Tuesday, September 29, 2009

Economics for Spring - BW Spring Newsletter

Man, an animal that makes bargains.

Adam Smith 1723 – 1790

This Newsletter – now in its 9th year of publication has – like most orthodox written media in recent times – seen frequency of publication overtaken by my website http://www.brentwheeler.com and more recently my blog Eye2thelongrun . The former has longer pieces spanning several areas of interest while the later is rather more spontaneous but of course full of the usual traps which fast and loose can bring.

A key theme this spring is the wonderful evidence of the irrelevance of political process, politicians and their policies.

My chief general objection to the politics is:

1. The fact that the name of the game is manipulated outcome achieved by poor and inconsistently mandated force thinly disguised as parliamentary democracy, and,

2. The failure to heed H.L. Mencken’s great warning that the Puritanism it often invokes is “The haunting fear that someone, somewhere, may be happy” a notion surely to be eschewed by even the vaguely rational.

The saving grace may be sporadic entertainment value derived primarily through irony.

Three demonstrations without Minto….

1. I am perfectly capable of stimulating myself thank you

In a severe and well argued attack on Paul Krugman David Levine points out that barely 10% of the promised US stimulus monies have actually been spent and yet the recovery appears to be trucking along at a reasonable clip. Others too have pointed out that Obama’s cavalry have not actually arrived and don’t appear to be needed. Similar trends can be seen elsewhere.

In New Zealand too, recovery has not been a government promoted affair. Nary a bicycle clip has been raised in anger to date in spite of the talk fest. A major nine day fortnight adopter (F&P Appliances) thankfully realised before it was too late that the answer actually lay in a non government sponsored Chinese takeaway.

The apparent exception in N.Z. might be thought to be the lowering of interest rates and central bank interventions. Even there though it should be said that N.Z.’s central bank remains amongst the most removed in the world from government control and there were strong arguments in favour of a bowel mover to get interest rates more in line with economic activity levels long before the R word came anywhere near the tip of the political tongue.

No need then for the helping hand thanks – and don’t bother imposing the inevitable costs now that we can see the “help” is not required.

2. I emit therefore I am

Another stellar non performance of any real relevance has to be in the carbon emission hand wringing contest. Radio NZ – not noted for outing apocalypse now conspirators – reports that:

The world's carbon dioxide emissions is likely to fall by more than 2% this year - the biggest drop in 40 years - mainly due to the global recession. Measures such as emissions trading and China's economy-wide drive to increase energy efficiency have also played a part, but the International Energy Agency estimates that the recession is responsible for about three-quarters of the fall.

This tells us two things worth knowing. First decreased carbon emissions really are accompanied by lower growth and recessionary conditions – nice to know there is a cost before we plunge into “bold policy”. Second, on a generous view some schemes might produce a half a percent decrease – with a chunk of that coming from increased energy efficiency.

Nowhere in sight is the tedious flannel of moving motions, committee written protocols and banal communiqués. Even where government is at work – in this case in China if the report is to be believed – my understanding is that the modus operandi involves serious coercion rather than verbal posturing.

3. This is My party

There are two important things to know about referenda. First they represent the highest profile collective vote of no confidence in some piece of policy outside the formal electoral process coupled with a widespread belief that the formal process is incapable turning the policy round.

Second they represent an unacceptable assault on the machinery of and output from the factory which is Parliament. Workers at the factory are thus obliged to ignore them totally. Mere details such as “who wins” a referendum are to be treated with suitable disdain. In fact the greater the majority the more important to dismiss these straw polls since large majorities winning referenda represent large scale attempts at closing the factory or at least limiting its output.

Adopting the schizoid notion that a law works so long as it’s not enforced (the forced no smack Jack policy) or that there will be (compulsory) consultation but no change of mind regardless of result (to “h” or not to “h”) simply reinforces the irrelevance of the factory and its inmates.

The record of what can be achieved through political processes is a poor one. The record of achievement through spontaneity and pouncing on random good fortune is much stronger – primarily because it is closer to reality than obsession with the feeble idea that power per se is of great moment. This may not have once been as true as it seems to be ever faster becoming…

For politicians then – in all walks of life - best to remember Henry Kravis – “if you don’t like change you are going to hate irrelevance.”


Like all decent economists I know I shouldn’t predict. I try not to and naturally warn others against it. This works well with bank economists – when they tell me the dollar will fall I ask them how many lots short they are – pretty much the answer is zero. Like all curious cats however I can’t resist now and again.

I did claim somewhere near the beginning of the recent road bump that Asian economies (which I stretch from Thailand / India to include all the rest short of Japan) would scream out of this well ahead. That may be the last signal that this millennium does not belong to the West. So far – confirmed. Am I long Asia? In my own modest way – yes I certainly am - despite not eating the hens’ feet yet.

YTD August 2009 the MSCI equity returns looks like this:

1. Indonesia 75%

2. Sri Lanka 68%

3. Vietnam 67%

4. China 64%

5. India 62%

6. Australia 19%

7. New Zealand 13%

Can this last – obviously not and prices are not the bargains they were. The valuation gap between Asian and western stocks has widened though; the spread between eastern and western P|E rose to 8.6 in mid-July, from its three year average of 4.5 (Asia: 23x, the U.S.: 16x, EU: 13x).

Advice? Asia is here to stay and we need to understand it. Forget going to that N.Z. suburb Brisbane and get up to Asia for the holidays to learn about it – and I don’t mean trolling Orchard Road for Italian shoes or visiting the “gem factory” from the Indra Regent, Bangkok.

Strong Suits in IT

Weaving your way through various rubbish on the web can be trying with most of the free stuff offering precisely and unsurprisingly exactly what its price suggests it would. On the odd occasion however, someone is making gains from someone other than the long suffering downloader and thus we get useful pieces of “free” software.

Some picks are:

1. Unlocker assistant – every now and again you go to delete a file or move it and get a stern rebuke to effect of “You do not have permission to do this” or “this file is in use, be off with you”. No amount of coaxing will do. Unlocker assistant http://ccollomb.free.fr/unlocker/ is the answer. As well as unlocking it will delete anything which won’t go away. Ultimate flush. Free and it works.

2. Bulk file rename – so blasted flexible and powerful as to be almost daunting till you realise you only need use what you want, this free program does what the name suggests. Best applications are in music files and with photos where the default rubbish generated by the camera / photo software / MP3 player is a true pain and the pain extends to dozens of files. Try this smart piece of work http://www.bulkrenameutility.co.uk/Main_Intro.php

3. A serial, running diary with tagged entries and the ability to sync between smart phones, the net and PC / laptop, I find this free real time diary “day book” invaluable. It’s easy with one click to keep email you want without clogging up the inbox, take photos of products etc and note them… anything where a continuous record is useful. Searching and grouping is as good as your tagging. Try this http://www.evernote.com. It will rip anything off the web and into a note and has a superlative clipping tool which is very simple to grab screen and bits of screen shots with. Free and it works.

4. Keeping up with updates is a true pain but also a necessary one. Announcing that you are a technophobe no longer cuts it at parties (never did in my humble – just keep up, what?). A good way to keep up is via http://www.filehippo.com/updatechecker The smart alecs here have produced a little program which runs through your installed programs, matches them to the latest version and you can get your favourite bore on the phone and just keep saying “yes”, “ no” etc while you click your way to “free” updatedness.

The Last Word

IMPARTIAL, adj. Unable to perceive any promise of personal advantage from espousing either side of a controversy or adopting either of two conflicting opinions.

Have a good spring / autumn

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