Thursday, April 27, 2006

Someting nasi goreng on

And for some reason, this was in the Australian Financial Review, but escaped my review of the more widely read general newspaper, the Sydney Morning Herald, a sister publication. Shows the story is being handled gingerly.
Arms bust puts Indonesia under the gun (gotta have a ticket to Read)
A small group of mainly Indonesians flew to Hawaii earlier this month but they weren't planning to bring back the usual souvenirs.

They went to Honolulu to buy 245 air-to-air Sidewinder missiles, 882 Heckler & Koch MP5 guns, 880 HK 9mm handguns, 16 HK sniper rifles, 5000 rounds of ammunition and an aviation radar system.

But on April 9 their plans came unstuck. The group, including known arms dealers for the Indonesian military and two Indonesian Air Force officers, was arrested by the FBI as they tried to make the illegal $US40million ($54million) purchase from an unnamed US company.

Four arms dealers - alleged leaders Hadianto Djoko Djuliarso and Ibrahim bin Amran, both Indonesian, plus a Singaporean and a Briton - were taken to Michigan and charged with conspiring to violate the US Arms Export Control Act. The two leaders were also charged with money laundering offences. The two officers, both lieutenant colonels, were deported.

The embarrassing incident comes as Washington gradually lifts a long-standing arms embargo put in place after the Indonesian military, known as the TNI, massacred dozens of people in Dili, East Timor in 1992.

Last November, Washington announced the arms embargo would be lifted if Indonesia's human rights record improved and if the TNI - which is known to be involved in many other illegal activities including logging, prostitution and drug running - was reformed.

Just last month, US Secretary of State Condoleezza Rice said during a visit to Jakarta that Indonesia had made progress in combating military corruption. As part of these closer ties, a senior Indonesian military delegation is heading to Washington this week to discuss defence and security. But, for some in Indonesia, the Americans are clearly not moving quickly enough.

"What you've got here is an overlap of regimes," said Bob Lowry, a former Australian military attache in Jakarta and expert on the Indonesian military. "It's an example of the old system and people not adjusting to the new realities."

This latest escapade by the TNI, however, is unlikely to damage the rapidly thawing relations. After all, Washington needs the under-equipped TNI brought up to strength so it can help combat a rise in Islamic extremism and the obvious threat this poses to the West.

"America's interest is to cultivate Indonesia again in the context of the war on terror," Indonesia expert and Australian National University professor Harold Crouch said.

"They won't be shocked to know there are some crook arms dealers coming from Indonesia. I think that's well known."

Nevertheless, the incident in Hawaii has the Indonesian government ducking and weaving. Defence Minister Juwono Sudarsono and the newly installed head of the military, Marshal Djoko Suyanto, said that of the weapons being purchased in Hawaii, only the radar system was actually ordered by the Air Force from Djuliarso's company, PT Ataru Indonesia. The rest, including the missiles, were for someone else.

"I met with the US ambassador and he understood our position," the Defence Minister said. "This case is about a recalcitrant business partner and, indeed, we will review our partnership [with Djuliarso]"

But many find this denial hard to accept. There's the presence of the two Air Force officers, statements by the arrested men that they were acting on behalf of the Indonesian government and, thirdly, the fact no one else in Indonesia has a need for heat-seeking Sidewinder missiles, which are used by fighter aircraft to shoot down other planes and cost about $US80,000 each. Further, the Indonesian military has previously expressed a desire to buy Sidewinders.

Mr Lowry said he had no doubt it was all done with the knowledge of the Indonesian Air Force. "The sin is that they've been caught out because the new regime doesn't allow it," he said. "What they've been caught doing was quite common until just recently.

"It's quite a large number of missiles. Who the end users of these things were going to be is one question. Under normal circumstances it would be the Indonesian Air Force. I can't image who else they'd pass them on to."

US authorities have stated the case does not involve the exporting of weapons for terrorism.

The 14-year arms embargo has left the TNI badly in need of new equipment.

"They [the TNI] are certainly rundown," Professor Crouch said.

"A lot of their planes are not flying and a lot of their ships can't go to sea. Technologically they're in a bad state."

Meshugganah Molly

Oy, that Molly Ivins. She's such a Meshugganah!

Of rocks and stocks ,and streams of consciousness

This post is destined to be a string of tenuously connected thoughts, all starting with some folks down Texas way I happened acrosst.

The Texas Hedge Report observed "For most of this month, the physical prices of gold and silver have been rising nearly every day, yet the mining stocks have been stagnating and in some cases falling. Over the last 3 months, the operational leverage that mining stocks are supposed to provide has not been seen." And then asks, "What gives?"

Guambat has previously pointed out that, though you might own a gold producing stock, you may only get the shaft.

The Texans set out to answer their "What gives" question and make similar observations:
[L]et us reiterate that long term we are extremely bullish on the prices of gold and silver. They are the only two currencies in the world that are not someone else’s liability. In a world of fiat money chaos and destruction, the long-standing monetary stability and finite supply of both gold and silver will be increasingly desired by investors around the globe. In recent days, the rally has corrected twice, but for long-term investors, we think the U.S. Dollar’s imminent and unrelenting weakness will be the catalyst for much higher prices on both metals over time.

If one is bullish on the precious metals, the question then becomes how best to play their upcoming appreciation? Is it stocks, futures, options on futures, or simply owning the metal itself through ETFs or physical storage? Mining stocks we felt had greater upside, but also greater downside than the physical. We wanted to own the metal stocks of established miners as we were partial to the operational leverage they provided to investors. A 1% increase in the price of gold for instance; often times meant a 2% or greater increase in net earnings for these mining companies. Junior miners were and still are too speculative for our blood – though certain juniors may offer spectacular returns, many others will go up in smoke.

However, over the last 3 months, the physical prices of both gold and silver have done far better than the mining stocks. Gold has tacked on nearly $100 to its price and silver has jumped even more percentage-wise recently, yet many components of the XAU and HUI haven’t budged or are barely up in the same time frame.

We think the reason for this divergence is several fold. First, the gold and silver stocks may have gotten a bit ahead of themselves as the underlying earnings of the companies need to play catch-up with their stock prices.

[This can happen if, e.g., you decide to use spot metal prices to value the company instead of the company's own wisdom: "As the commodity price climb has steepened, brokers have exploited a discrepancy between analysts' target prices for resource companies and the "spot" prices at which those companies sold the ores they dig out of the ground. The gap exists because analysts tend to base forecasts on prices over time rather than on more volatile spot prices. As a result, their valuations typically lag a price boom. Brokers call this tendency to undervalue resource stocks "the biggest opportunity in world equity markets"." So, if you've paid top price for something, not to worry; you just got ahead of yourself. Everything will be A-OK.]

Secondly, a lot of the miners have shot themselves in the foot with higher than expected cash costs due to oil and production shortfalls that have limited to some extent the EPS growth achieved with higher physical prices to gold and silver. [E.g., "oops, I've been getting so much more for my rocks, I forgot that I'd have to pay so much more for the other guys' rocks."]

Third, places like Latin America with recent left-leaning presidential elections in Bolivia and Peru have turned increasingly hostile towards producers. The growth of Hugo Chavez type dictators in Latin America could conceivably be beneficial to the actual metal prices as supply is reduced, but negative towards the foreign miners that occupy Latin American mines that now run the risk of higher taxes or perhaps even nationalization.

