Gazing Into the Abyss

Gazing Into the Abyss1 300x225 Gazing Into the Abyss

Murphy ’s Law states that the Universe sides with the hidden fault. Things fall apart, the centre will not hold (but these days, ‘the periphery’ has it even worse!). No sooner had we hit the ‘send’ button on our last, relatively ebullient opus, then the market was sent sprawling into risk-off mode on the back of a recrudescence of the European debt crisis. We are buying the dip. Gazing into the abyss focuses the mind most wondrously, and we suspect that, having exhausted the alternatives, the global financial shepherds will drive the flock back from the cliff-edge. 

In short, we remain long, reiterating the views repeatedly expressed herein: there shall be NO European country-wide defaults or restructurings, and the current pricing of peripheral European debt constitutes a buying opportunity – though perhaps, not quite yet. The Euro will survive, but we find better value in Asia. Our main investment drivers remain the secular rise of Asia, the political paralysis of the US, the commodity super-cycle, “lower-for-longer”, market hypercorrelation (risk-on/risk-off), and thus, the compelling opportunities in the carry trades, Russian equities and global resources, and emerging fixed income. We are short Treasury duration. We continue to hedge dollar exposure – and can be patient with this one. 

As regards Russia, it has been neither the best of years nor the worst. Russia remains the cheapest major emerging equities market, but it is finally getting less cheap by the day, as the international investors begrudgingly come to acknowledge the improving fundamentals. On the fixed-income side, on the other hand, Russia now trades several hundred basis points inside of several European Union members and should continue to tighten; it very certainly deserves the A/AA-ratings lost by some of its peers. Debt markets are simply “smarter” than equity markets – i.e. they react faster to fundamental economic change, far less to scare stories. 

The RTS remains one of our top picks in the GEMs. Growth is improving but a bit slower than we had hoped – Russia’s recovery from the catastrophic first post-Soviet period was impressive, but a huge amount of reform is required before Russia becomes a fully modern state. In fact, on the ground in Moscow, Reform is happening every day – often frustrating when viewed up close, if one takes a couple of steps back, the transformation over the past decade has been amazing. Not, alas, compared with China (where Russia is the Tortoise) but certainly compared to Europe or the US, (where it is the Hare). Macroeconomic stability is less good than before the crisis, but compared with any other G8 country, Russia remains a veritable haven of safety in a very dangerous world… takes some getting used to, doesn’t it? 

We are looking forward to Khodorkovsky suffering the full rigours of Russian law, putting this tiresome story behind us for seven years, and have given up expecting anything resembling truth from the Western press – we congratulate our many Russian friends upon the World Cup! Viva Vladimir Vladimirovich! 

Our friend Marc Faber, of Doom and Gloom fame, often digresses… among his less controversial digressions being his travel logs – frequently probing deep into places no man ventures without trepidation – Mongolia, Cambodia, Darkest Africa, even fly-over country deep in the US heartland. 

After almost a month cruising Raja Ampat, West Papua, arguably the single most magnificent cruising grounds this planet has to offer, T&B spent a highly inspirational week in the Celestial Shopping Mall – Singapore. 

As regards Raja Ampat, we left grasping for words to express how beautiful, how rich, how diverse our planet can be. Pristine coral reefs teaming with a million species of fish; mangrove forests inhabited by gaudily plumed birds and crocodiles, rain-forests as yet untouched by the axe. Paradise regained. 

And yet we live in a time where innocence has been lost – and who, fully conscious, can look upon the unimaginably intricate and beautiful workings of nature without regret – without a silent apology? As viewers of the Discovery Channel will recognize, nature is a finite resource. Once extending from pole to pole, this magnificence is now confined to a handful of places so remote as to have survived the constant extension of mankind – of human population spreading out exponentially over the face of a finite world. We would urge our readers to go and have a look at the few corners of our planet while they still can.

On a more cheerful note, a trip to Singapore invites profound reflection. It is the anti-Moscow. Such a clean, orderly, functional place. Singapore is the ultimate happy country. It is well-governed with the full consent and support of the governed, there is no crime, disorder or chewing gum. People pay their taxes happily. The national sports are eating and shopping. People naturally queue up – not smug like the English, nor anal like the Germans, but cheerfully – indeed, the whole damned country is cheerful, polite, alert and helpful.  T&B literally could not wait to get back home to grim Moscow!

Is this man’s ultimate goal? Is this the summit of human happiness? To shop contentedly for global brands? Apparently so. And that is what keeps T&B on the move, looking for places not yet swept up into the globalization trade – like the faces on the Moscow Metro, each one telling its unique story. Our next report shall be from Havana! 

