Category Archives: Globalization

Their Man in Africa: Chinese Checkered in Zimbabwe

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And what’s the real deal behind the unrelenting bad press for Robert Mugabe, President of Zimbabwe? (Not that we are Mugabe fans here, but anyone who gets trashed regularly in the mainline…sorry…stream media invites lively curiosity, if not outright solicitousness from us). Well, here’s what:

“In April 2007 the chairman of China’s top political advisory body, Jia Qinglin, head of the National Committee of the Chinese Peoples’ Political Consultative Conference, flew to Harare to meet with Mugabe. It was a follow-up to the 2006 Beijing China-Africa Cooperation Summit where the Chinese government invited the heads of more than 40 African states to discuss relations. Africa has become a diplomatic and economic priority for China and its economy.

At that time, Beijing got an open invitation to help develop dormant mines in the country. The deputy speaker of Zimbabwe’s parliament called for more Chinese investment in the country’s mining sector, according to China’s Xinhua news agency. Zimbabwe’s mining laws were changed to allow the government to reallocate mining claims that were not being exploited.

Mining generates half of Zimbabwe’s export revenue. It is the only sector in the country that still has foreign investors after the collapse of the main agricultural sector. Western companies with mining claims in Zimbabwe were not exploiting them. “We would appeal to the Chinese government to come in full force to exploit these minerals,” Zimbabwean Deputy Parliamentary Speaker, Kumbirai Kangai said to the official Xinhua.

Kangai assured potential Chinese investors that they would not expose themselves to legal action if they took over claims held by Western companies.

A few months after, in December 2007, Chinese company, Sinosteel Corporation, acquired 67 percent stake in Zimbabwe’s leading ferrochrome producer and exporter Zimasco Holdings.Zimasco Holdings is the fifth largest high carbonated ferrochrome producer in the world. It used to produce 210,000 tons of high-carbon ferrochrome per year, nearly all of it along the mineral-rich Great Dyke, accounting for 4 percent of global ferrochrome production.

Zimasco has also the world’s second largest reserves of chrome, after South Africa. It was formerly owned by Union Carbide Corporation, now part of Dow Chemicals Corp.

Oh, oh! Alarm bells went ringing in London and in Washington at that news….”

More by the straight-talking Bill Engdahl.

Financial Follies: Between the Buck and the Bubble

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“If the Fed raises rates to prevent a sell off in dollars, they’ll crush the highly indebted and already struggling populace and, in so doing, unleash a serious economic crisis. But if the Fed keeps rates where they are, or even lowers them, they’ll trigger a dollar sell-off and unleash a serious economic crisis.

Either way, the story ends the same: a serious economic crisis.

At this point, our bet remains that the Feds will go to default mode which means cranking up the printing presses into the red zone, letting the dollar move ever closer to its intrinsic value: zero. That they’ll follow this route is suggested by two inputs. First, a depreciating dollar means a reduction in the trillions of dollars in obligations now owed by the U.S. government. And, secondly, foreign holders don’t vote.

So, we are calibrating our investments toward a serious economic slowdown, but with high inflation. Some people would call that Stagflation. But given the severity of both sides of that formula, the situation may be better described in terms of Scorched Earth. Or, because people seem to find concepts ending in “flation” handy, Stag-flagration.

Businesses and personal net worth will be devastated at the same time that costs run out of control.

How to Play It?

Our strongest recommendation is to position your portfolio in anticipation of higher inflation and, in time, a turnaround in interest rates. The latter is because interest rates, which are still near a 50-year low, can only go up as the inflation rises to the point of banner headlines (at which point, the government is hoping, the economic downturn will have moderated).

In fact, we think the move towards higher interest rates is a trend that will surprise many, but, once it gets going in earnest (and corporate bond yields are already on the rise) last for at least the next several years.

In terms of other investments, it’s worth noting that in the last major bull market for tangibles, back in the 1970s, oil was the best performing investment, followed by gold, U.S. coins, silver and stamps….”

That’s David Galland, from Casey Research.

