Trade Notes: Buy Coal India?

Image via Wikipedia

The head of Coal India’s IT department told me a remarkable story in the mid-1990s.  They had started putting the CV’s of all their employees (about 800,00 of them, though the numbers were a bit imprecise) into what they called the world’s largest employee database.  That’s when they’d found that some of their employees, if alive, should be more than a century old.

Turns out some of the coolies (the people who would be physically transporting the coal) and other laborers had been transferring employment from father to son and so on.  Each coolie had a medallion as an identity piece, as long as you had one, you could work and you could get paid. 

Background: The Economist on the KKH

 

Image via Wikipedia

 

The Economist’s Asia View blog has this travelogue of their correspondent traveling on the KKH (the Karakoram Highway) that links China to Pakistan.  Built quite a few years ago (I think it started in the late 1960’s) by the Pakistan Army Corps of Engineers and the Chinese (oh, who’re we kidding!  The Chinese), it was opened to civilian traffic more recently.  As is usually the case in Pakistan, the Pakistani side of the KKR has fallen into disrepair and the Chinese have taken on the task of rebuilding the highway.  As the correspondent says,

Our bus pulls away, beginning the descent to the Pakistani border town of Sust. The imposing communist-style archway that informs travellers officially that they are leaving China is a less effective border marker than the change in the Karakoram Highway itself: the paved road, which I had grown accustomed to since leaving the Chinese border town of Tashkurgan in the morning, deteriorates into a muddy, pot-holed track.

Background: Maoism is bad Enough Without Arundhati Roy

The Naxalite Corridor in India

The Indian prime minister Manmohan Singh considers Maoism the biggest security threat to his country.  Considering India has two nuclear-armed and decidedly unfriendly neighbors, this is a pretty strong statement but I think he’s right.  China is more of a long-term threat, especially in terms of future competition for resources and markets while Pakistan remains a fissiparous, albeit nuclear armed, foe with little strategic depth.  But the Maoist (also called Naxalite after the village of Naxalbari in West Bengal) threat is both more immediate and more critical to the future of India.This counterinsurgency is a reaction to decades of misrule and corruption in some of the poorest Indian States with the worst record of local government.  In a sense, if it hadn’t been for the Naxalites, the long-suffering locals would very probably have had to come up with versions of their own (left, right, extremist Muslim, extremist Hindu, animist, you name it).

Pared down to its essentials, the solution is also somewhat simple (not easy, simple):  fix the military threat, fix the governance.  But India is somewhat ill-prepared to deal with threats like this.

Background: Hedge Fund Fees, Terry Smith and Warren Buffett

Terry Smith has written again about the kerfuffle he’s raised about his last entry on the Hedge Fund 2 & 20 deal.  He says that commentary on his calculation has centered either against the calculation methodology or basically said “so what?”  I don’t question his methodology, nor do I think it doesn’t rate some soul-searching.  However, there are a couple of other things that I really have an issues with:

Trade Notes: Play Short China Like Hugh Hendry?

A short view of China is not a new thing for me, but I’ve always been cautious about getting into that particular trade because of the surprises it can spring.  As Clusterstock mentions:

actually shorting China has never been a straightforward proposition. For one thing, due to the bubbly nature of the market, you can get your clock-cleaned really fast, even if you’re correct in the medium term. So you have to make related bets.

Trade Notes: Is There a way to Play Global Warming and Weather Volatility?

 

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The short answer would be an easy “Yes”.  This was emphasised most recently by the September returns of Clive Capital, Chris Levett’s commodity hedge fund based on macro calls.  He used to run a similar portfolio at Moore Capital before he left to start up his own firm in December 2007 (in case you’re wondering,  his middle name is Clive).  That fund returned 6.6% last month, that’s a pretty tidy profit on roughly USD 4 billion AUM.  More so considering it was up around 1.7% for the previous nine months.  I’m not a big fan of Clive because they tend to use rather a lot of leverage, don’t communicate much, and haven’t been able to protect the downside as they claimed in their marketing material.  In any case, the reasons for the performance are interesting,

Background: India’s Promise and the Labor Grenade in the Room

We are beginning to see images like this more and more in the financial press, and with good reason.  There is going to be a pretty big imbalance between India and China in terms of working age populations (and it is likely to get worse, given China’s huge male to female ratio imbalance).  In some ways, that presents a massive relative opportunity to India in terms of potential growth.  But India’s inability to provide neither more agricultural productivity and rural employment (where most of the population still lives) nor more factories (where the rural to urban influx could be absorbed) is a major potential headache.  As this story in the FT says:

Trade Notes: Stay on With Long Gold Like Soros and Paulson?

Image by World Economic Forum via Flickr

George Soros, notwithstanding his worry that Gold may be the ultimate bubble has stayed on his long Gold position.  He warns that

Gold is the only actual bull market currently. It just made a new high yesterday. In the present circumstances that may continue…