David Caploe

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David Caploe
About the author:

Honors AB in Social Theory from Harvard and a PhD in International Political Economy from Princeton.

China Luxury Market

Date: 17 April 2011

Since China's inflation is the hottest topic in the world political economy today, this seems a good time to look at the dynamics of China's luxury market. Especially so as many people other than long-time "China bust" folks are now starting to say inflation will require China's national government to slam on the brakes. Indeed, it may do so with such force, the world's strongest economy since the Black September 2008 meltdown will, finally, not just slow down, but have to swerve sharply to avoid a total crash. So this MAY be the proverbial "last irony", but, if so, at least we did it BEFORE everything in China came grinding to a halt ;-) Or not.

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High-Tech Investment Frenzy, Then and Now

Date: 14 April 2011

High-Tech Investment Frenzy, Then and Now
Webvan - Tech Favorite Crashed & Burned 10 Years Ago:
Lesson Learned or Shape of Things To Come ???
Credit: Thomas Hawk

While Internet capital pools today are far greater than 2000, the stock market is not glutted with offerings. In 1999, there were 308 tech IPOs - in 2010, just 20. Tech start-ups today are real businesses — not just eyeballs and clicks. Facebook has fast-growing revenue and Groupon, profitable since June 2009, is on track for billions in revenue this year. In 1999, 248 million people were online, less than 5% of world’s population. Today one in three people globally equal two billion users. “In those days, you had tiny companies going public that hardly had a business plan. And now you’re talking only a few companies — that are already global with revenues.” Still, with only a few perceived “winners,” some investors must be choosing losers or paying too much: “When you see the valuations bandied about — I do think, boy, these better be really special.”

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Israel: The Saudi Arabia of Shale Oil ???

Date: 13 April 2011

13 April 2011. Well-informed sources say Israel has world's third-biggest oil shale deposits after US & China: "We estimate the equivalent of 250 billion barrels of oil. To put that in context, Saudi Arabia has proven reserves of 260 billion barrels." But oil shale mining is condemned by environmentalists as a dirty, energy- & water-intensive process. An Israeli company, IEI, believes its technique will be cleaner by separating oil from shale rock some 300m below ground. Water will be a by-product of its process, not consumed in large volumes. IEI estimates marginal cost of production will be $US35 - 40 / barrel, cheaper than ~ $US60 / barrel to extract crude from places like the Arctic -- & compares with $US 30 - 40 / barrel in deepwater oilfields off Brazil. "The Israeli deposits have been known about, but never listed, because it was assumed there was no appropriate technology." Now, there may be.

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BP's Dudley Screws Up Russian Arctic Oil Deal

Date: 12 April 2011

12 April 2011. Last week, an arbitration tribunal indefinitely blocked a BP share-swap agreement with state-owned oil company Rosneft. The ruling indicates how seriously BP's American CEO, Robert W. Dudley misread Russian politics - despite the fact he headed a separate / private / and VERY lucrative for BP joint venture with a different group of billionaires there from 2003 - 08. Apparently they didn't like their partner canoodling with the hated state-owned competitor. So they went to an arbitration panel when the Rosneft deal was announced, saying it breached their own shareholder agreement with BP in the partnership called TNK-BP. To the surprise of few, except apparently Dudley, they won. Now the Rosneft deal is suspended, just in time for BP's annual stockholder meeting on Thursday. Fun.

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New UK Bank Rules: US Looks Even More Pathetic

Date: 10 April 2011

11 April 2011. As Wall Street successfully mobilizes its lobbying muscle with Congress and the Obama regime to fight off further "regulation" - and any real implementation of what weak rules do exist - in the UK the battle is just starting over how best to manage financial institutions considered 'too big to fail'. Today, a volley will be fired at UK's politically and economically powerful financial sector by a government-backed commission, expected to propose UK's largest banks separate trading from deposit-taking functions. That goes further than so-called / self-styled / alleged US financial "reforms", which, typically and predictably, almost totally blur the line between speculative trading and traditional banking services. At least the UK will have the US model for what not to do.

