Gambling Butterflies

Swim for the camera…
Who was the most impressive world leader yesterday? Was it Obama celebrating his birthday, as well as another couple of days of strong market performance on the back of his weekend economic-council-master-stroke, or how about another Mr President (former President Bill Clinton that is) flying in to North Korea to meet with Kim Jon-Il and securing the release of two US journalist “hostages”, in what was publicised as a humanitarian mission but looked suspiciously likes an official engagement. Maybe it was Ahmadinejad, defying all detractors surrounding him and being sworn in for his second Presidential term in what must be the most blatant travesty of “democracy” taking a second-seat to “religious entitlement”. No, no, no – none could compare to the rippling set of arm-muscles and incredibly macho poses as perfected by the alpha-male Primeminister Putin – arguably still “leader” of Russia (Medvedev who?) – now Putin’s a leader his people can be proud of, as he butterflied his way powerfully across the water towards the camera lens, and posed with his bare torso riding high atop a Serbian stallion, the likes of Gordon Brown and Angela Merkel must have started trembling at the thought of being caught paddling around in their swimwear during their summer-breaks.

Who’s counting?…
There is a noticeable lack of photo-ops though from leaders in the Far East, representative of a slight wedge between the meeting of East and West. The markets are even more a different story right now however. Much of what we have been seeing in the recovery throughout European and US equity markets is but a play on the strength of the Asian economies, with China once again taking the lead and representing the single most important hope for continued growth – spurring advances in markets as diversified as commodities, currencies and even corporate credit spreads – everyone seems to be placing their bets on the ability of the world’s most populous nation to continue to hum along nicely and generate ripple effects throughout the global economy.

So what happens when it looks as though the GDP growth figures that China (and indirectly the rest of the globe) pin their hopes on, don’t add-up? It seems that the latest set of first-half numbers that were provided by provincial-level authorities are far higher than the central government’s national figure (RMB15.4bn according to the provinces, RMB13.9 according to the National Bureau of Statistics) – this unfortunately serves to multiply (no pun intended) concerns over the accuracy and trustworthiness of China’s statistics. Much has been made of this in the press in the last two days, but as with the overreaction to that one day fall in the Shanghai market last week (since totally erased and now riding higher at 107% YTD) the underlying message is still strong and too much emphasis cannot be placed on what is a common miscalculation that belies a still strong and promising growth rate.

Commodities as a currency…
Gold rises above $960/oz for the first time in a month, as technicals and the continued rally in commodities point to another run for $1,000/oz. Oil makes it noticeably above $71/brl as it sets up a new field to pitch its tent in within the new trading range, at the same time of course as the US$ continues to weaken - Cable now back at 1.69 after having shot through 1.70 for the first time since last November – watch what happens there as August is a very strong currency-market indicator of equity-market performance in the next quarter – the return of the risk-trade the major change in appetite for the falsely generated safe-haven of the US$ of course, and with asset classes all-around suddenly appealing to the yield hungry investor, there is a lot of cash that has been sitting idly that is now flowing through the markets – exactly as the central banks and “central looking’ governments want. Good job so far.

On Friday, the US super-star-non-farm-payroll numbers will be released (-328k cons). Markets yesterday already seemed to shrug off any bad news so let’s see how investors react. Is everything really quite as rosy as we want to believe, or have we simply resigned ourselves to the fact that the dark days are well and truly too much to bare? It now seems that no matter what happens in 2009, the incredible amounts of liquidity will continue to generate positive market sentiment unless an absolute disaster is witnessed in the news. Lehman lessons learnt last year will most likely ensure we make it through to Christmas in good spirits.

If government fails, gamble…
To end, a delightful little story caught the eye today about a province in Sicily made up of more than 2,000 inhabitants that had pinned their hopes not on divine intervention, nor on the intervention of their own state government (no hand outs here I’m afraid) but on another example of one of the greatest attempts to re-distribute wealth by taking from the masses and giving to the few (sometimes only one even) – the national lottery (capable of being either viewed as an expression of communism, or capitalism at-its-best). The head of the community had provided a percentage of their salaries to purchase as many lottery tickets as possible in Italy’s largest ever jackpot (close to $170m) in the hope they would share the winnings amongst themselves as well as use some of the proceeds for municipal projects.

Some nations have Prime ministers that lead through aquatic athletic example (but the people still suffer), others fudge results for the greater benefit of their own growth and assist the global economic recovery amongst “friends”, and others are so inept and corrupt that a local government believes it has a better chance of winning the lottery than receiving government assistance anytime soon – the odds of winning that lottery? – 625 million-to-one! Place your bets.