Gustav takes aim at N'awlins, oil prices

I think the story is in NATGAS rather than crude. If Gustav is anywhere near what Katrina was, the effect should be more pronounced in Natgas.

What with the Russian imbroglio and Natgas already heavily oversold, I expect gas to go upto 10.5. For the record I am long UNG at 38.5.

Chindia

An interesting paper by W. Michael Cox and Richard Alm of the Dallas Fed (link above) posits India is poised to benefit more in the long run from its services driven approach towards development over China - which has taken a more conventional manufacturing/export driven route towards development.

A couple of things stood out: In 1980 China's per capita income was $556 in 2007 it was $4766, India's on the other hand was $917 and $2534. Compounded annually China's per-capita income growth rate in the last 27 years has been about 8%. India's on the other hand was 4%. Note these are NOMINAL figures in US $. Given that the CPI denominated in US $ has probably been around 6% in this period (http://www.economagic.com/em-cgi/data.exe/feddal/cpimsa). India's REAL per-capita growth in 27 years has been -2% and China's +2%.

The paper says that the typical Indian services worker generates about $25000 per year in productivity. Based on personal experience I think that's too high. It should be in the $15000 (About 6,00,000 INR) per year region: We have 35 employees our revenue is about 200,00,000 INR - which makes the per employee revenue to be about 5,70,000 INR. Admittedly my sample is very skewed and I am only considering one imperfect firm. But I believe my company is the typical small-sized services firm that will make up the bulk of future growth in services exports. That would put the services worker's productivity squarely in the same range as China.

For all practical purposes China is a middle-income country (or will be shortly), India on the other hand has languished in the emerging column for the last 3 decades and looks to continue doing so for my lifetime. I think India's time as a counter-weight (economically and geo-politically) to China is past.

Pakistan Outlaws Falling Prices

Securities can trade within their daily limit of 5 percent "but not below the
floor-price level'' of yesterday's close.

I had to re-read this a couple of times. So they are outlawing the fall of stocks prices below the last closing price. While they're at it why don't they outlaw gravity, or perhaps one can't fall below however much one has risen.....

This is the original post on the Karachi Stock Exchange: http://www.kse.com.pk/kse4/notices2/shownotice.php?id=004177

A Savings glut

There's a theory out there (can't remember who came up with it) - the problem with the world is not too much debt but rather too much savings. Because of the Chinese one-child policy, China's Seniors have saved like crazy. (The thinking goes since you won't have enough children to take care of you - you need to save). All these savings need to find a home, hence the financial engineering to create new products to capture these savings.

Which of course means that with ample supply of debt - consumers, corporations and investors go on a buying binge. Guess what happens when the binge ends? I doubt the saver is going to be immune from the after-effects.