Comment:

The buck is doing its old see-sawing on the edge of apocalypse, but having fallen off the cliff over the last year, we still feel inclined to temper our despair with numbers. Here’s an interesting piece that differs from Galland on the dollar:

“The point is that the dollar has been in a negative trend for almost exactly 7 years with the closing peak registered on July 5th of 2001. In the mean time the CRB Index has risen by more than 2 1/2 times. To get to a bottom for the dollar we needed to see some sort of peak in ocean freight rates and a bottom for stocks such as AMGN. The charts on this page make a somewhat tentative case that a trend back towards a sustainably stronger dollar has already begun although quite clearly the DXY will have to rise well above its moving average lines to mark the turn. There are encouraging signs for the dollar which suggest downward pressure on the commodity the theme but it is still much too early to mark this one as paid…”

Kevin Klombies at Inter-Market Relationship.

Brazil Booming…

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Lost Your Job on Wall Street? Head for Brazil! PDF Print Mail
27 May 2008
by John Fitzpatrick
The financial crisis which has hit American and European banks has cost tens of thousands of workers their jobs. One side effect of this has been a rise in interest by Western bankers in other markets, particularly in India, the Middle East and the Far East. The Times of London coined the expression summing up the dilemma facing those with no prospects in Western markets: ‘Mumbai, Dubai, Shanghai – or Goodbye”. It quoted a headhunter as saying there had been an annual increase of 20% to 25% in the number of Western bankers heading East over the past two years. So far there has been no sign of many (if any) of these jobseekers heading to Brazil but there are a number of reasons why they should consider the idea.
Any Wall Street whiz kid would feel at home immediately in São Paulo. The city is obsessed with money, success, status and flaunting your wealth. Visit the old downtown area around the Bovespa and BM&F futures exchange, Avenida Paulista, Faria Lima, Funchal, Itaim and Berrini or head further out along the Marginal highway almost as far as Interlagos and you´ll see banks, brokerages, finance houses, insurance companies, accountancy firms, consultancies, actuaries and lawyers´ offices by the score. Countless sky-high buildings, gleaming as the sun reflects their glass exteriors, swarm with hundreds of thousands of busy bees, plugged into their computers, phones glued to ears as they gaze into their computer screens while holding conversations with a dozen people at the same time

The New Exit-Empire Tax….

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“The primary purpose of the Heroes Earnings Assistance and Relief Tax Act of 2008 is to provide a range of tax breaks for veterans. But the law also imposes the first-ever “exit tax” on even moderately wealthy expatriates. I predicted Congress could pass an exit tax bill like this over a year ago, and now it has.

Once President Bush signs this bill, the law will require future expatriates to pay a tax on all unrealized gains of their worldwide estate, including most offshore trusts. And the tax applies not only to former U.S. citizens, but also to long-term green card holders who have resided in the United States for at least eight of the 15 years before they expatriate. (Fortunately, long-term residents can “opt out” of the exit tax, as I’ll explain in a moment.)

How are you supposed to pay the tax without selling your assets? That’s your problem – not the IRS’s – although the bill permits deferral in certain circumstances….”

From The Sovereign Society.

The Red Tape Chronicles on ID Theft

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“Like arriving home to see a broken window, Holli knew something was wrong when she pulled up the statement from her new 401(k) account and saw a stranger’s name there. Under her name and account information, she found a second name: Paulino Rodriguez. But was it an accident, random vandalism or a serious crime? She opened the virtual door to her account and sorted through the broken glass. Her worst fears would soon be confirmed.

After some frantic research, Holli pieced together part of the story. Rodriguez, the 401(k) Web site revealed, lived in Escondido, Calif., about 90 minutes south of Holli’s home in Fountain Valley. He was a restaurant worker in an Escondido Burger King. This was no prank — though Holli would soon feel like several government agencies, corporations and a criminal were having fun at her expense. She was a victim of something experts call Social Security number-only identity theft, generally committed by immigrants who don’t have the necessary credentials to work legally in the U.S….”

More at MSNBC’s The Red Tape Chronicles.

Comment: 

When people get treated like numbers, the numbers get gamed. More evidence that large, polyglot states are inherently unworkable.