Happy Cruising/trading/grazing…


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5 Responses to Gazing Into the Abyss

  1. J. A. Bruges says:

    Your discussion of prostitution suggested a very interesting notion. I refer to the following:

    ‘Whatever one’s moral qualms, it is an essentially transparent transaction — no sane person goes to a prostitute expecting to find “true love.”‘

    Fantastic! When’s the last time you read “Notes from the Underground”? That is exactly the theme of that screed: that there is a certain kind of person who does go to a prostitute expecting to find true love. One might say in fact that this describes the position of the liberal intelligentia toward capitalism to a T. Anyway, it’s a keeper! Thank you.

    Also loved the following:

    “We are informed that the “Beautiful Game” has peacefully substituted for the Great Game; quite frankly, we find trench warfare a great deal more dignified than watching hordes of drunken louts manfully affirming the greatness of their respective nations as two clutches of economic migrants run up and down the lawn.”

    This was a thing of beauty.

    As for your rant about the decline of the American Empire — hell, never mind empire, the nation is crumbling….. I would not say though that the problem is partisanship. The two parties are, in Hitchens’ words, two cheeks of the same derriere. They elect the democrats to war on the poor and the republicans to work the rapprochement with China…whatever, but it’s come down to a choice of weapons, that’s all. For the working class the long term result is the same: the health system, a disaster; employment, disappearing; infrastructure, crumbling. As for education — fuck — this is where I lose it all. They have simply decided that it is no longer necessary to do anything except provide bare literacy and “job training” for the masses. At my daughter’s high school, there are many days without HEAT. At the public colleges and universities all “non essential” courses and departments are being jettisoned: no classics, no foreign languages (except Spanish), no arts, no comp lit…. if what they are teaching doesn’t help shoehorn you into a job, it is not worth teaching. The fucking retards don’t even understand that the greatest revolution in technology — hi tech — was entirely created by egyptologists, philosophers, mathematicians, musicians, physicists, and classics majors….because when they created computer science, there was no computer science major or classes. Ha! (IBM used to hire classics majors exclusively to do debugging.) Never mind. It is a disaster, and we are in about the third inning. Needless to say, the elite private institutions continue to teach the classics, Russian, art history, etc.. I prepare for a whole generation of courtiers — for what can these graduates do except teach at the Ivies or scratch each other’s nuts? In fact, this might provide a fascinating chapter in the sociology of knowledge.

    Sigh. I remain clueless about your support for the austerity being imposed in Europe. Can the further immiseration of the working class be a foundation for economic growth? Is the tactic of socializing losses and privatizing gains and possible long term solution?

    Thank you for suggesting to readers that they donate to WIkileaks. As you swim in the waters of high-finance and beautiful women, I swim in the waters of cutting-edge hi tech. It might cheer you to know that ALL the programmers I know are fundamentally and by temperament behind Wikileaks. While many of them do not agree with the payback actions, denial of service attacks on visa, mastercard, etc., ALL of them completely support transparency, accountability, and sharing of information. And they do have the skills, experience, and time to make sure that what info wants to be made public will be made public one way or another. The nature of the internet is such that loosely federated networks of shared resources can be dynamically shuffled and reshuffled. …and with this cheerful thought, I leave you to ponder your next market-killing strategy.

    (My mouth watered at your description of Papuan paradise….)

    J. A. Bruges

    • Ursa Major says:


      Regarding the European austerity, it is unfortunate, unfair, undemocratic and many other “uns” and only one “in” – as in inevitable. They simply have no other choice in order to avoid default. It is a situation familiar to people with overdrawn credit cards the world over.
      Yes, in an ideal world the pain would be distributed to those who were responsible for the meltdown. It is not going to happen. There simply is no available system capable of producing that result.
      Socialist revolutions have been tried – and results left something to be desired – anyway, this is not a political screed – it is an attempt to assess the possibilities within the existing socio-economic framework. The peripheral states will have to be relatively impoverished viz-a-viz Germany – Germany is far more productive than Greece. Greeks cannot continue to live a German lifestyle. The alternative, exit from the Euro, is not so much messy as catastrophic. Think Argentina 2002 – or Russia, 1998… I do not think that the social fabric in any European country is yet ready for that degree of pain. Therefore, they will have to accept a more chronic form.
      The outlier is a possible political uprising against austerity seen (wrongly) as being imposed from abroad. The consequences will not likely be positive for the state deciding to go it alone…

  2. Eric, time to start charging for T&B. $1 for a subscription to T&B monthly (you’ll have to be consistent), $5 for e-mail questions to be answered (unlimited), $10 for direct phone line access to get guidance. The amount of zeros to be attached is, of course, up to the market to decide…

  3. Eric Koch says:

    As the sidereal dawn looms large on the horizon, here’s a glimpse into the not-too-distant future.

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