Brahm

• Russia Looks Better on Paper Than in Real Life [view article]

  Having been part of a "superpower" before, Russia now is not an ordinary emerging or developing country. There are severe anomalies in its characteristics. It is both modern (in education levels, arms industry and power, mining, etc) in many respects as other advanced nations as well as primitive (political institutions and capabilities, infra-structure, industry, standard of living, etc) as are many developing countries. It is not surprising that it looks better on paper than in appearace on a day to day basis as found in its confines.It will be so for a long time, and should not be underestimated or ov er-estimated.
  
  Based on its history and its czarist past, it is expected to protect its national interests, exert influence on its immediate neighborhood, and, when the opportunity arises to its favor, flex its muscles. However, it does not mean that it cannot co-exist peacefully with its immediate neighbours, provided the neighbours don't give it cause to believe ithat its security is being challenged.
  
  Distant powers have to be mindful of this as well, especially if they are not willing to risk their own involvement in direct armed confrontation with Russia. Before they fully become capable, these distant powers or superpowers have to counsel moderation on their proverbial future allies on Russia's borders. In the meantime, these powers should assist these nations in economic development to build internal strength without posing as threat to Russia.. Aug 25 02:39 PM

• Will Global Events Keep Oil Above $100? [view article]

  Sorry for the truncated and un-reproofed post above. I pressed a key which resulted in the post above which was not ready.
  
  Readers caught the drift though, perhaps. Things will continue in a cat and mouse fashion, even if unsatisfactorily for both sides. Neither side wants to go to the drift. Russia will assert its interests on its borders, whenever it can. It is for the UDS and Europe to figure out how not to get these countries on the periphery of Russia to behave without getting themselves be swallowed by Russia due to their fown follies (as In Georgia recently).
  
  The markets will learn to live with this situation, if it does not get pout of hand. Oil and gas will con tinue the westward flow. In time the priceds are just going to reflect supply and demand. As long as this ha[ppens, I will be cautiously bullish long term for Gazprom, Lukoil and the Russian market.. Aug 22 08:04 PM

• Will Global Events Keep Oil Above $100? [view article]

  The tensionis going to continue, but within bounds. On the chess table side, Putin (or Russia) is not going to play dead or allow the US-Europeans bring NATO and missiles to its periphery, if it can help it. The Europeans, more than the US, would not want to up the ante to the point that both sides won't be able to back off, and a real cold-war begin again. So my guess is the Europeans will go only so far and no more with the US in making it really cold or hot for that matter.
  
  What about Russia? It also would not wish to go to the brink in protecting its immediate neighbourhood from encroachment by hostile forces or missiles. It needs to export its energy (oil and gas) and raw materials to the west and Asia, and get technology and investment for development of its economy. It woul;d also not want to retiurn to Soviet era days when it was boxed in more than one way.
  
  Western Europe (and the world) cannot do without Russian oil and gas for the forseeable future. So the US and Europe will pla Aug 22 07:53 PM

• What's Next for Brazil's Economy? [view article]

  This article is well argued, but it is too long and touches on too many important points. One can disagree on the degree or extent of the effects on the global economy. My strong feeling is for a painful slowdown of the overall global economy with different levels of effects in different regions. But no deep global slowdown. It will be somewhat painful for Western Europe, Japan and the US. Perhaps outright recession in Europe nd Japan. The US is already in mild recession (desoite the official GDP numbers!), but will perhaps be not be in as serious recession as in the foregoing two regions. Because the US tolerates a higher level of inflation, than Europe or Japan. The US's banking and housing sectors are in more bad shape than elsewhere, and will need the Fed's "moderation" which will be forthcoming at least in this political year.
  
  India is actually trying to moderate or slow its economy to get a handle on its inflation problem. So there will be a lowering of the growth rate for the GDP.However, a reduction of its GDP, to say 5-6%, would be painful for India. The Government would want to avoid going lower than this rate.
  
  China has room to crank up its domestic economy as exports to Europe and Japan pullback somewhat. But will it? Inflation is rampant in China as well. The extent of the slowdown in China requires an expert in reading Chinese tea leaves to figure out how China will act or not act!
  
