Obama's Ascendancy and Fall

Along the way I have had a rather interesting dialogue with a colleague of mine that I have the utmost respect for.
Not only is he one of the very best traders I have ever worked with and one of the funniest persons; but he is someone that has a love for the culinary arts like myself, fully interactive in any environment, and with every sort of company. One of his contentions and a consistent one to boot, was that Obama would be a one term President, a viewpoint I have not been able to embrace until recently

He has always ascertained for any number of reasons that Obama would be one term. Recent events that have had very little main media profile has me seriously doubting my opposition to my colleagues contention.

The first aspect deals with the Presidents assertion that Pakistan/Afghanistan would be the focus of the war on terror. His approach is philosophically and fundamentally no different to that of Dubya, just different geographically.

In his attempt to unearth Osama Bin Laden and his Taliban supporters, he has created a source of future enmity and hatred for the USA. The result of his actions is that there are anything between 2.5 and 3 million displaced persons now living in refugee camps in the Afghan/Pakistan borders. This is a direct result of the action of the new Commander-in-Chief. People are dying and displaced, the camps lack water and appropriate facilities, and the only thing that they know is that their current situation and circumstance is a direct result of US policy as ordered by Barack Obama.

Additionally while his recent speech in Cairo was a landmark one in many respects and reached out to the Muslim world, some may see it as cynical picking Hosni Mubarak as host, when one considers the record of the Egyptian leader.

What's even worse is that as part of the financial services industry I watch in astonishment as a bit of a double play occurs, on the one hand harsh rhetoric and the appointment of a czar to oversee executive pay even as the majority of the banks are allowed to borrow from Peter to pay Paul. In this instance I refer to the fact that many of the banks (and read Goldman Sachs, Morgan Stanley as banks now) happily feeding at the FDIC guarantee trough to borrow cheaply and pay back TARP Funds. Nice arbitrage especially when these institutions are only paying back a portion of what they actually owe; but it allows them a way out from under the heel of the administration re executive compensation and the like.

While I continue to believe in Obama to a greater extent than not, I am increasingly of the opinion that what has always been a plan that sits on a knife edge, will end up falling apart, especially with a likely second leg down in the economy as unemployment picks up and the federal deficit continues to grow at an astounding pace.

The End of US$ Hegemony - June 16th 2009

This morning I delve into the domain of my esteemed colleague on FX Jack Spitz. We have had numerous conversations on this topic and I suspect many more ahead.

Of late all eyes have been on the FX markets and with good reason; but it has not been the more traditional economic data and drivers that we have generally looked upon; but instead what increasingly looks like a complete paradigm shift.

With the G-8 Ministers meeting this weekend providing rah-rahs and pom-poms for the Greenback and the Finance Ministers of Japan and Russia suggesting faith in the worlds reserve currency for very different reasons, one might question my focus on the end of the hegemony of the Greenback and why this may be the beginning of a paradigm shift that will change the worlds reserve currency.

How can this be?

Currently and for the last number of decades the US way of life and its military spending in particular has been financially sponsored and supported primarily by the Chinese, Japanese and South Koreans, with the Russians in the last few years and the ascent of oil prices, jumping into second place for buying US debt and funding that lifestyle.

We have continually however, and with increased volume of late, heard and read about the concern that's been expressed by these nations, with the exception of Japan and Korea, about the continued depreciation of the USD.

It's a simple matter of observation, seeing the Chinese continually trying (not always successfully) to purchase real and in particular commodity assets with their USD rather than maintain overly large reserves in what is a continually depreciating currency. Recent examples are Chinalco's bid to acquire a stake in Rio Tinto (and despite huge concessions on the part of Chinalco, still a resound failure) and only yesterday Sinopec's bid to acquire Addax Petroleum with a Stg 4.8bn bid.

Over the last number of months the stories/rumours have been numerous on these same creditor countries looking to diversify away from USD and in the last number of weeks we have had stories from not only these creditor countries but also the IMF suggesting use of SDR's (a currency basket of Special Drawing Rights of which the USD is still the largest percentage, though with the Euro and other currencies also making up said basket); add to that Paul Krugman the recent Nobel Laureate in economics suggesting that the GCC should de-peg from the Greenback and the growing cacophony of voices spouting the same notion, demands that attention be paid.

Hence the shellacking that the USD has been faced with of late, as concern grows about the extent of US deficits ($2 trillion and growing) and despite all the talk of a strong dollar policy the evidence that continues to suggest otherwise.