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Trying to "Hide" Food Stagflation

Date: 7 April 2011

7 April 2011. Stagflation -- paying more and getting less -- has hit the world food industry big-time. But you won't necessarily notice it. Because food companies are "hiding" it by downsizing their packages while maintaining -- or even raising -- their prices. Don't be fooled. Chips are disappearing from bags, candy from boxes and vegetables from cans. As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages. With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most "visible" at the grocery store, where shoppers are paying the same amount, but getting less - but only if you look really hard to see them.

 
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China 5-Year Plan: All Prosperity to the People !!!

Date: 6 April 2011

6 April 2011. The central focus of China's new 5-year economic plan is its shifting economic base away from manufactured exports toward one rooted in demand for goods and services by increasingly affluent consumers. That is crucial to Communist Party’s central aim: keeping allegiance of a society that wants a bigger share of national prosperity. Raising living standards appears to be government’s main priority, calling growth of domestic demand “a long-term strategic principle”. Environmental protection, energy conservation and technology are also allotted ambitious goals. And for the first time, government will place a cap on total energy use.

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Global Natural Gas Explosion: Clean, Cheap Product / Costly, Destructive Process

Date: 4 April 2011

5 April 2011. As the world watches in horror at the unfolding Fukushima nuclear disaster, it forces a new look at an on-going technological revolution in the least environmentally destructive fossil fuel -- natural gas. The fruits of this natural gas revolution may not be long in coming on-line, especially given the seemingly unstoppable rise in the price of oil. In many parts of the world, geologists are now testing the ground for natural gas trapped in shale (shale gas), sandstone (tight gas) or coal seams, gas that has been largely unreachable in the past. Using a technology called hydraulic fracturing, or "fracking," a sort of controlled earthquake, companies are now bringing the gas to the surface all over the globe. But the process can be ecologically brutal.

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Fukushima Highlights Russia "Safe Nuclear" Marketing

Date: 4 April 2011

4 April 2011. Although Chernobyl remains the calamity by which all subsequent nuclear accidents will be measured, the ad hoc device that avoided a meltdown - so-called core-catchers - are now a design feature of the newest reactors Russia’s state-owned nuclear power company, Rosatom, sells globally. Inventor of the "core catcher" expresses what may sound like a jarringly opportunistic sales pitch: Chernobyl was the hard-earned experience that made Russia the world’s most safety-conscious nuclear proponent: “The Japanese disaster will give the whole world a lesson. After disaster, a burst of attention to safety follows.” Opportunistic or not, in recent years, Russian nuclear industry has profited handsomely by selling reactors in emerging markets, including China & India — whose insatiable energy appetites keep them wedded to nuclear, despite vows to proceed more cautiously in light of Japan disaster.
 

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GE's $14.2 Billion Legal Tax Avoidance Further Sign of US Decay

Date: 1 April 2011

1 April 2011. General Electric reported worldwide profits of $14.2 billion in 2010, with $5.1 billion of the total from US operations. Its American tax bill? ZERO. In fact, G.E. claimed a tax benefit of $3.2 billion. Low taxes are nothing new for G.E. It's been cutting the percentage of its US profits paid to the IRS for years, resulting in a far lower rate than even other multinational companies. Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks with innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department is often referred to as the world’s best tax law firm, including former officials from not just Treasury, but also the IRS and virtually all the tax-writing committees in Congress.

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Japan Supply Chain Worries Now Hit Many US Sectors

Date: 31 March 2011

31 March 2011. Businesses in a number of industries are trying to adapt to a new reality. No longer can they count on reliable access to critical supplies, prompting frantic phone calls, contingency planning and product redesigns. Film and television producers, along with the companies that support them, for example, are scrambling to stock up on commercial-grade videotape. A major supplier, the Sony Corporation, closed its factories in Japan. Many studios say they face no shortage now, but there is a fear of one soon — and that is all it takes to put companies on edge. “Folks everywhere know there will be a shortage and are buying as much as they can”

 

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Ex European Central Bank Chief Economist: What Kind of Euro ???