Fourth, many mining companies are (in our opinion) extremely poorly run – perhaps more so than any other industry we follow. Most mining companies seek to grow their production profile at any cost. This means issuing a great deal of heavily dilutive shares annually to “build the business”. Coeur d’Alene (ticker: CDE) , for example, has seen its share count grow about 30% per annum from 1997 thru 2005 – providing a constant headwind to shareholder returns. Coeur has further diluted shareholders by over 10% since the start of 2006! As one could imagine, Coeur’s silver production hasn’t grown anywhere near 30% per annum over the last decade, which means that shareholder dilution in terms of falling metal production on a per share basis has been real. This is not to single out Coeur alone (we have no position in the name), as nearly every mining company has perpetrated this offense on shareholders. [Whilst others are busily and happily buying back their shares.]

Lastly, the reason that has perhaps been the greatest contributor to mining underperformance of late is skepticism. Gold and silver are going up and a great deal of the crowd is anticipating a large pullback. Like in the oil complex a few years ago, higher highs in the price of the commodity are met with a great deal of disbelief by a young Wall Street crowd that was in diapers the last time commodities really performed well.

It was that third observation that fired me up. CNN had a similar worry when it recently ran a story about "5 things to watch in energy: here's what's moving the market over the next few weeks". One of the five things was "Nationalization". Now I'm not usually asleep over the morning Sydney Morning Herald, but I must have missed the huge nationalization movement that is sweeping the world of oil (and maybe other commodities?). This is what CNN said about that:
Venezuela is most often in the news with plans to nationalize oil industries, a move many say discourages international investment in that country's infrastructure, hurting production.

A news report Monday said that Venezuela's left-leaning president, Hugo Chavez, is making plans to sharply raise taxes and royalties on foreign oil operations in the country.

Analysts fully expect the trend toward nationalization to continue for the foreseeable future and say its happening in not just Venezuela but across most of South America and in Russia as well.

And you can add another country to the list: Mexico.
So, Guambat burrowed into Google and found that there is, indeed, a nationalization blip on the market radar, mostly in South America, but with models for Russia, AsiaPacific islands and who knows where else.
Washington's worst nightmare: Bolivian President Evo Morales, during his recent successful campaign, repeatedly described himself as Washington's “worst nightmare.” Ollanta Humala Tasso, the front-runner at the end of the first round of the Peruvian presidential race, could well be Washington's next “worst nightmare.” Sharing a political philosophy with Bolivia's Morales and Venezuela's Hugo Chávez, Humala promises to move Peru in a very different direction than that followed by outgoing President Alejandro Toledo Manrique.

Other components of Humala's still hazy economic policy include state participation in “strategic sectors” of the economy, the renegotiation of multinational contracts, and a windfall profits tax on foreign mining companies. Humala Tasso has also criticized the Camisea natural gas line, a centerpiece project of the Toledo administration, calling for a revision of the contract and higher royalties for the government.

[The president said,] “There are some people who think, just because they have money, they have the right to intervene in the democratic process,”. [Oops, that quote was from the outgoing President and not from the incoming one. And he wasn't complaining about Washington, but Caracas.]
And so it does indeed seem that we are on the brink of yet another outbreak of bleeding heart commie socialist revolutions in South America. And just in time, too, because all those old Che t-shirts are wearing pretty thin. [See, I warned you the thoughts here were going to stream.]

There is a very supportive picture of the revolutionaries in this article: "Bolivia, Evo Morales and the Progressive Mandate in Latin America" To give you a taste of this comprehensive overview of the so-called mandate, here are a couple of excerpts:
On January 21, on a hill outside of La Paz, a traditional ceremony marked both a major shift in Bolivian politics and a milestone for the growing New Left in Latin America. At Tiwanaku, a site of pre-Incan ruins significant to the country's indigenous populations, Evo Morales, barefoot and dressed in a red tunic, received a silver and gold staff from leaders of the Aymara people.

It was the first time in 500 years that this ritual transfer of leadership had been performed in Bolivia. With a surprising 54 percent of the vote in a multi-party race, Morales not only secured the margin needed to avoid a run-off vote, he obtained the largest mandate ever given a president in Bolivian history. [Somehow I always figured a mandate would involve at least 3/4ths of the people, but there've been pollies world over who would have me believe otherwise.]

He takes power as the first indigenous president in a country where nearly two-thirds of the population identifies with the Aymara, Quechua, or other indigenous groups. The same fraction of the country lives in poverty and the divide between rich and poor closely follows racial lines.

Morales has announced plans to nationalize the country's gas reserves, rewrite the constitution in a popular assembly, redistribute land to poor farmers, and change the rules of the U.S.-led war on drugs in Bolivia. If he helps spur on the radical change that his social movement base demands, he will face pressure from corporate investors and from the White House. If he chooses a more moderate path, Bolivia's social movements have pledged to organize the same type of strikes and protests that have ousted two previous presidents in the past two years.

For their part, social movements supported Morales as the best option in the electoral contest. However, their allegiance to the state remains limited. "The [54 percent] isn't a blank check, it's a loan," said political analyst Helena Argirakis to Los Tiempos, Cochabamba's daily newspaper. Her colleague Fernando García added, "The social movements' support of Morales will always be conditional."

At the same time, Morales faces severe external pressure if he antagonizes foreign creditors. Conservatives in the United States have been horrified by the success of Morales whom they regularly slander as a narco-terrorist because of his support of coca growers. (Although coca can be used to produce cocaine, the natural plant leaves are used to make tea, have traditional importance for the country's indigenous people, and are almost impossible to abuse in their natural form.)

Bolivia owes large debts to international financial institutions, including the World Bank, the IMF, and the Inter-American Development Bank. This gives the U.S. an effective veto over future loans to the country and thus the potential to plunge Bolivia's shaky economy into economic crisis. Domestic right-wing factions, centered in the wealthy province of Santa Cruz (the heartland of Bolivia's energy industry), are threatening to secede if resource extraction is nationalized. These conservatives are ready to side with the U.S. and the IMF against Morales should an international showdown take place.
The article goes on to look at the rest of the South American countries leaning the same way. I'm sure I'd have been much better educated if I had read the whole thing. Let me know what it says, OK?

And as we try (from each according to his level of sleep to each according to his care factor) to come to an understanding of the complexity of this situation, it bears repeating that all these events have particular regional and character issues. This is not some monolithic South American Caliphate. Even the left is critical (and there have always been revolutionaries more revolutionary than thou), as this article points out:

Macho Men and State Capitalism - Is Another World Possible?
Chavez is drumming up support in a rhetoric that seeks to reminisce of those days of glory when Simon Bolivar intended to unite Latin America. Chavez' Boliviarian revolution suddenly seems the only viable option, not only among the non-elite in Latin America but also gathering support among once disillusioned leftists worldwide.

However, the true democratic debate has been silenced in this simplified two-sided fight between the projects of macho men. While Chavistas and anti-Chavistas tirelessly battle and Venezuelan families are divided, little space seems to be left for alternatives and critiques of the supposed Chavista revolution, without being labeled anti-revolutionary. While the anti-imperial and anti-capitalist discourse of Chavez attracts supporters worldwide, including even such world famous writers as Noam Chomsky and Eduardo Galeano, Chavez is busy making direct business contracts with oil giants such as Petrobras, ChevronTexaco, BP, ExxonMobil, and Shell. As Chavez claims to represent the indigenous population of his country, many questions remain about these mega-corporate ventures, as indigenous voices from over all over the continent speak of the effects of these oil empires, that is, if anyone wants to listen. Where are the dissident feminist, environmental, and indigenous voices to create a real revolution?