But this week is especially important as the SCO (The Shanghai Cooperation Organization) meet in Yekaterinburg, Russia, (formerly Sverdlovsk) Monday and Tuesday with Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation group. The SCO continues to gain in significance and in the context of the refusal that the US received in its request to attend this meeting, becomes even more significant.

It's quite evident that the primary subject will be what to do about the US dollar as the world reserve currency. China is already establishing the Yuan as the preferred currency in bi-lateral trade agreements and Russian continues to express a similar desire to use the rouble.

I can't help but believe that we might be seeing a landmark moment in history unfurling before our eyes as it speaks to the hegemony of the Greenback as the worlds reserve currency.

I Want to Believe....in Green Shoots

The quiet optimism I had talked about of late as it spoke to recovery seems to have been overtaken by rampant stupidity.

However I must admit that I read a piece recently from Albert Edwards of Soc Gen, whose faith may have been slightly shaken as he wondered aloud whether he had in fact missed the start of the new bull market rally.

I suspect not, because one can have very strong bull runs in bear markets and looking at the large percentage gains in the rally over the last 6 weeks, I suspect that we need to remember that those gains are hardly linear i.e. based on where one was to track from let's assume last years highs, then we are still down size from there.

From Recently Updated

The other component that would have me wary is simply the economic backdrop. With on average 500,000 jobs being lost in the US each month and plant and retail closings you have a multiplier effect that may have some way to run.

There might be signs that housing is trying to find some equilibrium, but I am reminded of a great line that I read recently to describe our economic travails and it was that "we are no longer falling off a cliff; but rapidly bouncing down a steep hill"

I sit back appalled that I have missed such an impressive rally in equities; but suspect it's quite unsustainable and would agree whole heartedly with the likes of John Mauldin, Albert Edwards, Ambrose Pritchard Evans, that this is a suckers rally for the very reasons supra.

The metrics are pretty impressive looking back over the last 5-6 weeks Equity up anything 30-50%; Credit spreads compressed in the last month IG12 in about 140 points; Curve steepened; Yields higher - 10Y UST hit their resistance area in the 3.32 - 3.35% area last Thursday and will likely hold a 3.00-3.35% for now: Funding Spread vis-à-vis - Libor-OIS now at +71 (versus last years high of +364); 3mth Libor at its lowest level for quite some time trading under 1.00% (well off last Oct 5.77% high).

Investor risk appetite is definitely returning based on not only equities but on the desire for corporate issuance at a price.

So why the scepticism on my part?

From Recently Updated

Simply put it doesn't add up just yet and furthermore the damage that has been done is structural in nature.

The Banks have all come through the Stress Tests with flying colours, or at least the majority and the others can raise the required capital with ease now that investor appetite for risk has returned; but Treasury carried out these tests and the initial results had many of the banks up in arms including Wells Fargo from all accounts on the initial outcome and recommendations by Treasury to the extent that there was substantial push back by the banks. While the tests might not have been be undertaken with a tickle stick as some have suggested was the case of Barclays with the FSA; it also suggests that the initial rigour was relaxed at the end of the day.

From Recently Updated

I continue to call for embracing the current economic reality. That is not pessimism that's simply making an assessment of the current facts and circumstance without sugar coating. The observation at this point is the likely divide that we will end up with, as you have the very strong dominant players such as JPM, Goldman, CS and MS and the rest of the crowd.

An acrimonious letter of complaint to Bill Caroll , Host of CFRB 1010 Morning Show

I had the bad luck to be listening to a repeat of your morning show last evening on CFRB and was appalled by your callous attitude towards the suffering of the Tamils in Sri-Lanka. I believe I understand why it is so many listeners consider you a racist based on the attitude you adopt on your show.

While I don't subscribe to that theory, your evidently polarizing approach and contempt for a minority that is suffering, not to mention your reference to the Tamil protesters, in a fashion that would suggest that they are not worthy enough to have the ability to protest in a fashion of they choosing, including breaking the law, screams your contempt at them for trying to bring attention to the slaughter of their families overseas.

I certainly wouldn't disagree with you that walking onto the Gardiner Expressway can only be deemed dangerous; but I suspect that the women and children were not the first to get up the ramp, that’s not me making excuses either, and I wholly agree that breaking the law is not something that should be supported.

Nonetheless you missed the point completely as you excoriated the Tamil spokesperson, threw scorn on the fact that the Tamil community here in Toronto are caring enough of their relatives and former country men and women, in their old homeland, to want to elicit our government to try some form of intervention.