Brits Buying in New South Wales

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People from the UK are among the most prolific buyers of property in Australia, new figures have revealed.

According to the Real Estate Institute of Australia, Britons are third-largest group of foreign property buyers in the country, reports Homes Overseas.

Statistics from the group showed that British investors bought more than £1.27 billion worth of property in Australia last year.

This accounts for more than a tenth of the overall amount of foreign investment in Australia attracted last year.

Britons were only outnumbered by people from Singapore, along with investors from the US.

Figures showed that New South Wales was one of the main hotspots for foreign buyers during 2007, along with Queensland.

Collectively, these two regions were said to account for nearly half of the overseas investment in Australia last year.

This comes after the country was described as a “safe bet” for investors by the Foreign Property Buyer website.

Crude Oil Decoupling from the US Dollar

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“Crude oil has detached itself from movement in the US dollar. Movement in crude oil prices suggest that the options markets has a big role to play and a part of the rise in crude oil is attributed to covering by option sellers. Frankly, very few traders and investors expected crude oil prices to rise near $125 at this time of the year. Long term investors will exit their investments once crude oil breaks $150 as incremental returns will fall over $150. Investors have made over 100% returns when crude oil prices rose from $50 in early 2007 to now. Crude oil over $150, investors will not get 100% returns in twelve months once crude oil breaks $150. If crude oil prices float over $200 for a long time whether in 2009 or 2010, there will be real evidence of a global slowdown. Even emerging markets like India where petrol and diesel prices are subsidized, the government will start reducing subsidies. The rise in crude oil prices may last another year and a half and thereafter the pace of the rise will fall….”

Chintan Karnani, Asian Metal Markets

Fighting for Food: Mobs riot as food prices soar in Somalia….

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“Down with those printing the fake money!” the young men yelled, denouncing the growing number of counterfeiters who have contributed to escalating prices. “Down with opportunists!”

The Mogadishu Traders’ Union said it decided Tuesday to again accept the old 1,000-shilling notes and ordered its private security units to enforce that at the city’s main Bakara market.

“We, the big traders, have already decided to accept the old note and today we want to tell other businesses also to accept the decision,” said Abas Mohamed Duale, deputy chairman of the union.

Protests and riots over rising food prices have recently hit other nations, including Haiti, Egypt, Cameroon and Burkina Faso. The price of rice and other staples has risen more than 40 percent since mid-2007.

The Asian Development Bank said Monday that a billion poor people in Asia need food aid to help cope with the skyrocketing prices.

Soaring fuel prices, growing demand from the burgeoning middle classes in India and China and poor weather have contributed to the jump in food prices worldwide, economists say. Africa has been particularly hard-hit.

In Mogadishu, the price of corn meal has more than doubled since January. Rice has risen during the same period from $26 to $47.50 for a 110-pound sack.

The cost of food has also been driven up by the plummeting Somali shilling, which has lost nearly half its value against the U.S. dollar this year because of growing insecurity and a market clogged with millions of counterfeit notes. The shilling has tumbled from about 17,000 to 30,000 per $1…..”

More from AP.

Mumbai Madness: The World’s First Billion Dollar Home…

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“Forbes estimated Ambani’s net worth at $43 billion in March. Reliance Industries was founded by Mukesh’s father, Dhirubhai Ambani, in 1966, and is India’s most valuable firm by market capitalization. The couple, who have three children, currently live in a 22-story Mumbai tower that the family has spent years remodeling to meet its needs.

Like many families with the means to do so, the Ambanis wanted to build a custom home. They consulted with architecture firms Perkins + Will and Hirsch Bedner Associates, the designers behind the Mandarin Oriental, based in Dallas and Los Angeles, respectively. Plans were then drawn up for what will be the world’s largest and most expensive home: a 27-story skyscraper in downtown Mumbai with a cost nearing $2 billion, says Thomas Johnson, director of marketing at Hirsch Bedner Associates. The architects and designers are creating as they go, altering floor plans, design elements and concepts as the build…”

More at Forbes

with a hat tip to Kevin Duffy for the link.

