January 7, 2016

Absolute Return Partners - The Biggest Stories of 2016? 5-15min

It has always baffled me how the financial industry in general, and financial newspapers in particular, appear to be hell-bent on forecasting this or that in early January. I actually find it outright laughable when someone projects the FTSE100 to be at 7,000 by Christmas time, or for the U.S. 10-year T-bond to hit 2.5% by midsummer. How on earth do they know? The generally poor predictive record proves they don’t, I suppose. On the other hand, that is perhaps what the majority of investors want. If you belong to that majority, there is no need to read any further. You will be wasting your time. ... If you see any forecasts from me (and you do), you will note that (i) they are very long term in nature, and (ii) they are based on structural trends, not tactical (cyclical) trends. Why is that? Partly because I think short-term forecasting is a sucker’s game, and partly because I know for certain that the structural trends that we have identified will happen. It is only a question of when, but more about that later. ... You can hardly open a newspaper these days without some commentator looking to buy fame by attempting to predict the next crisis but, as I just pointed out, the last one isn’t over yet. Therefore a far more relevant question is: What is likely to be the next leg of the GFC? ... I think three topics are particularly likely to steal the limelight in 2016:
- All sanctions against Russia to be lifted and trade relationships to be normalised.
- The EM crisis widens as commodity prices continue to fall.
- The credit market is spoiling the party again.

Fortune - Amazon Invades India 5-15min

In pulling back the curtains, Amazon, one of the most private public companies in the world, revealed how it is racing to piece together an immensely complex puzzle—much of which it is having to build from scratch, at giant expense and with painstaking attention to the minutiae, as it tosses out assumptions that American customers have taken for granted for decades. In doing so, the company, an upstart here, has thrown itself into a knife fight with two privately owned and much more established Indian competitors—Flipkart Internet Pvt. and Snapdeal, owned by Jasper Infotech Pvt.—as well as a clutch of smaller Indian startups that are nipping at all of their heels. ... It is a fight that Amazon is far from certain of winning, yet one it cannot afford to sit out. The company predicts that India will be its biggest market after the U.S. within a decade and that the Indian e-commerce market as a whole will ultimately be gigantic. ... It is not hard to see why the battle for India is this fierce, nor why Bezos, famously obsessed with analytics, would see it as essential for Amazon’s future. The numbers alone are dizzying. India’s population of 1.25 billion is four times as big as the U.S.’s and more than double Europe’s. And since the median age is 27—a full decade younger than Americans’—the trajectory will be steep. India will overtake China as the world’s most populous country in just seven years, according to the UN. It is now the world’s fastest-growing major economy, and the IMF projects 7.5% growth next year. The roads and railways might be creaking under the strain. Many laws governing business are a confounding tangle, including a law forbidding foreign companies from selling products directly to Indians. That law effectively renders Amazon India a platform for vendors—akin to its “fulfillment by Amazon” program in the U.S. ... Barely one-quarter of India’s population has access to the Internet at home, whether on a smartphone or computer, and only a small fraction of those have ever shopped online. ... By some estimates the company is spending nearly $25 million a month in India already.

The New York Times - Maritime ‘Repo Men’: A Last Resort For Stolen Ships < 5min

Mr. Hardberger is among a handful of maritime “repo men” who handle the toughest of grab-and-dash jobs in foreign harbors, usually on behalf of banks, insurers or shipowners. A last-resort solution to a common predicament, he is called when a vessel has been stolen, its operators have defaulted on their mortgage or a ship has been fraudulently detained by local officials. ... Tens of thousands of boats or ships are stolen around the world each year, and many become part of a global “phantom fleet” involved in a broad range of crimes. Phantom vessels are frequently used in Southeast Asia for human trafficking, piracy and illegal fishing, in the Caribbean for smuggling guns and drugs, and in the Middle East and North Africa to transport fighters or circumvent arms or oil embargoes ... Usually the vessels are not recovered because they are difficult to find on the vast oceans, the search is too expensive and the ships often end up in ports with uncooperative or corrupt officials. ... sometimes, when the boat or ship is more valuable, firms like Mr. Hardberger’s Vessel Extractions in New Orleans are hired to find it. His company occasionally handles jobs involving megayachts, but more often the targets are small-to-medium cargo ships that carry goods between developing countries with poor or unstable governments.

Wired - Department of Defense Head Ashton Carter Entlists Silicon Valley to Transform the Military 5-15min

The DOD of course has a long history of jump-starting innovation. Historically, it has taken the megafunding and top-down control structures of the federal government to do the kind of investing required to create important technology for the military. Digital photography, GPS, the Internet itself—all were nourished by defense contracts before being opened up to the private sector, which then turned them into billion-dollar industries. ... Now the flow has reversed. Defense has been caught in the throes of the same upheaval that has disrupted legacy industries, unseated politicians, and upended global dynamics. In the digital age, innovation more often comes from smaller entrepreneurs than from the hierarchical structures that were the hallmark of 20th-century government and business. ... Defense contracting is notorious for bureaucratic lethargy and technological backwardness. And executives are leery of appearing to be too close to the US government while they seek to expand overseas. Put bluntly, they don’t want to alienate potential customers. ... The Valley is a place where brainpower is its own kind of currency, and Carter, who holds a PhD in theoretical physics from Oxford, made an impression on the locals. ... somehow Carter must instill the seeds of a cultural and logistical overhaul that will make the modern military-industrial complex nimble enough to provide the kind of innovation and support its 21st-century fighting force needs.

The New Yorker - The Commercial Zen of Muji < 5min

Muji was launched in Japan in 1980, as Mujirushi Ryohin, which means “no-brand quality goods.” It was intended to be a generic line for the Seiyu Supermarket Group, boasting the tagline “Lower prices for a reason.” Initially, Muji included only forty different products, mainly food and household goods. Today, it is an independent two-billion-dollar company, selling more than seven thousand items ranging from furniture to soap. It keeps prices low by paying close attention to processing and packaging (most of Muji’s paper products are unbleached), and by using undesirable and industrial materials, which are cheaper in bulk (it once famously sold “U-Shaped Spaghetti,” made from the discarded ends of pasta). ... According to its 2015 year-end report, Muji is currently in what it calls its “jump” phase (preceded by “hop” and “step”), defined by growth abroad and efficiency at home. ... Muji has succeeded in part by incorporating the aesthetic consequences of cost-cutting into its design philosophy.