The fact that you also chose to rant in an ignorant fashion about what they thought they would achieve, shows how much you miss the point. Yes folks were and have been inconvenienced by the protest rallies over the last few weeks, myself included; but if you look at the amount of media coverage received by the action taken Sunday, and the responses from various arms of government at the Provincial and Federal level, then that would suggest to me that the Tamils are receiving the interest that they have been trying to attract.

After the genocide that we observed in Rwanda, as Canadians we like to see ourselves as peacekeepers and helping the downtrodden, we have a large population of Canadians of Tamil extraction who are asking for the government of Stephen Harper to use its diplomatic channels to approach international partners at the UN to bring pressure to bear to stop the slaughter; yet you mockingly ask what they hope to achieve, and in fact dismissively imply, its just noisy brown people (my emphasis) breaking the law, putting their children in jeopardy and worse, god forbid inconveniencing and not respecting their fellow Canadians.

The fact that towards the end of your show you backtracked somewhat from some of these heinous attitudes that you spouted earlier in the show does not in anyway help.

I suspect you should be the point person on the wall of shame, you are so quick to attach people's name to for your callous attitude towards a humanitarian crisis.

Movies That I Only Watch on Planes!

I am watching a movie on a flight to Vancouver right now. Its rather touching and I have just had a bit of a revelation.

I think that I am a bit of a sop for movies about underdogs or unrequited love.
My preference has always been for movies that are fast paced, with gratuitous amounts of sex and violence and in watching this ridiculously touching movie starring Dustin Hoffman - Last Chance Harvey Shine - (with Emma Thompson) I am really moved.

Quite sad; though I am even sadder for the bruising I am taking from the rather rotund and large hipped, big boned South-Asian stewardess as she continually knocks my shoulders for the umpteenth time as she waddles past......

When I look back, I have watched numerous movies on airlines over the years that I would not give a second thought too at Blockbuster or when they arrive in the Theatres (still havent seen Titanic); because they simply don't fit my preference for the fast paced gratuitous sex and violence or for a crime drama thriller British style that I particularly enjoy.

So looking back I can name a few movies that have absolutely surprised me that I have watched on planes that fit that category; but were surpisingly enjoyable though somewhat light on story, some of which are now firm favourites.

Marley & Me; The Notebook; Teh Reader; The Namesake (a movie that I truly love and is now one of my favourites of all time); Valkyrie, a really good movie with an outstanding performance by Tom Cruise (a man I love to hate yet, I find it difficult to criticize the majority of his movies, in fact I really enjoy the majority of his movies).

The list goes on and not wishing to bore you any further will stop there and continue this idiotically enjoyable movie about the human condition as it speaks to loneliness. Shine on Harvey!

My Tokyo Experience

Tokyo Trip Apr 2009

For more pikkies of my Japan Trip click on this link:

http://picasaweb.google.com/grazor.ray/TokyoTripApr2009#


What an amazing place Tokyo is.

The Japanese are polite, patient, courteous and especially punctual.
In fact the other side to that politeness is that they ignore you with studious conviction. They don't stare and they avoid eye contact unless directly approached.

Its a city of many contrasts feeling at one time as though its all neighbourhood. and at the same time the degree of sophistication evident in so many things also speaks to its worldliness.

I think now of the odd and an interesting marriage it represents, something. borrowed, something blue, something old and something new. Don't really know about the blue bit, but if you take their language, the script they write in, then most definitely borrowed, as is Buddhism and certainly plenty of the old and new living happily together.

I am currently sitting on the Shinkansen, Super Express, more commonly known as the Bullet Train to you and I, so I can absolutely attest to its speed and punctuality.
Its beautiful and sleek, totally functional, comfortable and the damn thing is so spotlessly clean as to be almost intimidating. I am on a day trip to Kyoto to fulfil a 30year desire to visit the place that the first Tokugawa Shogun had his Kyoto residence, Nijo Castle.
Why you may ask, well simply put during my undergrad I took Japanese Economic History with the period Tokugawa to Meiji specifically as my study range.

Did I mention Tokyo isn't cheap, with the exception of the ubiquitous noodle bars and yakitori houses, most items come at a higher cost here in Tokyo.

My observations of the Japanese and my conversations with my dear friend and his fiancee who are hosting my visit, confirms some thoughts I might have had; but my eyes are continually opened based on simple observation.



The evident hierarchical nature of the society absolutely creates its own quite interesting challenges for the ex-pat gaijin community. Probably the most obvious being the evident lack of social interaction outside of the work environment with Japanese colleagues. As my friend's fiancee informed me, after struggling in Japanese all day, its quite nice to wind down and be around folks, where you can not only think in your language; but essentially relax in it and not have to worry about the myriad of cultural trappings and sometimes obstacles to be found here.

