Wednesday, December 28, 2011

The military intelligence non-event and non-failure of Kim Jong Il's death

Most of the world knows by now of the death of North Korea's dictator, Kim Jong Il.  You may also know it took more than 48 hours before the information was publicly announced to the world and the announcement came from the North Koreans themselves and not from any western intelligence services.

The New York Times recently ran an article claiming this is a failure of western intelligence services:
For South Korean and American intelligence services to have failed to pick up any clues to this momentous development — panicked phone calls between government officials, say, or soldiers massing around Mr. Kim’s train — attests to the secretive nature of North Korea, a country not only at odds with most of the world but also sealed off from it in a way that defies spies or satellites.

My question to the New York Times and everyone else is how do you know we didn't know about it?  IF our intelligence agencies had picked up the information and then broadcast this news to the world do you think this would have been a good use of that intelligence gathering method?  News and information coming out of North Korea is challenging at best so IF our spooks had a channel to this sort of high level information why should we let the North Koreans know we have the information ourselves?

During the Clinton administration it was leaked that our CIA was spying on the Japanese during trade negotiations.  Talk about short sighted. If you are successfully gathering information why go public with your success? From the LA Times:
Among the successes, sources say, is strong intelligence information the CIA provided on the Japanese during this spring's heated auto trade negotiations between the Clinton Administration and Japan. "We've done really well with the Japanese," one source said.
Now of course it is entirely possible our spooks did not find out about Kim Jong Il's death until the public release.  I hope not but it is entirely possible. If so there is hope on the horizon. In 2008 Orascom was granted a monopoly license to provide cell phone service in North Korea.
Orascom Telecom Holding was awarded a Greenfield license to establish and operate a WCDMA (3G) network in DPRK in January 2008. koryolink was launched in December 15th 2008 as a joint venture between OTH (75%) and Korea Posts and Telecomm Corp. (KPTC) (25%). koryolink has deployed its 3G network to initially cover the capital Pyongyang - which has a population of more than 2 million - with an ambitious plan, already under implementation, to extend coverage to the entire country. OTH has over 431 thousand subscribers and 100% market share as of December 2010.
All it would take is a few well placed  bits of hardware and software installed onto that network to provide a flood of data for our intelligence services to chew through. Furthermore cell phone transmissions can be remotely detected and analyzed if a physical connection to the network cannot be obtained.  As the North Koreans discover the convenience of cell phones the challenges of intelligence gathering will lessen.

Additional reading:
http://www.foreignpolicy.com/articles/2011/12/28/kim_jong_il_funeral_photos
http://news.yahoo.com/funeral-north-korean-leader-amid-worry-future-000414786.html
http://www.orascomtelecom.com/regional_Presence/default.aspx
http://g.co/maps/jw6kg

Monday, December 5, 2011

Twitter Linkage roundup

Some good links and tweets from my twitter stream:

RT @QuoteJunkie: "To Avoid Criticism, Do Nothing, Say Nothing, And Do Nothing." - Elbert Hubbard #Quotes
Stunning @BrazilFinance: Anyone who has doubts EU is a failure should read this: http://t.co/KLCoVjjk
RT @ForexLive: ForexLive: Fed swaps with ECB nearly $900 mln http://t.co/3n9xBqzT
I know I'm repeating myself, but these charts are going the wrong way if you are bullish: http://t.co/Mz0UM73y http://t.co/uIGD6kVb 
Skullcandy's Groupons are creeping up to higher and higher priced inventory http://t.co/0N8VKSPU First $59 deal $SKUL %SKUL
RT @tomkeene: Europe's shrinking money supply flashes slump warning - Telegraph http://t.co/J9z8nbWa ...money supply doesn't matter...right.
RT @OpenSecretsDC: What companies have your lawmakers personally invested in? Find out in our congressional wealth database: http://t.co/fTWkmsBV #tcot #ows
RT @relevantorgans: How can 23 yr old son of a lifelong public servant drive a red Ferrari? The magic of socialism! Now shut up and dig. http://t.co/MoDsIQTM
RT @Uldis_Zelmenis: Hit of the day by Citi: For 35 years post WW2 real returns on debt were negative. The negative returns in th (cont) http://t.co/IfcqeNhs
Falling Chinese home prices http://t.co/FEtKhpIg
A snippet on Hugh Hendry's recent trading strategy http://t.co/IaWq45cG
RT @theanalyst_hk: Seriously, how could I be bullish? http://t.co/YnPoztie
LED bulb benefit/cost at inflection point http://t.co/Qpz8qu7x #yesiamageek
@BadassoftheWeek swimming lessons http://t.co/hJRhyhdH