Chavez has teamed up with Brazil's now scandalous Lula to create the world's largest oil corporation PetroAmerica, the combination of the two state owned companies PetroVenezuela (Pdvsa) and Petrobras. While Chavez is sending cheap oil to poor Latino immigrants on U.S. soil, he ignores the lives of indigenous people at home and his ventures, if continued, will lead to their eventual extinction.
With all that homegrown action down South America way, there is bound to be plenty of opportunity for Monroe Doctrine chest beating up North America way. Poor old Georgie, though, won't be able to have much to say about it because his tongue will be tied by the immigration debate. Even he knows he can't get away with making us happy with Mexican immigration at the same time he'd be serving up images of Pancho Villa.

But that won't stop others, like this chap, Ronald Bailey, at ReasonOnline:
The problem is that the vast majority of the world’s remaining oil reserves are not possessed by private enterprises. Seventy-seven percent of known reserves belong to government-owned companies. That means oil will be produced with all the efficiency associated with central planning. Michael Economides estimates, for example, that it will take $4 billion in investment to keep Venezuela’s oil production at current levels. Yet that country’s Castro-wannabe president, Hugo Chavez, is investing just half that.

If ChevronTexaco, ExxonMobil, or other private companies actually owned the reserves, the world would be in a much more secure position with regard to oil production. Instead, we are subject to the whims of figures like Chavez, Russia’s Vladimir Putin, and Iran’s Mahmoud Ahmadinejad, and must worry about the doubtful stability of their personalities and regimes.
Say what you will of his preference for private ownership of oil production, I think he was entirely remiss in not mentioning the government-owned companies of OPEC when he spoke of Venezuela, Russia and Iran. While Iran and Venezuela are OPEC members, the total list includes:
OPEC National Oil Companies (NOCs):
Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela

Golding the Tiger Lilly

"China's 130 securities houses lost 15 billion yuan (A$2.5 billion) in 2004 and probably more in 2005. All but a handfull are technically bankrupt.

Embezzlement and criminal activity is so widespread in the securities market that the regulator is moving to take all cash settlements out of the business and hand it over to the banks under a complex custodial arrangement.

It is a bankrupt industry, riddles with scandal and commonly considered to be rotten from top to bottom.

'There is effectively no institutional investor class here in China. There is 1.6 trillion yuan (A$267.5 billion) in people's savings accounts but no one wants to put it into the mainland stockmarket. The corporate governance sucks; the intersts of management are not aligned with those of shareholders. It is rotten from tope to bottom. And there are no real reform measures -- it is like putting scaffolding around a crumbling building.'

The brokerage industry in China is only 15 years old. When the stockmarket was set up in the mid-1990's, the provincial and city governments moved in to set up the brokerage houses. The industry fell into the same trap as the state-owned banks -- a politically driven process with poor corporate governance and a lack of supervision. Now it is a financial basket case.

[And yet] the new fight [for Western brokerage houses] is to land a spot in the Chinese broking and investment banking industry.

The Goldman Sachs solution has been [to] set up a brand new securities house... effectively held in trust for it by a Chinese associate. First Goldman made a donation of $US62.5 million (A$83.7 million) to authorities in Hainan province. This money was to be used to pay out depositors whose money had been embezzled in the failed Hainan Securities Company. Shortly afterward, Beijing's securities regulator, in a State Council approved decision, issued a new broking license -- completely separate from Hainan Securities.

[Goldman's Chinese associate, Fang Fenglei] set up Beijing Gao Hua Securities Company using Goldman funding. Goldman Sachs then took a 33 percent stake in a separate company, Goldman Sachs Gao Hua Securities, with Fang's brokerage company holding the remaining equity.

I t cost Goldman an estimated $US200 million all up and was completed in mid-2005. [But it got a leg up on its competitors.] 'Goldmans have got 50-plus [employees]. The amount of people they can see, play golf with etc. -- without having to fly in and out from Hong Kong -- means their ability to source deals is immense.'

UBS has taken a different tack to Goldman Sachs. The UBS deal received State Council approval last September, just before the securities regulator pulled up the drawbridge and said no more deals for now. UBS will pay $US212 million for 20 percent of the troubled Beijing Securities, which had losses of 160 million yuan in 2004. This makes it the first foreign firm to buy directly into one of the ailing mainland brokerages. It allows UBS to have control of management of the group. And previous obligations and losses have been carved out. UBS will not be liable for them.

UBS' co-shareholders include the local Beijing government, three state-owned companies and the [ubiquitous] World Bank's private-sector investment arm, IFC. Exact details of the ownership structure have still to be released.

Critics claim that UBS paid $US200 million to go down the same rocky path as Morgan Stanley did in the 1990s -- the CICC road. This was a new joint venture investment bank, a one-off deal allowed by Beijing. Almost from day one Morgan Stanley became embroiled in huge arguments with its joint venture partners and has finished up treating its equity in the group as a protfolio investment, surrenduring all management input.

CICC has been a profitable investment for Morgan Stanley but it is a totally separate operation and actually competes with Morgan Stanley for deals. CICC is now run by Levin Zhu, the eccentric son of former Chinese premier Zhu Rongji.

ON the positive side, the potential for the Chinese market far outwieghs that of other emerging markets such as Russia. The Chinese are among the highest savers in the world [and the banks and brokerages are plumped up to get their hands on that savings]. Once the local population has confidence in the stockmarket, the growth potential [and ability of the brokers to skim off the savings] is enormous.

For the world's biggest brokers and investment banking houses, the opportunity is too big to ignore."

I apologize to Colleen Ryan who wrote most of the material above in the Australian Financial Review's headline story "High stakes: brokers battle for foothold in China" yesterday, 26 April 2006; I cut and rearranged her piece and added a couple of snide comments in brackets.

Wednesday, April 26, 2006

Money for nothing

The headline on the story in the Sydney Morning Herald was much more provocative than the substance, but it stopped me and stirred me to have a think. The headline said, "Faber says gold price may reach $US6000". The story said, though,
MARC FABER, who told investors to bail out of US stocks a week before the 1987 Black Monday crash and began recommending commodities at the end of 2001, said gold might rise tenfold in the next 10 years.

"If the Dow Jones [index] goes up three times in the next 10 years, I think gold prices will go up by a minimum 10 times to something like $US6000 an ounce."
Well, that is a lot of IF and I'm inclined not to go there. Still, my thought process on reading the headline was not, "gee, gold is going up", but rather, "gee, the dollar is tanking and inflation is going through the roof". Visions of post WWI Weimar Republic played before my eyes, or Latin American just a few decades ago, where you had to run to the market with wheelbarrows full of cash before you needed another wheelbarrow full just to buy some bread.

There is just a little too much exuberance and not enough common risk aversion these days. The commodity markets are one reflection of it. Consider these remarks in stories over the last 24 hours.

Reuters, by Martin Hayes: "Although leading preciaous metals gold and silver wre still adrift of recent generational peaks, alalysts see these levels being surpassed, given the remorseless fund buying taking place. 'It is the funds - pure and simple - they are just buying precious and base (metals), and there is no real end-game in sight,' a trader said."

