Volume IV, Issue 2/ February 2010
Welcome Letter
Social Science Fiction
Fitz here. I just returned from spot checking the Uruguayan health system with my eight year old son who has tonsils the size of golf balls. I am very happy to report our satisfaction with the care and attention this relatively minor ailment received including a follow up house call from a kindly bilingual doctor with a great sense of humor who had no qualms about a twenty kilometer trip down our bumpy dirt road to check on what was little more than a sore throat. And the cost for such care? Let´s just say I felt almost guilty when paying the bill which included the price of ten days antibiotics and some sort of fruity concoction with ibuprofen as the core ingredient.
Yet it is now Saturday the 27th so we best begin putting pen to paper and try to bring some semblance of order to this month´s research and musings. How time flies, especially when the month only has 28 days and the travel schedule starts heating up. Add to that the fact that only a day or two after I returned from the last company visit, Frau Fitz left for Cartegena Colombia to enroll in a month long intensive medical Spanish course. So it is just dad, the six dogs, three horses and our overworked yet loving maid around the farm. It´s a mad house but we have been having a lot of fun.
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This Month, Tim reports from the frigid boom town of Harbin in Northeast China. Often referred to as the ¨Oriental Moscow¨ Harbin not only has a fascinating history, it is an intrepid intellectual adventuring capitalist´s land of opportunity. Over the last several month´s the team here at Without Borders has been putting together our answer to the now burning China question. As you will see in the Actionable Intelligence section, and as we mentioned in the December 09 edition, we don´t believe there is a catastrophic collapse imminent in China yet the real estate markets and capital markets are more than overdue for a correction.
China plays by China´s rules and we ´loawai´ are little more than tolerated intruders in the best of times and intolerable nuisances when times are difficult. The fact that most of the major finance houses have discounted the risk premium in China and the rest of the emerging world boggles the mind until you start to realize they need to have a market for their own holdings as they lighten up on their exposure to ¨risk¨. In the Actionable Intelligence section we have two ways to profit and like our wildly successful ¨Trade Trade¨ that brought in a net profit of over 400% this recommendation has both a long and a short position.
The title for this month´s edition; Social Science Fiction is also the title of this month´s Pulse article. Academics, in order to win acclaim, research grants or a big prize with some dosh attached try to quantify their research with ´data´and ´expected outcomes ´ with four decimal places. For more than twenty five years, academic economists as opposed to practicing capitalists, have been trying to make Economics a ¨respectable¨ science while desperately trying to transform the field of study from the domain of the Worldly Philosophers who took note of how individuals willingly interacted with one another in the provisioning of goods and services to a formulaic science replete with Greek letters and tomes dedicated to the area under the curve. While always flawed, their accepted scientific method has now become the ethos of politicoramuses who run the politiconomy and the egg head strategists at bailed out banks. But it is now clear someone forgot to carry the one deep inside the sub equation inside one of the complex variables in the overall global economic equation. As we have written before a root problem was the definition of risk as volatility but there are indeed many other flaws that are now coming to the forefront.
Other than providing the letters, the Greeks have recently contributed to the world of economics and intricate formulas not only through their experiment with derivatives and balance sheet skullduggery but perhaps also by demonstrating (in the streets) that no matter how much one may want to quantify, it is a lot harder to quell an angry mob than it is to slide a variable or two to the other side of the equal sign. We will discuss the fallacies of central planning and the madness of entitlement heavy economies from China to California. We will touch on Greece, Spain, Iceland, Italy and the United Kingdom along the way as we take a tour through the global debt laden minefields that remain passable only because enough people are willing to suspend reality. In order to appreciate a Science fiction novel, the reader must be willing to suspend disbelief and accept the parameters outlined in the author´s alternate world. In order to accept the reasoning of Bernanke and Trichet one must be willing to do the same. Actually we will explain why we think that Social Science Fiction is far less grounded in today´s reality than anything Robert Heinlein or Neil Stephenson could ever create. We will explain why we believe that despite all the headlines, Greece, like Iran is a weapon of mass distraction and there are much bigger threats out there.
We will finish up this edition with an update on our favorite Merchant Bank which has seen its share price spike over 40% since our recommendation a few months ago and we will discuss why we think the best is yet to come.
Thank you once again for your time and patronage. We are honored to have you as a member of our wandering band of intellectual adventurers.
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