How much better can it all get? http://t.co/yyRRYdfv ---- Looking at whether all the good/bad news is out
RT @jennyandteets: Guys, know who likes to hear about your fantasy football team? Your fantasy girlfriend #yourekillingme -- I have enough problems with the real world, I don't need to stress about my fantasy life as well.

Tuesday, November 22, 2011

China's lending in context -- Time to pay the bill

Earlier this month I highlighted the continued deceleration in Chinese lending growth from it's peak in late 2009.  Just how massive their credit growth was unknown to me until this recent post and chart by Global Macro Monitor

The growth in lending right after the 2008/09 credit crisis is truly spectacular, even compared to other high growth Asian economies.  I'll snicker even more when I hear talking heads gush about how the Chinese mandarins were able to 'navigate' their way through the economic crisis and their ability to manage such a large economy.
Bunk.
They just called up the bankers and said LEND.
The bankers asked,  "How much?"
It was not some Chinese mastery of the economic cycle or superior technocratic skill; it was simply an ability to throw lots of money at the problem. Unfortunately for China the bill is now coming due.

Friday, November 18, 2011

Linkage roundup

Some reading material for you from my twitter stream:


Italian default scenarios by Credit Writedowns http://t.co/XZ1feKq5 -- The situation in Italy is getting worse. 
Doubline Emerging Markets Income Fund Presentation. Good emerging market review http://t.co/x5OicI8J
RT @BrazilFinance: m'fer... RT @zerohedge: Presenting Europe's Remaining 2011 Bond And Bill Auctions... All 104 Of Them http://t.co/jjJOxRPi
RT @thenewstribune: Crystal plans to open Friday, but #WhitePass and The Summit at #Snoqualmie in wait-and-see mode: http://t.co/bok5eeQz -- ski season opens early in the Pacific Northwest. Go global warming!
Social media decision tree http://t.co/tZ4nxDuZ
Interbank credit stress examples #2,346 and 47 http://t.co/Mz0UM73y http://t.co/uIGD6kVb -- Until these stop rising I'm not getting bullish.
Spain/Germany spreads at fresh highs http://t.co/Q8tuP3eB -- not good
RT @AlephBlog: Europes liquidity crisis http://t.co/deWTyNf8 The spread on senior unsecured bank debt measures EZone financial credit stress: high now $$
RT @EpicureanDeal: Spot on: "The hiring of Chelsea Clinton doesnt so much debase... TV news... as reveal its true value." http://t.co/rV9rTGB8
RT @niubi: A Desperate Apartment Seller In Beijing | Sinocism http://t.co/DuDojIWZ
RT @PragCapitalist: OECD: LEADING INDICATORS POINT TO SLOWING GLOBAL GROWTH: Just in case Europe didnt have you feeling uncertain e... http://t.co/V1yAL4Pu
Chinese ghost cities get really wierd: http://t.co/Q4B4UeS5
Now the WSJ gets bullish on munis: http://t.co/V4VX0xgR I've been bullish a while, still holding $MUB http://t.co/Z2xoDWcv
RT @creditplumber: Great little 18min TED video about lie spotting by Pamela Meyer. http://t.co/wbW1GT3w via @Ritholtz
RT @pdacosta: Big Obama donor got no-bid $433 mln contract to supply experimental drug for threat that may not exist http://t.co/qkGMXD6A h/t @AdamPSharp
RT @BergenCapital: $MSG - a lost NBA season is about 100mm of EBITDA off of $MSG (40% of FY 2012 EBITDA)
Skullcandy $SKUL keeps unloading inventory via Groupon. The latest: http://t.co/DNDCLhaE
Time lapse video of Earth from space station. Very beautiful! http://t.co/hrdDsA2m
RT @stlouisfed: New data available on FRED: Indexes on housing affordability from the National Association of Realtors http://t.co/z4APddru
RT @thetailchaser: USD 3m Libor fixings. It seems some institutions r getting squeezd out of the market. Takin other institutions w/ them http://t.co/WPzOVMDH
How much more can the ECB buy? http://t.co/z2m5L0R7
RT @ritholtz: Joke of the day: The Italian debt crisis is now being renamed Lehmancello $$
RT @izakaminska: Another brilliant blog from Lew Spellman http://t.co/bgmQdipu
How you fail is important and continually praising kids for 'being smart' can backfire. http://t.co/ycfOUekP
RT @PragCapitalist: IS THE CHINESE PROPERTY MARKET COLLAPSING?: Despite all the clamoring over a new recession, it looks like the U.... http://t.co/Rhl9Rmww
Motivation -> http://t.co/74a0c1yL