Reuters, April 25: "London Metal Exchange (LME) zinc ended at a new high and copper and nickel closed near their peaks on Tuesday on continued investment fund buying, and the market may run still higher, traders said. 'Traders with 25 years experience are wondering what is going on -- just pick a number from $9,000 to $20,000 for copper,' an LME trader said."

And the Australian Financial Review considers resource stocks at the height of their volatility. Stephen Wyatt reports (sub req'd):
Analysts and traders remain alert to further gyrations since only a week ago there was a short-lived spate of panic selling. Gold and silver were particularly hard hit, gold dropping below $US610 an ounce at one stage. Few analysts and traders would be surprised to see a further sharp downward correction at any time after the extraordinary rallies enjoyed by these markets.

Barclays Capital commodity analysts point out that the traded volumes in 23 of the largest UScommodity futures markets covering energy, base and precious metals, agriculture and livestock sectors, hit an historical high of 8.4million contracts in mid-April.

Open interest, the number of contracts open in the market, has been on an upward trend for the past 12months.

This is one of the greatest resources booms in Australia's history. And the boom has put commodities back onto the top shelf of the investment supermarket.

Analysts are gobsmacked at the massive price rises and are becoming increasingly nervous.

Citigroup commodities analyst Alan Heap warned that "these high values cannot be justified in terms of historical trends and the prevailing supply-demand fundamentals".

But like most analysts, he said a possible sell-off would be a technical sell-off rather than an end to this resources boom. Most analysts suspect that while commodities may be overextended now, they will remain strong because fundamentals are still very sound.

Getting back to the Mark Faber article,
The author of the newsletter The Gloom, Boom & Doom Report said gold wasn't expensive when "you compare its price to the quantity of money that has been printed in the last 10 to 15 years in the US and the world in general".

The outlook for gold depended on how much money Federal Reserve chairman Ben Bernanke "will print", Mr Faber said in an interview in Tokyo on Monday.

"As you know he has pronounced speeches about asset deflation," Mr Faber said, referring to Dr Bernanke. "He's concerned about real estate and stocks going down, so in the long run for sure he'll print money."
And this is a sure-fire recipe for inflation unless the CenBanks crank up interest rates, notwithstanding the apparent lack of "official" inflation, to begin to mop up all those freshly printed notes.

And while on the subject of the inflation we're not having whilst the Chinese and Indian labour forces are keeping a lid on Western labour costs, the Australian markets are snacking on new highs again today, without apparent threat or worry of any rate increases because inflation is a "no worries" issue here, too.

Earlier this week we had a report that the pipeline was full of inflation but the core rate was masking it and so it didn't offically exist, as the Herald reported.
Prices paid by businesses at the preliminary stages of production soared 1.6 per cent in the March quarter and 8.6 per cent over the year. But prices at the final stages of production rose just 0.8 per cent in the quarter and 3.8 per cent over the year.

The gap between price rises at the preliminary and final stages of production is now at its widest in more than five years.

Pressure is particularly acute in manufacturing, where input prices have risen 15 per cent over the past year, outpacing output price growth of 7.9 per cent.

Higher import prices for petrol contributed to inflation at each stage of the production process, but the spike in prices above $US70 a barrel for crude oil is not captured in the numbers.

Petrol price rises present a problem for the Reserve Bank because they add to inflationary risks while lowering consumer spending in the economy.

Analysts said the Reserve Bank would welcome the producer price news. "The Reserve Bank will greet the latest producer price data with a mighty sigh of relief," an economist at Commonwealth Securities, Andrew Mitchell, said.

The Reserve mentioned a pick-up in producer prices in its explanation for raising interest rates in March last year.

An interest rate strategist with Maquarie Bank, Rory Robertson, said the Reserve was more interested in general demand conditions in the economy than any pick-up in headline inflation.

Higher petrol prices are battering at the factory gate, but businesses appear reluctant to pass them on to consumers.

[The] measure of inflation at various points in the supply chain, released by the Bureau of Statistics yesterday, indicates businesses are squeezing margins to absorb rising fuel costs rather than putting up prices [which is damned sporting of them, I'd say].
And the CPI figures we got today elicited the same laisez faire market response. Although the headline rate was at the unexpectedly high top of the Reserve Bank's 3% comfort zone, the core rate (ignoring fuel and food as such volatile costs) was only 1.7%, proving that if you ignore the price rises in the economy, there is no inflation to worry about.

And just to underscore the complacency in the markets these days, John Mauldin passed along a report by James Montier, Director of Global Strategy at Dresdner Kleinwort Watterstein, in Mauldin's Outside the Box email this week. You should read the whole report, here. Here are some excerpts:
Investors seem to be displaying signs of pure fearlessness.
Our fear and greed index continues to remain at extreme risk-loving levels.

Further evidence of this enthusiasm for all things equity can be found by looking at the short interest ratio on the QQQQ (Nasdaq ETF).

This out performance of junk is not limited to the top few stocks. The chart below shows an equally weighted year-to-date performance by quality ranking. The worst stocks have had the best performance (C ranked stocks up an average 17% YTD) whilst the best quality stocks had the worst performance (A+ stocks up a mere 1.2% YTD)

A recent study by Standard and Poor's shows this is an unusual situation. In general, the highest rated quality stocks outperform the junk, and do so with lower risk.

The final worrying sign of a surge of interest in junk equity is provided by the volumes data on the OTC Bulletin Board (OTC BB). The OTC BB is a quotation service for OTC securities (i.e. those not listed on the Nasdaq or any of the national exchanges). It is to all intents and purposes, a market place for low quality stocks. Volumes have exploded in true mania style. At the time, 2000 looked like a huge surge in volumes; now it's barely a blip!

One final observation: this dash for trash is not limited to equities. As a recent Bloomberg report points out, "U.S. companies one step away from default are selling a record amount of bonds... Even CCC rated companies, considered in so-called technical default, meaning they asked investors to revise the terms of their (existing) debt, were able to sell bonds in the first quarter."

Friday, April 21, 2006

Interior says magazine's CNMI article Ms-es the point

The Marianas Variety alerts us to the Spring issue of Ms. Magazine which has an expose of the garment factory business in the CNMI, putting things in an unflattering, if perhaps prima facie, light.

Its story is "Nat’l magazine reports on NMI’s exploited alien workers" and because MV doesn't seem to archive its stories online, I'll provide it here.
“I’m glad that the article creates awareness about the plight of women who are being exploited,” said Deputy Interior Secretary for Insular Affairs David Cohen. “However, I am disappointed that the article does not give credit to the CNMI for making a great deal of progress in recent years to improve labor conditions,” he said.

