Emerging Markets: Goodbye BRICS, Hello IndoAsia

Try to ignore the latent racism going on in this article and focus on the main point: “Emerging Markets” are diverging (the fact that this chart even exists seems to suggest as much) and we need a better way to think about the category.  As the workforce shrinks and cost of labor grows in China, countries like Bangladesh, Indonesia, the Philippines, Vietnam and (already the case) India will begin to fill the gap for manufacturing/export based developing economies.  Speaking of India, Raghuram Rajan is going Beast Mode on inflation (Yeah Seahawks fans!).  Inflation in India is running at around 10%; Rajan is calling for a target of 4%.  Furthermore, India’s central bank will “make managing inflation its main policy objective and set monetary policy by committee,” something other central banks are fond of (the committee thing, maybe less so the inflation thing).  Here’s something central banks are probably not too fond of: an “interest rate lobby”.  Turkish Prime Minister Tayyip Erdogan is facing “heavy market pressure to raise rates and defend a sliding lira but is fearful of restricting growth.”  Apparently Erdogan, “whose ruling party is preparing for local elections in March and a presidential contest in August,” has significant influence over the bank and therefore his election is tied into monetary policy which doesn’t seem like a very good plan.  Also, everyone is talking about the slowdown in Chinese economic growth, but the economy is still expanding at about one Turkish economy per year: “If China adds the same amount of value in 2014 as it did last year — an outcome that would be broadly consistent with economists’ current forecasts — then China would have taken two years to create value roughly equivalent to the size of the Australian economy, which was worth $1.54tn in 2012 and ranked 10th in the world.”  Finally, Bill Gates is shutting down the prophets of doom on poverty and foreign aid: Gates “predicts that by 2035 almost all countries will be what are now categorized as ‘lower-middle income’ or richer.”

Blurring The Line Between Main Street and Wall Street

Vivaldi Asset Management has registered a new fund-of-hedge-funds for your Average Joe called the “Infinity Core Alternative Fund.”  Said fund will target “what it sees as an avenue between Main Street and Wall Street…the fund’s investment minimum is $25,000, compared to an average $5 million investment by clients of Infinity’s private fund-of-hedge-funds.”  Meanwhile, are mom and pop becoming optionMONSTERs?!  “Retail investor trading volume rose 12% to a daily average of 3.9 million [options] contracts in 2013,” an outcome which may be more accurately understood as an institutional pullback in options trading and portfolio hedging amidst an equities rally.  Finally, Jamie Dimon is optimistic about the economy.  And this time he means it: “we’re using the word optimistic because we are actually optimistic.”  What’s different this time, you ask?  “The sun and moon and stars are lined up for a very successful year.”  Terrific!  Seriously though, credit demand is growing and that’s a good thing: “outstanding loans to companies reached an all-time high of $1.61 trillion at the end of last year, topping a record set in late 2008, according to Federal Reserve data released on Friday.”

European Union: Squeezed By Creeping Nationalization

Europe may be in the midst of a “reversal of trends towards liberalization and privatization that have driven energy policy in the last decade.”  As many European governments continue to subsidize green power generation and dictate low prices for consumers, profit margins at utilities have become fragile.  Take Spain for example, “where generous subsidies to the renewables sector and caps on energy prices have led to the build-up of a 30 billion euro power tariff deficit — the difference between the cost of energy and what utilities are allowed to charge for it.”  As the re-nationalization of its utilities industry continues, the Eurozone is looking more and more like a “planned economy.”  Also, “record high unemployment is giving rise to extremism” in Europe; the CEO of Accenture says “The number one challenge in Europe is unemployment…I am extremely concerned about the rise of extremists in Europe.”  The Chairman of UBS puts it another way: “Think how the Tea Party in the U.S. has complicated political decision-making.”  Meanwhile, government debt in the Eurozone fell for the first time in roughly six years in Q3.  “Debt in the 17 countries sharing the euro stood at 8.842 trillion euros ($11.98 trillion) in the three months to September, or 92.7 percent of the bloc’s GDP, compared with 8.875 trillion euros, or 93.4 percent, in the previous quarter.”

Terrific Headlines: Buffett Makes Millions Selling 500-to-1 Monkey-Linked Derivatives

This article pretty much peaks at the headline but its still pretty funny.  In case you missed it, Berkshire Hathaway is insuring a $1 billion prize for Quicken Loans’ March Madness perfect bracket challenge.  He estimates the odds somewhere around “There are no true odds on something like this, Einstein himself could not figure out the odds.”  Oh.

USA: Online Banking Appears To Cap Out At 60% Of Internet Users

Pew Research Center: “61 percent of all Internet users in the U.S. bank online, while 35 percent of cell phone owners bank using their mobile phones.  This is compared to 58 percent and 18 percent in 2011, respectively…the online (desk-top) banking adoption rate is fairly even across all age groups, skewing just slightly toward the under-50 crowd.”  People seem to be clinging to a fear of online banks, which may be unwarranted for several reasons, one being that “thieves more commonly obtain personal data through low-tech methods like ‘dumpster diving’ and stolen physical property.”


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