No doubt like a typical gaijin I keep being amazed or gawk at simple stuff
.
*The taxi' whose door opens by itself and closes by itself.

* parking lots where cars mysteriously disappear into the floor once switched off only to mysteriously reappear facing in the right direction to drive away.

*The fact that there are vending machines offering a wide array of products though predominantly cigarettes and a strange variety of drinks almost every 75 metres along the way

* Numerous folks wearing white masks, which I didn't initially understand until it was explained that the large amount of cedar trees in the city has led to 1 in 5 individuals having hay fever like symptoms, so its pretty standard..
The other being that when someone has a cold it helps prevent them from spreading it. (Common sense huh)

*Designated smoking areas along the street that's adhered to by one and all.

* that a car can only be purchased if you can show you own a parking spot or have arranged for one

*The fashion statement for the younger women which is one of long socks/leggings running just above the knee, with either denim shorts or a short denim skirt and high heels is a de rigeur outfit in its various interpretations.

* I don't believe I have seen a male under 40 who doesn't carry some type of man bag, very practical actually and generally very stylish.

*Our tour guide(I did a half day tour that was highly informative) kept on referencing western style toilets on my first day. I didn't think too much of it until I went into one of the public bathrooms at the Buddhist temple, hmmmm......different...... and so I understood that there is a traditional Japanese style apart from sit down, despite the Toto brand having some of the most sophisticated I have ever seen.
One opened for me in restaurant rest room in Kyoto today as I approached it making me nervous and wary that someone was watching me.

* Litter is unheard of as was evident this morning as my host was driving me to Tokyo station in his lovely Porsche and had to avoid a gentleman in the road that had stopped his scooter to track down a piece of litter he had inadvertently dropped.

* all the neighbourhoods despite the lack of large gardens etc, are all filled with trees, bushes and all the doris(avenues) are lined with ginko or cedar; but the surprise was the amount of citrus trees with large ripe fruit that can be found. (limited research suggests it might be the bitter orange used in ponzu)



Tokyo is a phenomenally fashionable town and it shows in the very wide variety of western shops and designer labels. Did I mention that it aint cheap :)

I saw Puma's yesterday that were averaging $440 a pair, admittedly they were naturally high end with a designer name attached to them that I had never previously heard of, there were even Puma platform shoes. We also went to a Nike store where you could design your own sneakers, which is a big thing in this town.....Bathing Ape anyone, the styles are multi-hued and equally multi varied.

The Prada cube in Aoyama was quite extraordinary which brings me to another feature which is the variety of architecture and how attractive the majority of it happens to be. As my host pointed out, invariably as they knock down the older structures, the new ones going up show style and panache and of itself is worthwhile for a tour.

The folks in this town like their cars throwing cold water on some of my misconceptions about Japan being a land of small cars. Yes there are numerous small vehicles, especially trucks delivering liquor and spirits as well as foods; but goodness, I can't remember the last time I saw so many high end vehicles and I am talking Rolls Royce galore, Porsches of all sorts, Range Rovers, the Aston Martin seems especially popular, Maserrati's, and BMW's are two a penny. Lots of Alfa Romeos (including the classic Spyder of which you rarely if ever see one in Toronto).
As a sequitur, by the way a delicious and ironic revelation was that the Japanese have played a very expensive joke on those of us that live in the west and pay the premium for their luxury divisions think Toyota/Lexus and Nissan/Infiniti as examples. There is no Infiniti brand here they are all Nissans admittedly with specific names for the Japanese market. The ubiquitous Oakville mum run around. Lexus SUV, is a simple Toyota here. The wily buggers have charged us more for their domestic brands through a simple rebranding exercise. Knowing this intellectually and comprehending it mechanically before was one thing: however I found staring it in the face though to be more than cheeky!

Moving on, one of the consistent highlights for me has been the quality of the food and the fact that I am now a true believer in Japanese A5 Wagyu, something I was able to experience on the evening of my arrival in conjunction with a NY colleague of mine that was coincidentally in town and was leaving the next day. While I have consumed wagyu before, the quality, taste and texture of the A5 was quite something else. We had the most amazing meal at a Yakinuku restaurant in Nishi-Azabu off a tiny side street with a completely unheralded entrance, that I suspect you would walk pass without appreciating it was there.

We were taken through and up the ladder of taste and flavour, with the grilling taking place at our table and guidance from the lovely young woman that was grilling for us, beautiful slivers of meat with a variety of sauces for dipping then a variety of wagyu A5, which was so beautifully marbled that I watched with increased expectation as she grilled a decently thick almost rectangular column to perfection, which was duly consumed with relish by myself and my dining partners.