Part I The Daily Reckoning Won’t Cry for Evita – Bustling Buenos Draws Outsource Workers….

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Here’s the first of a short series of notes I did at the Daily Reckoning that got used – one way or other – in “Mobs, Messiahs and Markets.” This one from May 12 2006 showshow outsourcing might attract global info tech workers to Buenos Ayres. I’ve moved the note to the front of the newsletter from its original place to make it easier to read.
Fri, May 12, 2006 07:04:06 PM

From: The Daily Reckoning

Today’s Daily Reckoning

Don’t Cry For Evita

The Daily Reckoning

London, England

Friday, May 12, 2006

———————

*** We hate to brag – but we saw this bull market coming from a mile
away…people are losing faith in paper…

*** Unreliable contrarians…debt has a mind of her own…

*** Prices are becoming a barrier to homebuyers…laying low in things
settle down in the United States…and more!

———————
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You are receiving this email as a part of your FREE
Subscription to The Daily Reckoning. You signed up
for a free subscription on Tuesday, December 27, 2005.
Should you wish to *** please follow the
instructions at the bottom of this email.
——————————————————
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More views from Bill Bonner…*** Ameriquest, one of the nation’s leading mortgage lenders closed 229
branches and laid off 3800 employees. Households are paying more in
mortgage interest than they have for the last quarter century – 15.8%. It
appears that they have reached a limit. Mortgage applications are
declining. Unsold inventories of houses are increasing. The bubble in
America’s property market is over. At last, it looks as if prices are
becoming a barrier to buyers.

But what will those who need a roof over their heads do now?

Where they will go?

*** Colleague Lila Rajiva, down south, offers a possibility:

“Buenos Aires is bustling. Not just with tourists or casual visitors
either. It seems a lot of foreigners are here to take advantage of the
relatively cheap price of real estate. The real bargains, of course, were
snapped up during the slump a few years ago, but there are still good
deals to be had – especially for refugees from the inflated prices of the
American and British housing market.

“It seems that housing is only one reason people are coming down here. On
the subte (underground rail) downtown, I ran into two visitors who must be
a sign of things to come. The weather is summery right now, though it’s
the beginning of fall in the Southern hemisphere, and both of them were in
the usual get-up of the European at large – khakhi shorts, tennis shoes,
and baggy tee-shirts. So, at first I thought they were students
backpacking for a semester, but Ross, the younger one, was an English
teacher who had taken off a year or two to “lie low” until things settled
down in the United States.

“‘What things?’ I asked.

“‘The economy, politics…everything,’ he shrugged.

“‘Things’ were too turbulent in the United States just now for his taste.
When they settled down, he’d have a better idea whether he even wanted to
return or not, he claimed. Meanwhile, South America was inexpensive and
warm. He’d spent a week lying on the sand in Uruguay and was now on his
way north to the Iguazu falls. When he got back, he’d look for a job. He’d
heard that a lot of businesses were looking for native speakers to teach
English as a foreign language in Buenos Aires.

“‘Just like all those Dell call-centers in Bangalore,’ he pointed out.

“Neil, the older man, was English and a trifle paunchy. He had been in and
out of Argentina for six months. As he chatted, he balanced a laptop on
his knees into which he was busy punching figures.

“‘Checking my portfolio,’ he explained.

“It was a healthy one, from the looks of it.

“‘Telecoms are good investments still,’ he confided. ‘I bought some shares
in a company at home a while back and doubled my money in just two months.
You should try them. Of course, I was working for a telecom at the time
and got them pretty cheap.’

“I wanted to know how he got to take off six months from his job.

“‘Actually, I don’t have one,’ he admitted. Though he was not yet forty,
he was retired. How come?

“‘Sold my house in Nottingham, that’s how,’ he chuckled. ‘The price had
gone through the roof and I knew it was time to get out. I invested the
money and now I travel. I still do a bit of software consulting, but only
over the net. The main thing is to go where it’s warm and cheap to live.’
He looked over at me hopefully.

“‘I was actually thinking of India…’ Continue reading →