A NATIONAL feminist magazine has documented the abuse of alien workers’ rights in the CNMI, the existence of sweatshop conditions in garment factories here, the islands’ low minimum wage, abortions, forced prostitutions, and the role played by disgraced Washington lobbyist Jack Abramoff, former House Republican Leader Tom Delay and the commonwealth government in ensuring that these problems remain unaddressed more than a decade after the national media reported them.
Ms. Magazine’s Spring 2006 issue carries the story “Paradise Lost,” referring to the exploitation of women, mostly Chinese and Filipinos, in the CNMI’s garment and sex tourism industries.
Gov. Benigno R. Fitial has been aware of the Ms. Magazine article for a few weeks although he has not actually read the article, according to Press Secretary Charles P. Reyes Jr.
“We understand that it negatively portrays the CNMI,” he said.
Big red letters on the cover of Ms. Magazine read, “Sex, Greed and Forced Abortions in ‘Paradise.”
Ms. Magazine staff reporter Rebecca Clarren and photographer Martin Von Krogh came to Saipan in early February to work on the story.
Ms. Magazine has offices at the Feminist Majority Foundation in Los Angeles, Calif., and Arlington, Va.
CNMI residents can view the cover and the contents of the magazine on its Web site,
The full story, however, is not available online but a few copies of the magazine found their way to Saipan this week.
Reyes said the Fitial administration “clearly has no tolerance for labor law violations and will vigorously prosecute the case to set a clear example to all,” referring to the Starlite Club case, whose owners were arrested for hiring minors as strip dancers and for other violations.
“We cannot afford to allow the CNMI’s image to be further besmirched,” Reyes said.
Cohen said there are still serious abuses going on in the CNMI that cannot be tolerated, but he said local government leaders and responsible business leaders are aware of that “and are working with us, not against us.”
The greatest challenge for the CNMI government, according to Cohen, will be to ensure that sufficient resources are available to address the backlog of labor complaints.
“Resources are hard to come by in these difficult times, but it’s extremely important to ensure that legitimate complaints of workers are investigated thoroughly and adjudicated without excessive delay,” said Cohen.
He added, “It makes me sad that people will read this article and conclude that the CNMI is a horrible place. The CNMI is actually a wonderful place that is struggling to deal with some very serious challenges.”
Labor Secretary Gil M. San Nicolas earlier told Variety that the Department of Labor was doing its best to reduce their backlog of labor complaints. Last week, Labor finally issued an administrative order on a labor case filed 10 years ago.
‘Paradise lost’
Ms. Magazine’s story begins with a scene inside the Rifu garment factory where mostly Chinese women “cut, sew, iron and fold blouses with such efficiency and focus that they seem like machinery themselves.”
It mentions the workers’ hefty payments to recruiters, which can amount to $7,000, so they can work on Saipan.
As this newspaper has reported in the past, these workers hardly earn enough money to pay back recruiters within their one-year contracts.
The CNMI’s minimum wage has been $3.05 an hour since 1996 after the gradual wage hike law was repealed at the behest of the garment industry.
The CNMI is home to about 40,000 nonresident workers, mostly from China, the Philippines, Bangladesh and Thailand.
Jeff Schorr, Saipan field representative for the Office of Insular Affairs, said the article “provides no balance and largely rehashes many of the problems rampant in the mid-90s.”
“There is no credit given to the efforts and progress made in contract worker conditions made by local government officials in recent years right up to the present; and no mention made of the efforts made by the Office of Insular Affairs, the Department of Labor, (the Occupational Safety and Health Administration) and other federal agencies for almost 10 years now,” said Schorr.
The story mentioned the “chronically underfunded” CNMI Department of Labor which takes six months to a year to complete reviews of complaints, and the absence of labor unions in the CNMI.
It also noted the lack of authority to investigate or prosecute by the Federal Labor Ombudsman’s office, which is under the U.S. Department of the Interior.
“There are serious problems here and everybody knows it…. There isn’t anyone who would say there aren’t worker abuses,” Federal Labor Ombudsman Jim Benedetto was quoted as saying. Benedetto is off-island.
Schorr said the labor ombudsman pointed out to Ms. Magzine that progress has been made in addressing labor problems in the CNMI.
“To be quoted out of context is unfair, inaccurate and an example of why there is increasing lack of respect for journalism today by the public, as studies and polls have shown,” said Schorr.
The story then narrated how, in 1995, the CNMI government hired Washington, D.C. lobbyist Preston, Gates, Ellis & Rouvelas Meeds law firm of which Abramoff was a part. Abramoff, because of his close ties to Republicans in the House, including then-Majority Whip Tom Delay, was able to block attempts to end the CNMI’s exemption from U.S. minimum wage and immigration laws.
Chinese garment workers, wanting to stay on their jobs, ended up having abortions at Saipan’s abortion clinics posing as acupuncture clinics, the article stated.
A few years back, the CNMI government conducted sting operations on establishments believed to be underground abortion clinics but it is unknown whether they succeeded in putting a stop to the practice.
The article also discussed the $20 million garment industry settlement agreement after two federal class-action suits were filed on behalf of garment workers alleging violations of U.S. and CNMI laws that included forcing workers to work under hazardous conditions.
However, a number of these garment factories continue to violate U.S. and CNMI labor laws and engage in illegal termination and discrimination.
Funds from the $20 million garment settlement agreement are almost wiped out.
The closure of seven Saipan garment factories since the lifting of international trade quotas on Jan. 1, 2005 have displaced thousands of workers, most of them with pending labor cases. Only a small percentage have chosen to go back to their home country, while most of them have sought temporary work but remain unsuccessful.
Ms. Magazine noted that the inability of these workers to find other jobs has led them into the “sex tourism” industry. The Equal Employment Opportunity Commission’s Hawaii regional director Timothy Riera was quoted as saying that women recruited to work on Saipan as waitresses or in other legitimate jobs often end up being forced to become strippers or prostitutes.
One of the women interviewed by Ms. Magazine said she was recruited as a waitress but said her employer forced her to work as a prostitute. She added that they were expected to have sex with as many as four men per day and given but one daily meal of noodles.
In recent weeks, Variety has been running stories about night clubs that employ minors and other workers who are forced to do sexual acts. The victims are usually fearful of their supervisors or employers who can readily send them home. While the employment of minors and sexual servitude have long been known of in the CNMI, only recently have arrests been made.

As we so often find, to our joy or dismay, the blogosphere is already "on it".

Vague Nihilism has this (and more, including links):

Former Republican Majority Leader Tom DeLay (shown here with President Bush) has a long history in the politics of the Commonwealth of the North Mariana Islands. These Islands, under the flag of the United States, have numerous clothing factories staffed by Asian guest workers (you know, like in Bush's plan for guest workers instead of immigrants) who are paid below the U.S. minimum wage.

For years, reports have depicted these women's lives as closer to slavery than freedom.
Wal-Mart and other major U.S. retailers are currently facing a multi-billion dollar lawsuit filed on behalf of 50,000 female workers from China, the Philippines, Bangladesh and Thailand. These women allege that they were lured to Saipan with the promise of good jobs and a good life and arrived to find prison-like conditions were factories and living spaces were surrounded by barbed wire and guards.

The women allege that they were forced to work 12 hours a day, 7 days a week in unsanitary factories, were not compensated for overtime, and were paid very poorly. Some of the women were also asked to sign contracts that forbade them to date or marry or otherwise risk pregnancy. There are also allegations of forced abortions.

Tom DeLay, whose involvement with CNMI businesses ran through Jack Abramoff and Seattle law firm Preston Gates, overlooked such practices, never bothering to investigate them. According to The American Prospect:

Many observers have looked at Saipan and seen ugly manufacturing sweatshops and sleazy bars where girls as young as 14 are forced into prostitution. But not DeLay. To DeLay, Saipan was an inspiration, not an embarrassment. Indeed, the United States, DeLay told the Houston Chronicle in 1998, ought to create a mainland guest-worker program just like the one Saipan offered Chinese citizens, where “particular companies can bring Mexican workers in” and pay them “whatever the market will bear.” The Saipan solution, he added, was “a shining example of a free-market success.”
Look for the full article in the Spring 2006 issue of Ms. Magazine. The article is not posted at the moment, but here is an excerpt of the story:
With few economic options, pregnant workers often feel they have no choice but to visit one of Saipan's underground abortion providers. At least four acupuncture clinics offer pills to induce abortions, according to a local translator and former garment worker.