The meal ended on an especially high note when I was served a bowl of soba noodles in a cold broth that had a hint of citrus, with beautifully chopped green onions and white sesame seeds sprinkled over the top. It was sublime, the textural crunch added by the sesame seeds to the perfectly cooked soba and that broth with its wonderfully perfumed fragrance was outstanding.



The very next evening of course my hosts chose to take the bar up a notch taking me to a tiny fish restaurant in Shibuya on a Friday night allowing me a number of experiences at the same time.
The first being my chance to observe the throngs of Salary Men out on the town in droves, in their suits and with their briefcases, getting a load off after a long week. The second was the superb meal that we enjoyed at Kekiya.

We started with ultra fresh thinly sliced pieces of bass that was marinated in a mix of olive oil, lemon and dribbled with a light, fresh and invigorating pesto. That was followed by crab spring rolls that has no relationship to the more traditional spring rolls as the wrap was more of a firmer textured crepe with warm crab flesh and greens and beautifully seasoned. We moved on to a large platter of sashimi and thank goodness my host insisted that I had some of the fatty tuna belly, which I had generally avoided in the past; but found that this piece of toro melted in my mouth and was so flavourful, I was disappointed I hadn't eaten some more when it first arrived.


Next came gyoza dumplings which simply didn't meet my expectations in shape (cylindrical and cut into good length individual two mouthful portion) or taste and filling. Here we had discernible pieces of seafood with a flavour base that excited the already overwhelmed taste sensorium.
We followed that up with tuna jaw that had been braised and goodness what a total joy, fantastic ingredients cooked with minimal fuss and beautifully presented not to mention amazingly tasty, we rounded of the meal with two whole grilled sweet fish on the bone served with a lovely clean lemon and olive mix with infused herbs, goodness my hosts know how to appeal to my centres of joy!. The food has been fantastic. Did I mention our Saturday sushi lunch with the most divine Unagi I have ever had. This was a full serving uncut on a long slender plate with a small dollop of rice underneath that allowed you to focus on the beautifully grilled nature of the pike eel and the subtlety of the teriyaki sauce, the sheer enjoyment of which forced me to order a second one.

Tokyo has many contrasts as I have observed. After having being at Shibuya crossing on Sunday evening (a total madhouse), having also mingled in the insanity that is Harajuku on a Sunday afternoon, less than 15 minutes away we are in a part of Nishi-Azabu called Hiro, the Five O'clock bell is rung and my host informs me that from all accounts the bell is rung throughout Japan daily, but as we walk back from a supermarket shopping excursion I am struck by how peacefully quiet the neighbourhood is and that's what I found time after time when wandering away from the major dori's or avenues, you hit narrow side streets that it's a total wonder to explore. They are narrow, neat, clean and invariably one will find small eateries, shops or interesting architecture. Life off the beaten track has never been so interesting and this represents in so many respects the land of so many contrasts that I found in my visit to Tokyo.

Not mentioned or mentioned only briefly in this short travelogue; but must be done, observed:

* the madhouse that is Tsukiji Fish Market and eating ultra fresh sushi and freshly grilled pike eel in the surrounding area at 8am in the morning washed down by a beer.

* A day trip to Kyoto for an opportunity to ride the super fast, super clean and especially comfortable Shinkansen Super- Express, better known as the "Bullet Train". Still a marvel of modern engineering that takes you 500km away in just over 2hours. They are never late ( though bloody expensive) The other reason for Kyoto is the history and the temples. You will not be disappointed.

From Grazor's Blog - Writing because no one wants to listen!

* Yasukuni Shrine in Tokyo. You may have heard about this based on the furore and controversy linked to Japanese Prime Ministers visiting the war dead. Ignore that and go, its very very worthwhile. Its an opportunity to get a complete history lesson on Japan and its relationship with the world.

* take cash and lots of it. Credit cards are fine; but as I found out to my horror,the Japanese cater to themselves, so access to ATM machines with Plus and Cirrus non existent, with the exception of finding a Citi or HSBC branch and even then try getting money out of your account, challenging.

*the basement floors in the large department stores in the Ginza

* the coach service to Narita. You will get a semi tour of Tokyo thrown in as you move from hotel to hotel for passenger pick-up

* the Japanese subway system. Clean (naturally) and very easy to use, though some decent walks on transfers from one line to the next.

More pictures from My Tokyo trip can be viewed here:

http://picasaweb.google.com/grazor.ray/TokyoTripApr2009#

Arrigato Gozaimasu!