales traders, etc... To me, a degree tells me you can read and write (I hope), thats all. Nowadays, a number of graduates can read and write, maybe write horribly, but cannot even carry a conversation in simple English. I say that as English is a business language, and I am talking about business graduates primarily.

In some developed nations and some high-esteemed corporations / GLCs, they value the pedigree degree from the Top 20 universities globally because they get to pick from the cream of the crop. Fine, if thats the kind of graduates you want. In the end, you want performers, enthusiastic workers, people who think outside the box, people who can work around issues and problems, good interpersonal skills ... street smartness. We all know that a degree will not tell you any of those quality.

I think why Robert Kuok frowns upon MBAs is that an MBA gives a person who has had some biz background a sort of license that they are now biz experts, which is clearly a silly proposition. The most galling thing to me about MBAs is the "schematic way of thinking through problems". Got an issue, lets do a data collection and analyse them. Lets do a client testing before rolling out a product, do a client survey, etc... All these while inherently OK, are all ass-covering methods of doing business. I believe Steve Jobs would not have rolled out the iPhone, iPad if he had a room full of MBAs.

If you put an entire room full of analysts, fund managers and bankers with a company that wants to boost its liquidity, valuation and raise funds - how many will come up with the right solutions. There are textbook solutions which will prescribe the usual: bonus, placements, new share issues, analysts coverage, press coverage, etc. MBAs will always attack everything with financial modelling, variance and regression analysis, case studies, client surveys, ... cause thats what they have been trained to do.

The ones that get to achieve more in their careers will go further to focus on potential dilution, company's branding, management's perception in the market place, concentration of business in value-add segments, margin maintenance, longevity of market share/penetration/growth of segment, their place in the ladder of competitiveness, and get to the real end objectives of the owners (fear of losing control, no money or don't want to spend their own money, family control issues, lack of foresight/drive).

To do all that well, an MBA will not get you there, its the interpersonal skills, the connection you can make with people. Basic concepts, knowledge are just basic tools for you to leverage on.