"I've driven four Chinese women to get abortions here," he says, pointing to an inconspicuous cement building with red Chinese lettering and an English sign that reads "Acupuncture, Herbs, Massage Oils." "I see girls whose bleeding did not stop, and on two incidents I had to take the girls to the hospital."

I must say that much of the language used in these reports is a bit sensational. That there was, and perhaps still is, abuse and exploitation, I have little doubt. Saipan can certainly be a bit of a frontier town in some respects, as are many places throughout the Pacific; but from my experience the people of Saipan are good, pleasant folks, and it is easy to visit that Micronesian island paradise and not come away with filth in your mouth.

Still, I do wonder if the place would not have been a better place if the garment factories had never come.

Fee Pie Fo Some

More model behaviour by the Millionaires Factory

MAp defends $92m paid to Macquarie Bank
Macquarie Airports (MAp) faced tough questions from security holders at its annual general meeting about the $91 million in fees it paid backer Macquarie Bank last year.

MAp, which has investments in airports in Sydney, Rome, Copenhagen and elsewhere, paid Macquarie Bank a total of $54 million in base fees and $37 million in performance fees in 2005.

That was on top of the fees MAp paid to Macquarie Bank for financial advice on matter such as the refinancing of Sydney Airport.

However, [chief executive Kerrie] Mather declined to reveal the total fees paid to Macquarie Bank in 2005.

The fund's independent directors had also chosen to take their performance fees in securities so it didn't flow through as a cash expense to MAP investors, she added.

The Daily Telegraph adds to the reports,
THE MAp director whose job it is to monitor fees paid to Macquarie Bank has vowed to ditch his shares if investors "punt" the Millionaire Factory as manager of the $5 billion airports fund. Trevor Gerber made the admission to The Daily Telegraph yesterday after MAp's annual meeting, where the board was repeatedly questioned over $92 million in fees paid to MacBank.

[W]hen Mr Gerber was asked about whether it was possible to seek "expressions of interest" from MacBank rivals, he said the question displayed a "commercial naivety".

"We have no desire to certainly no reason to seek alternative bids because the performance has been exceptional," Mr Gerber said. Later he said investors were able to "punt" Macquarie as MAp's manager if they wanted to – it only required majority backing.

If this happened he would sell his stake. Mr Gerber, a former Westfield executive, owns 170,000 MAp shares worth about $560,000 at yesterday's closing price of $3.29, up 7c.

In defending Macquarie's performance, the board pointed to a strong internal rates of return and growing dividend payments.

However, the share price is no higher than it was in January 2005 – a fact that grates with many of MAp's 42,000 investors. Ms Mather said she was "equally disappointed" with MAp's share price performance.

Mr Moore-Wilton offered hope, saying he and the board believed "the market will correct itself in respect to the underlying value of Map shares in due course".

The Sydney Morning Herald had this take on events.

Previous MacMentions in the Stew.

Another case of undisclosed conflicts of interest by research analysts

But this time it's not stock brokers; it's doctors, medical journalism, Big Pharma and the medical services industry.

Top mental health guide questioned
By Judith Graham, Chicago Tribune staff reporter, Published April 20, 2006
Most of the experts who prepared the world's leading medical guide to mental illness had undisclosed financial relationships with drug companies that presented potential conflicts of interest, according to a new report published Thursday in the journal Psychotherapy and Psychosomatics.

The study is the first to document extensive monetary connections between drug companies, psychiatrists and other scientists responsible for the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders.

The DSM, as it's commonly called, defines all the mental illnesses recognized by psychiatry and outlines the criteria used to determine whether a person has one of these conditions. Medical professionals refer to it as the "bible of mental health" in the U.S. The current version, the DSM-IV, was published in 1994 and modified in 2000.

The manual is of enormous importance to pharmaceutical firms, as the Food and Drug Administration will not approve a drug to treat a mental illness unless the condition is in the DSM. Drug companies then can market approved medications to physicians and consumers.

"This is one of the most important medical documents we have in this country, yet the public doesn't have relevant information about the experts involved in developing and revising it," said Sheldon Krimsky, a Tufts University professor and co-author of the new paper.

His study found that 56 percent of 170 panel members responsible for overseeing the DSM-IV had some type of financial tie to the drug industry--including getting research grants from drug companies (42 percent), serving as consultants (22 percent) and participating in speakers bureaus (16 percent). These relationships weren't revealed publicly.

The risk is that financial relationships might directly or indirectly bias panel members to make decisions favorable to the drug industry. Relationships formed after the DSM-IV's publication also can be problematic in that panel members could appear to be "cashing in" on their influence, Krimsky noted.

The enormous growth in prescriptions for psychiatric drugs also raises concerns about the potential impact on consumers.

Dr. Darrel Regier, director of research at the American Psychiatric Association, said disclosure of potential conflicts of interest "wasn't the standard in the field" at the time the latest edition came out. "For the next revision," due in 2011, "we will have full disclosure," he said.

Of particular concern, Krimsky suggested, is his study's finding that 100 percent of the experts on DSM-IV panels overseeing mood disorders and schizophrenia/psychotic disorders were financially involved with the drug industry. These are the largest categories of psychiatric drugs in the world--2004 sales of $20.3 billion and $14.4 billion respectively.

"The more lucrative the drug market, the higher the percentage of experts with financial ties--that has to raise serious questions about these panels' objectivity," said David Rothman, professor of social medicine at Columbia University's College of Physicians and Surgeons.

"We have not had an opportunity to review the study, but it is important to note that the physicians and other health-care professionals who sat on expert medical advisory panels have impeccable integrity," said Ken Johnson, senior vice president for Pharmaceutical Research and Manufacturers of America.

Others think drug industry practices are challenging the integrity of science. "The very vocabulary of psychiatry is now defined at all levels by the pharmaceutical industry," said Dr. Irwin Savodnik, an assistant clinical professor of psychiatry at the University of California, Los Angeles.

According to his calculations, the original 1952 DSM manual contained 107 mental health disorders. By the fourth edition in 1994, the number had more than tripled to 365.
See, too:
Case studies of Big Pharma’s sharp practice
Big Pharma: the reality
Patently wealthy, etc.

Thursday, April 20, 2006

Not Foxie (yet)

Saw this story in the Herald today: Clinton's war chest positively presidential.

Went to the Fox website to see if they had the headline "Hillary's big chest".

Not yet.

Can we talk?

The Sydney Morning Herald reports:
In the wake of its landmark court action against the world's biggest bank, Citigroup, the Australian Securities and Investments Commission has called for submissions to a discussion paper detailing case studies "loosely based on real life examples of conflicts we have seen".

In the paper, [which you can get here] ASIC questions how conflicts of interest are managed by retail and wholesale financial advisers and fund managers, and in research reports.

It gives simple examples of conflicts faced by financial planners, recommending clear disclosure of fees and commissions. Those are likely to be welcomed by an industry still reeling from the Westpoint collapse.