Date: 30 March 2011

Ex European Central Bank Chief Economist: What Kind of Euro ??? 
Otmar Issing, Former Chief Economist, European Central Bank
Credit: INSM

30 March 2011. Otmar Issing, 74, was chief economist of the European Central Bank from 1998 to 2006. Prior to his position at the ECB, Issing worked as a senior economics advisor to German Chancellor Helmut Kohl before taking a senior management position at Deutsche Bank, where he ultimately became chief economist. "As soon as public money is spent, private investors must also be involved and relinquish portions of their claims or agree to extending maturity dates. It is part of the market economy that those who buy securities and collect higher interest rates for doing so should carry part of the risk when something goes wrong. Taxpayers shouldn't always be footing the bill."

 

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Japan Radiation's Latest Casualty: World Shipping

Date: 28 March 2011

Japan Radiation's Latest Casualty: World Shipping
Yantian Container Port, Shenzen:
Strict Radiation Screening If Anywhere Near Japan
Credit: Bert van Dijk

28 March 2011. Fearing radiation's potential impact on crews, cargo and vessels worth tens of millions, some of world’s biggest container shipping lines have restricted or barred ships from ports in Tokyo Bay. China is starting to require strict radiation checks on ships arriving from Japan. In California Friday, the first ship to reach Port of Long Beach since the earthquake was boarded and scanned for radiation by Coast Guard and federal customs officials before being allowed to dock. Big southern Japanese ports, like Osaka and Kobe, are still loading and unloading cargo. But the Tokyo Bay ports of Tokyo and Yokohama are normally Japan’s two busiest, representing as much as 40 percent of its foreign container cargo. If other shipping companies join those already avoiding Tokyo Bay area, delays in getting goods in and out of Japan will only worsen.

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Japan Electricity Losses: Summer Without Air Conditioning ???

Date: 24 March 2011

 Japan Electricity Losses: Summer Without Air Conditioning ???

Long Hot Sweaty Summer for Japanese Workers ???
Credit: lowerincase

24 March 2011. Current capacity of Tokyo Electric Power Company [TEPCO] is less than half theoretical capacity. Because of air conditioning, peak summer electricity demand is a third higher than off-peak spring and autumn. So turn off the air-conditioning, you say? Easier said than done. When outside temperature is 35°C and humid, life in a modern office building without air-conditioning is intolerable. Plus factories producing silicon wafers and luxury cars cannot cope with wild fluctuations in temperature.  Thus the Japanese consumer will be asked to sweat to keep offices purring and factories humming, since it is conceivable Japan will not have sufficient capacity to cope with peak demand for years to come.

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Global High-Tech Supply Chain Shaken by Japan Crisis

Date: 23 March 2011

Global High-Tech Supply Chain Shaken by Japan Crisis
Silicon Wafers:

Crucial Link in Global Hi-Tech Supply Chain
Credit: pengo-au

23 March 2011. In many ways, modern global supply chains mirror complex biological systems like the human body. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness — as if a tiny tear in a crucial artery were to cause someone to suffer heart failure. Day in and day out, global flow of goods routinely adapts to all kinds of glitches and setbacks. A supply breakdown in one factory in one country is quickly replaced by added shipments from suppliers elsewhere in the network. Sometimes, the problems span whole regions and require emergency action for days or weeks. But the disaster in Japan presents a first-of-its-kind challenge.
 

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World Auto Supply Reeling From Japan Disaster

Date: 22 March 2011

World Auto Supply Reeling From Japan Disaster
Toyota's Gas-Electric Hybrid Prius v:
NOT Coming To A US Showroom Any Time Soon
Credit: Toyota UK

21 March 2011. Since catastrophe struck Japan, car makers that rely on its factories are concluding their operations will be affected more severely — and longer — than initially hoped. “This is a serious situation, with potential to affect many markets, including the Americas,” says Nissan's US head. Of particular concern to Toyota dealers is the gas-electric hybrid Prius, assembled only in Japan, that has experienced a surge in US demand. A vehicle pricing and sales web site says uncertainty about Prius availability has already caused the average price customers are paying to soar by about $1,800 since the earthquake: “There’s so much uncertainty. The supply-chain problem is much more dramatic than automakers are portraying. Even if they were able to come online in two weeks, which I think is wishful thinking, there’s a couple hundred thousand units to make up already, and nobody knows how long this is going to last.”