Thursday, November 17, 2011

Inflation expectations in the bond market

Here's an update on inflation expectations as expressed by the bond market.   As the nominal 10 year yield continues to drop it has pushed the TIPS real yield to nearly zero.  Some investors may grouse at the option of buying a security that guarantees a zero real return for the next 10 years and I agree with their sentiments. 


As to why this situation exists I would suggest it is a result of the Fed's desire to reflate the economy by numerous unconventional means (zero short rates, all the various flavors of QE)  


The spread between nominal and real yields has remains remarkably stable near the 2% mark with some noise on either side.   If we have another financial crisis, this time in Europe, I wonder if we'll see another drop in the implied breakeven rate....

Tuesday, November 8, 2011

Linkage roundup

Some reading material for you from my twitter stream:


http://t.co/vXWLZxuV - Italy near tipping point of increased margin requirements. I'm not the only one talking about this
RT @zerohedge: Hugh Hendry says he has made bets that will deliver a 40-to-1 return if the ECB cuts rates below 1% next year http://t.co/PAv4msUK
RT @edwardnh: The fact Greece's exit from euro has been discussed openly is seismic shift http://t.co/QVaWF7si
I'll get bullish when this stops going up. http://t.co/6vmUhc60
97% of family businesses don't make it past the 3rd generation http://t.co/MZAwrwRK
RT @FGoria: MT @M_McDonough: Italian CDS implying, country may be at risk of losing its investment grade status: http://t.co/mIVWCwkk
RT @mbusigin: Note that we did work on this in August, which gave us a different (bullish) signal: http://t.co/ivxLrhzB
RT @mbusigin: The few times realised volatility has eclipsed implied volatility, it presaged large declines: http://t.co/zTRw4ZDE
RT @edwardnh: Greece gets ultimatum: accept austerity plan or forgo extra bailout cash | Business | The Guardian http://t.co/DZSOBkDY -- Greece later backed down.
RT @edwardnh: France and Germany to withhold aid, Greece to be ejected http://t.co/WtNwsF6M #in $$ 
Greek referendum provides political cover http://t.co/MFDzDUCk
RT @PragCapitalist: THE GREEK REFERENDUM AND THE ROLE OF DEMOCRACY: I set off a bit of a firestorm on Twitter this afternoon when I ... http://t.co/O8GZFHvQ
New international bond etf's for Germany, Canada, and Australia $aud $cad $bund http://t.co/OemicVIk
Balestra Capitals Matthew Lucket Talks Gold, Deleveraging Story, and China Credit Problem http://t.co/9vGl387V @historysquared

Monday, November 7, 2011

China lending stats update -- The decline continues.

It has been over a year since I last highlighted the slow decline in official lending statistics out of China. Since then not much has happened regarding the direction of Chinese lending growth; a slow decline continues.

I point you to Steve Keen's debtwatch for why the rate of growth in lending is important.

The rate of lending growth peaked in October 2009 and has been declining ever since.  Compare this to the Chinese equity markets and you'll see how Chinese stocks haven't gone anywhere since October '09 either.


Unofficial lending is naturally harder to track but there are anecdotal signs of stress in this sector as well.    http://historysquared.com/ and http://www.alsosprachanalyst.com/ are two good sites to follow the 'underground' lending market.