But more controversial are proposals to change disclosure practices in the stockbroking industry, including in the daily research notes on investment strategies and recommendations brokers send to clients.

In one case study typical of current disclosure practices, ASIC highlights that: "The disclosure is a lengthy attachment to the report, is non-specific, written in dense legalese and in smaller font than the rest of the document.

"Empirical evidence suggests that clients almost never read the disclosure. In fact, most clients who print out the research put the attachment straight in the bin."

The regulator said research reports "should clearly and concisely disclose the actual relationships and fees associated with those relationships and the disclosure should be prominent and in the same size font as the body of the research report."

That would force stockbroking firms to significantly change their disclosure notices, giving more specific information about clients and fees.

The Investment and Financial Services Association's chief executive, Richard Gilbert, welcomed ASIC's recommendations but said "commercial confidentiality considerations must also be taken into account".

"We have to be careful not to throw the baby out with the bathwater," he said yesterday.

The head of the Securities & Derivatives Industry Association, David Horsfield, said "the cost of implementing this [new disclosure system] could be quite high".

ASIC said in its paper that brokers should disclose if they were a company's house broker, or responsible for floating a company, even after it had been listed on the stockmarket.

It said conflicts could occur where a fund manager "is obliged or expected to use other members of [a] corporate group as service providers". Such corporate structures could be likened to the Macquarie and Babcock & Brown specialist fund models.

The release of the discussion paper comes after ASIC launched civil proceedings in the Federal Court alleging Citigroup engaged in insider trading and breached its fiduciary duty to its client, Toll Holdings, which it was advising in the takeover of Patrick Corp.

ASIC is seeking feedback on its paper by June.

Update to "World bank irons out local wrinkles"

In World bank irons out local wrinkles, I noted that Rio Tinto was in the preliminary study stage of developing an iron ore mine in Equatorial Guinea. I noticed that the post popped up in a search that someone from Bechtel Group Inc., a large US construction company, did. They obviously weren't looking for my post. They were looking for "Liz Wall Simandou Simfer".

That search, though, turned up this fascinating report, setting out Rio Tinto's groundwork. I don't know enough about all that to either praise it or criticise it, but it did make for some interesting reading and to get some sense of how very little is left to chance. It opens a whole world of information. Notice the report is on the Woldbank website.

Don't eat Nemo

Sydney Harbour is toxic, so it wouldn't be good for your health, either.

Fish eaters poisoned
RECREATIONAL anglers can still catch and eat fish from the harbour even though Sydneysiders who regularly eat harbour seafood have been found with sky-high levels of toxic dioxin chemicals in their blood.

Members of a Sydney family who ate harbour seafood three to four times each week have dioxin levels many times higher than the average Australian, an investigation by the ABC's 7.30 Report has found.

Luca Ianni, 6, the son of a harbour fisherman, Tony Ianni, had dioxin levels seven times higher than the typical Australian child. He had regularly eaten harbour seafood, including prawns and calamari, since he was two.

"We'd bring two or three kilos of prawns home and boil them up, and have them with the family, we'd all eat boiled prawns," Mr Ianni told the 7.30 Report.

Blood test results were even worse for Luca's grandfather Andrew Crisafi, who grew up in Woolloomooloo and began fishing full-time in 1946. The 74-year-old had more than 113 picograms per gram of dioxin in his blood. That is more than 10 times the average for an Australian adult.

Dioxins are toxic chemicals which can concentrate in body fat and accumulate as they move through the food chain, according to the NSW Food Authority. In humans, they can cause chronic conditions such as skin lesions and in some animal experiments they have caused reproductive disorders, immune disorders and cancer.

Commercial harbour fishing was banned in January because high levels of these chemicals were found in seafood, but recreational fishing is still permitted.

Signs began to be put up around the harbour last week warning the public to eat no more than 150 grams of fish, or 300 grams of harbour prawns each month, and suggesting recreational fishermen release their catch.

The Opposition environment spokesman, Michael Richardson, called on the Government to pay the cost of blood testing the families of all 44 fishermen who had been licensed to fish commercially in the harbour. Dioxin testing costs about $2000 a person.

So you know now what to do with that noxious little Nemo if he ends up on the end of your hook.

More Iraq bribery

And this time it wasn't the Australian Wheat Board.

One of the "defenses" run by the Howard government to deflect criticism over its apparent complicity/complaceny in the AWB affair is that Australia is notably honourable in shedding light on Australian bribery in Iraq, suggesting that everyone else is turning an even more blind eye to the connivances of their citizens.

Not so.

Sex and money bought Iraq contracts, By T. Christian Miller in Washington:
A CONTRACTOR in Iraq has pleaded guilty to providing money, sex and designer watches to US officials in exchange for more than $US8 million ($10.8 million) in reconstruction contracts.

Philip Bloom faces up to 40 years in prison after admitting paying more than $US2 million in bribes to US officials with the Coalition Provisional Authority, which ruled Iraq after the US-led invasion in 2003.

Bloom's guilty plea on bribery and money-laundering charges is the latest development in a widening corruption scandal centred on a network of US civilians and military officials who worked out of a coalition outpost in the south-central Iraqi town of Hillah.

Under the plea agreement, Bloom must pay $US3.6 million in restitution and forfeit $US3.6 million in assets. His guilty plea "sends a message to Iraqis that US oversight will track down, arrest and prosecute American citizens who committed crimes in Iraq involving Iraqi money", said Stuart Bowen, who heads the office of the Special Inspector-General for Iraq Reconstruction.

Two officers in the US Army Reserve, Lieutenant-Colonel Michael Wheeler and Lieutenant-Colonel Debra Harrison, have already been arrested in connection with the case and more arrests are expected, investigators said.

From January to June 2004, when the coalition government was replaced, Bloom provided Stein and officers with first-class air tickets, real estate lots, weapons, new four-wheel-drive vehicles, cigars, designer watches, alcohol, prostitutes at Bloom's Baghdad villa and cash bribes.

In return, Bloom's company, Global Business Group, received $US8.6 million in contracts to refurbish a police academy in Hillah, a library in Karbala and other reconstruction projects. In some cases the work was never done, and in others it was shoddy, audits by the inspector-general reveal.

The contracts were paid with Iraqi funds held in the Development Fund for Iraq, which has been at the centre of many of the corruption scandals in Iraq.
Top gun female pilot under fire over conflict of interest
When Jay Garner arrived as the first US administrator in Iraq after the 2003 invasion, he chose a highly decorated air force officer named Kimberly Olson as his right arm because he considered her among the best America had to offer.

One of the first female pilots in the air force, she was a hard charger with an unblemished reputation for honesty, a high profile in the Pentagon and a commitment to the US goal of creating a new democracy in the Middle East.

Now Colonel Olson stands accused of one of the most audacious acts of impropriety in the corruption-plagued reconstruction of Iraq - profiting from the post-invasion chaos by using her position to benefit a private security company that she helped operate, interviews and government documents obtained by the Los Angeles Times show.

Pentagon investigators allege that, while on active duty, Colonel Olson established a US branch of a South African security company after helping it win more than $US3 million ($4 million) in contracts to provide protection for senior US and British officials as well as for a subsidiary of Halliburton.

Colonel Olson has spent more than a year fighting the charges. In military proceedings last year, she denied abusing her position to enrich herself or the company but agreed to plead guilty to lesser charges.