  Brazil is an interesting case. My take here is that commodity prices will have some effect on the export revenues. However, I do not expect severe decrease as commodity prices will moderate probably by only 10-15% overall. Don't expect massive decrease in revenue because a disproportionate fraction of exports of commodities is to emerging economies. These economies will not have much decrease in infrastructure investment, and hence the need for commodity imports will remain significant as most of the economies do not serious balance of payment problems.
  
  Food imports by emerging economies (China, Pakistan and others) will continue without appreciable benefit of decrease in food commodity prices (supply and demand issues here!). Unlike in the past, Brazil has a healthy balance of payment situation. The marginal decrease in export revenues for a year or two can be taken in stride. I do not expect serious slowdown in Brazil's economy.
  
  Unmentioned is Russia. The Russian economy is expected to continue growing, perhaps with marginal rate decrease, as most investment is infra-structiure related, consumer demand and energy/commodity export related production. The Russian balance of paynebt situation is comfortable to make for some slack in exports, if any at all.
  
  Overall, my take is still for marginal growth of 2% at least for the global economy. But that will be painful in some regions. Aug 21 01:48 PM

• JPMorgan: Buying the Stock, Not the Sector [view article]

  I fear the unknown, It is clear that the markets (and the best and the brightest) did not figure out everything with regard to what could happen to the financials and other mortgage related securities during the past five years. It is true that JPM has the $29 billion commitment from the Treasury. But the disaster may surpass that level. .After all everything is related to other matters in the finacial markets. Aug 21 08:21 AM

• Russia's Too Risky - Barron's [view article]

  To me it looks like Russia is no different than any other major orsuper power or colonialist. Dangerous? Perhaps so; depends on the beholder, or one's appreciation of history. The US did not tolerate even the Sandanistas in Nicaragua, except that the Sandanistas were not so much a Soviet lackey but in fact only local leftists fed up with corruption and authoritarian elites supported by the right wing barons tacitly backed by the US. Ditto in Cuba before Castro was squeezed by the US. What can one say about a small enclave subjected to "liberation" overnight in Granada? Perhaps, leftists and authoritarians of the Left variety, but n o more mendacious than any third world potentate!.
  
  Then there was Vietnam cooked up by the US to be an international Communist conspiracy by Russia and Mao, and posing a threat and take-over of Southeast Asia by international communism. Less than one year after the conclusion of the Vietnam war, China and Vietnam (uncle Ho!) went at each other in a war that lasted a few weeks with before the Chinese withdrew with a bloody nose! There was 1500 years of history between China and Vietnam which was ignored by the conspiracy theorists in the US. This history of conflict and repeated attemtpts to subjugate Vietnam by the Chinese militated overwhelmingly against the conspiracy theoreticians of the USA hawks!
  Yet, it did not prevent an American blunder, as bad as Iraq.
  
  There are parallels from British and French colonial history in the Middle East and elsewhere in the the world.
  
  Much of the foregoing prompts me to be skeptical about this drumbeat beating in the West against Russia. Russia is just asserting its interests on its borders. [Just like us with our Monroe Doctrine in the nineteenth and twentieth centuries!] Russia is not going to tolerate hostiler neighbours or influence/threats from distant powers on what it thinks its neighbourhood or sphere of influence. If it can help it! This is classic defence, and the way a major/super power always responds to those who threaten to upset the balances on its borders or perceived sphere of influence! Aug 18 02:19 PM

• Waiting for Financials' Other Shoe to Drop [view article]

  Bill Chara is an astute observer/commentator without the usual verbosity that often comes with analysis provided by many. The other shoe is yet to fall, and understandably a few others before the burdens are fully removed from the financial sector and the economy. Financial companies do not usuallydispose off their crown jewels when markets are limp. And, as has often been observed off and on crown jewels of a diverse nature and in diverse sectors. Aug 15 11:19 AM

• Natural Gas: Clean Fuel with a Dirty Little Secret [view article]

  With regard to decreases in imported gas, perhaps, the explanation is not oversupply in the US. NG markets are very healthy abroad, and there is actually a shortage of supplies in the Persian Gulf (lower transportation costs due to contiguity). Many projects on the board or desired to be implemented in the near term in the Gulf region cannot find the gas feedstock required for them. Production is way behind demand and market needs. India, for example, has difficulties finding gas for near term needs (2 or 3 years ahead) of LNG from the Gulf. Not very successful. Power projects appear to be stalled in some of the emirates due to a lack of projected supplies.in the near and intermediate term. Drilling has not kept pace with burgeoning needs for power supply feeds. Prices are also very healthy for spot marker supplies in the Eastern region, and it perhaps does not make much sense to send ships laden with LNG over long distances to the US where prices are not that attrative.
  