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Japan Disaster & Global Markets: "Nobody Knows Nuthin'"

Date: 21 March 2011

Japan Disaster & Global Markets: "Nobody Knows Nuthin'"
"Past Performance Is No Guarantee of Future Success"
Credit: Euronews

21 March 2011. Assessing the impact of the current crisis in Japan proves once again that economists and other self-styled experts have not solved the “tragedy of the commons,” the quandaries that arise when many people, acting in their own self-interest, create a threat to the common good. However imperfectly, though, markets WILL pass judgment, despite an unusually uncertain outlook. Investors, like everyone else, should understand today's world is a risky place. “You need to use a whole range of approaches to understand the market in a situation like this, and you need to be humble.” And, perhaps, accept an unpleasant reality: the next -- so called / alleged / but all-too-predictable -- black swan is definitely out there somewhere.

 

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Global, Japan Insurance Industries Rocked By Tsunami, Nuclear, Other Disasters

Date: 17 March 2011

Global, Japan Insurance Industries Rocked By Tsunami, Nuclear, Other Disasters
Who Will Pay ???
Credit: Loco Steve

17 March 2011. Japanese insurance companies, global insurers and reinsurers, hedge funds and other investors in so-called "catastrophe bonds" are all expected to bear a portion of losses likely to exceed $100 billion. Greatest uncertainty surrounds contamination from nuclear accident prompted by earthquake and tsunami. Operators of nuclear plants in Japan are required to buy liability insurance thru Japan Atomic Energy Insurance Pool, an industry group. But they are required to buy coverage of only about $2.2 billion for liabilities, and pool does not sell coverage for earthquake damage or business interruptions, suggesting it will be up to Japanese government to bear the brunt of those costs. Stocks of some US life and health insurers with operations in Japan sank on Tuesday, responding to Prime Minister Naoto Kan’s warnings that risk of radiation exposure had worsened. “What makes today’s natural disaster so extraordinary is that 4 of the 5 costliest earthquakes and tsunamis in the past 30 years have occurred within the past 13 months”

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Japan Elite Faces Growing Credibility Gap

Date: 16 March 2011

Japan Elite Faces Growing Credibility Gap
Fukushima Disaster Melting Down Public Confidence Too
Credit: tula_7755

16 March 2011. After days of confusion over responsibility, constant downplaying and cover-up of danger from both Tokyo Electric Power Company and his own government, Premier Naoto Kan now wants to get things under control. But it may already be too late. Fear is mounting among Japanese, and their trust in Tokyo's announcements is dissipating quickly. The world is now seeing the Japanese habit of trying sweep accidents under the carpet -- out of shame and a sense of group loyalty or corporate spirit. "The nail that sticks out gets hammered down," is not just a Japanese proverb, but a rule the country's children learn very young. This time too, it seems, no one in power in Tokyo has had enough confidence to tell the entire truth.
 

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Japan Tsunami Costs, Lessons for US and EU‏

Date: 14 March 2011

Japan Tsunami Costs

Tsunami Only Start of Japan's New Problems
Credit: enciclopediapt

14 March 2011. Japan was probably more ready than any other society for a cascading series of inter-locking natural & man-made disasters. Yet confronted by nature's force, there was little even a well-prepared country could do. Sadly, the terrible events of last few days & those perhaps to come are likely to WORSEN chronic economic problems Japan has faced since 1989, not least due to a perverse RISE in value of the yen. In that paradox lie important lessons for the other stagnating advanced economies, the US & EU. But whether they're ready to learn those lessons remains gravely in doubt.

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