  So please be careful regarding the gift of your analystical powers! Aug 14 08:54 AM

• Is the Commodities Bull Market Over? [view article]

  For commodities other than food, I prefer to forget Jim Rodger's 18 year cycle theory. The conditioins are quite different now with regard to supply and demand. Prior to 2000, the major consumers were primarily the US, Japan and Europe. These regions, more or less, had predictable demand, economic cycles, and growth rates. Despite their growth rates, supply was always ample, or new capacity could be created expeditiously in a predictable manner.. Potential mines/fields were relatively plentiful to meet the demand, except if at all during brief periods. And the potential resources base were rich also, and needed less investment and shorter lead times to develop for new production..
  
  Conditions have changed dramatically. There are many more consuming nations growing at very high rates, and demanding supply to respond to growing consumption rates and even still much higher investment rates for development of national infrastructure for which some of these commodities are essential.. At the same time.available new resource sources are of lower quality and smaller squantity with regard to total extraction potential. Nationalism is also rampant now, and access to these new sources is not that easy or even attrative as it used to be quite often. Long lead in relation to the urgency of demand for developing known projects are almost legend now.
  
  Intuitively I surmise the changed circumstances and conditions should have a profound effect on the applicability of Jim Rodger's commodity cycle theory in the context of the prevalent reality.. I agree with the author that the fundamentals are still there, and at this moment sentiment is a better explanation for the major part of the recent slide in commodities. Aug 12 12:28 PM

• While Natural Gas Production Increases, Company Stock Prices May Not [view article]

  Here are a few caviets to this excellent 'shale' story. Shale is not really a new territory, and many companies have been engaged in exploration/production from shale for more than a decade or two. It has recently become more attractive because alternative new NG supplies/discoveries involve high costs due to more difficult and deep terraine, especially in the Gulf of Mexico. So, it is always going to be a "competition"... between the two alternatives as the older supplies from easier terrains are depleted. Shale exploration and devleopment for gas production involve high capital investments, production expenses, and relatively specialized manpower experienced resources which are not availablein great abundance. Lower prices for NG derived from shale will have a some floor which will be influenced by alternatives as well as the depletion rate ofNG from the old wells. Barring a serious slowdown in the economy, the depressed NG prices prevalent now may just be a six month or a year's episode. Perhaps, also Alaska may just become less and less attractive and iffy, due to pipeline costs and uncertaintieson the feasibility of financing the proposed pieplines contemplated. Aug 12 09:05 AM

• Economic Outlook Dims for Russia; Slowing Seen for Europe, North America [view article]

  Slowing in the BRIC countries is inevitable if there is slow down in the US and European Union. There is nothing that says, based on the fundamentals, that it should occur at the same time (rather same month) everywhere. However, in my view the slowdown in Russia may be more muted compared to that in China. Russia is less export dependent (outside energy and we can't do without Russian energy!), and it also has great scope to increase or maintain internal investment for internal consumption and infra-structure development.
  
  If the US $ strengthens, then Chinese currency will appear to be weaker in terms of the rate vis-a-vis the US$ and Euro. This will result in more inflation in China, since China imports signgificant amounts of raw materials for its industry (re-exports of finshed goods), food for its urban classes, and luxury items for its upwardly mobile. Chinese exports may just slowdown under the thrust of its raw material and labour costs. As such, there is pressure from the rest of the world for China to let its currency appreciate.
  
  Inflation is also bad for internal Chinese harmony where workers just get by because of the absence of collective bargaining or free lklabour movement. China is more afraid of internal stability and turbulence on account of inflation, than it is afraid of lower growth of its economy. Other fundamentals also are deterirating for China on a long rerm basis under the pressure of raw material and food costs.
  
  There has been reports that multi-nationals are begining to look at other parts of the world for sourcing goods and investment in manufacturing, since the attrativeness of China is being seen to be eroding. Transportation and shipping costs are becoming more significant now due to the high price of oil. For example, it used to be that Chinese low and intermediate valued steel used to be feared in other parts of the world and the West. No more so! When the Chinese export these now, it is believed that they are not fully recouping the true cost of capital for these exports. High iron ore import costs, high transportation/shippin... costs back-and forth, and high import coking coal costs have to a large extent neutralized the advantages China had on labour costs. In similar way, in future China will face embedded disadvantages (vis-a-vis Brazil, India, Eastern Europe, or other developing/emerging economies) as a source of exports to the US and Europe.
  
  The tumble of the Chinese markets in the last few weeks reflect these to some extent. I would be wary in over-investing in Chinese securities, until the fundamentals become more certain or favourable. Aug 11 04:39 PM

• Of Russia and Black Swans [view article]

  It is true that we may cry "wolf" too many times, and most others may pay no attention to it. But sometimes it may just turn out to be the single time when the cry may be true in substance. Then the impact may just be too significant in scope and also long lasting. However, most prudent investors, whose portfolios are balanced in terms of risk and spread, can withstand the fall-out should one materialises. So no need to fear too much, if the fundamentals look good. Aug 11 03:59 PM

• Buy, Sell or Hold: What to Do with Potash Corp.? [view article]

  The long term outlook for grain is bullish. However, with regard to the near or intermeddiate term, there might just be some headwinds for the sector, though there is the question as to how intense the impact would be. One issue which is alive and somewhat significant is the question of subsidies. Due to failure of the WTO talks, Brazil may launch a case on alcohol (tariffs, and read corn here indirectly) and cotton (subsidies) in the WTO against the US. There is also a great deal of discomfort within the US itself on these alcohol and grain subsidies now that the prices of gasoline and grain have gone up in price astronomically.So, a new administration may be confronted head-on on these issues as it comes into office.
  
  My take on these is that the subsidies or tariff are not critical anymore for survival or healthy existence of the ag sector. The alcohol issue, the way it has been supported recently, is even misguided and has been harmful overall for global warming and the environment. Aug 04 09:43 AM

• Three Stocks That Look Cheap Here [view article]

  A few comments for an otherwise not a badly written piece. Valero is an excellent refiner, biut perhaps in the prevalent/expected scenario, we have to be worried a bit about the capacity issue. Recent data at least points to the fact that an appreciable amount of driving is discretionary and is subject to individual/family budget constraints. There is also a trend now to use more efficient vehicles for driving (and junking/parking guzzlers like SUV's). Over-capacity may become a serious problem in the intermediate and long term, and hence the loss of pricing power may be a looming realty, except for short periods during peak driving season. I believe there is also a move to contain heating costs, and hence gas available in much more abundance (watch the race for shale resource acquisition and acreage) may substitute heating oil in some measure, because it is a cheaper fuel. Hence, my feeling that it is premature to consider VAL at this time.
  
  On CAT, we should not ignore that emerging markets also have to control inflation, especially if they are strong export based economies. To remain competitive, to ameliorate the condition of the poorer faction of their societies, and to avoid political fall-out/turbulence whether they are democracies (India and Brazil) or not (China, Vietnam). Indeed India has raised interest rates significantly recently while aknowledging that this may have appreciable effect to its growth rates. China also may do so after the olympics to avoid unrest, though the Chinese system has room for manipulating currencies and erecting export/import barriers in certain goods or commodities. I don't wholly buy the argument that in the context of globalization and with all that it entails emerging market economies for the most part will not be subject to some constraints on their growth rates. I agree with the author that the deep modulations that we saw in the past in CAT (and other export based cyclicals) is a thing of the past. But this does not imply that CAT and others will not be affected, but can only have upsides per se. Aug 01 02:56 PM

• Wachovia/Golden West: The 'True Story' [view article]

  It has been often said "Don't kick a man when he is already down" Good advice for the case of all the down and outs in this world. However, the members of the Board of Wachovia (and other similarly situated financial companies) are not down and out people. Not by any means. They still retain their swagger by and large. Perhaps, the klucks amongst the shareholders who naively stuck with their shares through the downdraft should pick up their self-respect and kick these high priced guys off the Boards of these ruined companies, if the Steels at thei helm of these companiers don't have the sense to do so. It is going to be a long uphill struggle before Wachovia can come back restored to health. In the meantime there may be more downdraft before the slow recovery. Jul 25 10:11 AM

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