She was reprimanded and allowed to resign from the air force with an honourable discharge and no reduction in rank. She was also banned from receiving further government contracts for three years. She is now appealing.

Colonel Olson said the military's version of events contained "numerous factual statements and conclusions that are not accurate".
So, here we have a US citizen facing 40 years in jail for paying a US$2 million bribe to get Iraq business. We have a highly decorated career officer blackballed for using her position in the reconstruction effort in a conflict of interest. And we have Jack Thomas spending time in an Australian gaol because he got A$3,500 from a terrorist organisation.

What dya reckon will happen with the boys at AWB who have apparently been involved in bribery/kickbacks in Iraq to the tune of $300 million +/- and the AWB boys the Government seconded to the Iraq reconstruction program?


Wednesday, April 19, 2006

Simply ore-some

I hope you are paying attention, because this rise we're seeing in the markets Down Under is a once-in-a-generation spectacle. It's hold-your-breath time as "investors" daily pick up the high jump pole and easily clear the record high bar left over from the day before. Just great sport.

Let me show you what I mean. This is a chart of the SPI (the Oz equivalent of the US S&P500 futures contract) shifted back in time and overlayed on the Nasdaq chart as it blew the tops off back in 2000, which was also a generational extravaganza.

(Click on chart to enlarge; this is not body part spam)

Guambat has many times before wrung his hands over the dot.commodity boom, and expressed his gobsmackedness about this unstoppable leviathan. You'd think they'd come up with a receipe for sweet and sour copper the way the Chinese are consuming metals (or at least we are told they are). At this point I can only recommend flowing with the gold, laying back and thinking of BHP, Rio Tinto, Freeport McMoran, because trying to make any rational sense of this will only drive you mad. If you're going to be delirious, I say, be deliriously happy.

There are many people remarking on this levitating thing of wonder and beauty. It is childlike joy and abandon to see bubbles floating, balloons disappearing into the blue sky. One broker says, with an astrologer's wisdom, "So, the stars are aligning for the sharemarket at the moment, particularly with higher metal prices and oil prices overnight which helped push some stunning performances from BHP and Rio Tinto."

Others are more prosaic. Stephen Wyatt writes in the AFR,
Investor exuberance continues to push global resource markets to extraordinary levels. Gold prices hit 25-year highs yesterday and silver 23-year highs, while world oil markets rallied to record levels and copper hit its highest level ever.

Copper has more than tripled in the past three years to break through $US6000 a tonne, zinc has quadrupled through $US3000 a tonne, spot alumina prices have rallied fivefold through $US600 a tonne and gold has doubled through $US600 an ounce. In response, Australian resource stocks have leapt - BHP Billiton rallied to a record high above $30a share yesterday.

Gold in Asia yesterday was trading at $US617 an ounce and silver at $US13.67 an ounce.

Oil hit a series of new price peaks yesterday in all global markets except crude oil futures for May delivery traded on the New York Mercantile Exchange. Still, that was trading at $US70.77 a barrel in Asia late yesterday, just US8¢ away from its record of $US70.85 a barrel. Brent, the OPEC basket, the Mexican basket and Asian crudes were all trading at record levels.

And the market does not see the oil price falling anytime soon. Crude oil for delivery in 2013 was priced near $US70 a barrel.

Few analysts are prepared to call a top to these markets. The momentum is just too strong.

The chairman of precious metals consultancy group GFMS, Philip Klapwijk, warned that in the gold market "you're playing with fire if you ignore the weight of money argument looking ahead into 2006". "In the right circumstances, the 1980 high of $US850/oz could even be taken out," he added.

But some are warning that the markets are becoming increasingly dangerous as more and more speculative money floods into commodities. There is a rising disconnection between fundamentals and price.

GFMS recently pointed out that high gold prices were undermining the fabrication demand for gold. This accounts for almost 80per cent of total demand. Gold fabrication demand fell 18per cent year-on-year during the fourth quarter of last year and this weakness appears to have continued into 2006, with GFMS noting the possibility of it falling by 20 to 30per cent this year if the price uptrend continues. The gold market is now actually in supply surplus.

GFMS concluded that gold above $US600 an ounce was not sustainable long term, and that a $US400-500 ounce price range was sustainable.

And gold remains dangerously overbought. While the fundamentals for other commodities are much stronger, analysts are still asking whether these commodity markets have now rallied too far, too fast as well. Billions of dollars of speculative money is now flowing into commodity markets from investment funds.

Citigroup commodity analyst Alan Heap estimated that hedge funds (including commodity trading advisers) now had $US80billion invested in commodities.

There is a rising fear that commodity markets are on the edge of a downward technical correction. Few analysts, however, expect the boom to end any time soon. Most suspect a correction in a continuing bull market.

However if the world is confronting its fourth oil shock, it must be remembered that the three major spikes in real oil price in the past 30 years - the Yom Kippur War, the Iran-Iraq War and the Gulf War - all pushed the US economy into recession.
I keep hearing about the weight of money as the main cause of the rise of the Oz bourse. This argument doesn't put much weight on the demand for the physical metal or the shares of the companies producing it, but on the fact that there is just so much money being built up in superannuation and pension accounts and it has no place to go. What this means is that we are all saving as best we can for that rainy day but all of our savings are being funneled into the same few honey pots, which only (1) makes a motza for the money managers and (2) dilutes the value of the honey.

And while I find the weight of money argument compelling at a gut level, I still can't figure out if there is too much or too little liquidity in the system, which would seem to this thick observer to be necessary to support the argument.

I think that one factor that does make the weight of money argument look more potent than it is would be the proliferation of hedge funds. Apart from the instability this creates at a systemic level, this has exaggerated the peaks and valleys of the roller-coaster that is the market movement. Until these guys came along, most fund managers were pretty well limited to being long-only. That is, they could only make money on a rising market, and try to outperform the rest of the losers in a falling market.

Hedge funds, though, can go short, that is, actually profit and make money from a falling market. And, all the new "derivative" financial "products" (which are really nothing more exotic than gussy-upped bets) such as ETFs and minis and warrants, just make it so much easier for them and their bookies, oops, brokers. So, what I think we are seeing is the effects of these guys using their incredible financial muscle to push markets up until they just won't go any more, and then push them back down until they won't go any lower. They don't need to ask about fundamentals. It is an irrelevant consideration to try to assess if whatever it is they are pushing at the moment (these guys are absolute sluts and will do any market, anywhere) is overvalued or undervalued. They ride the dance pole of momentum and survive on averages and quick entry and exit. And most of them aren't even guys; they're black boxes.

Of course, there are some guys playing the games, too. Yesterday, the Oz market had one of its biggest point gain days on biggest volume in yonks. In trying to find reason for that (silly me), I discovered that CNBC's head spruiker, Jim Cramer, had, the day before, pounded the table for "investors" to "pillage the earth". (See this blog and this blog.) Now, I don't want to be taken for any petulant petunia, but I would hope that the "investors" in some of those companies have a good idea of what it is they are investing in. (See this post, and this one, and this one as examples of some of the tangential matters Guambat has explored).

And if you don't happen to be a hedge fundy, you might want to consider some little bits of reality as you race along your giddy way to ever greater heights, as Corrinne Lim and Stephen Wyatt reported in the AFR earlier this week:

The relentless advance in the prices of commodities - particularly industrial metals and gold - has been enlivened by an improved outlook for world growth in recent months and a rush of new money from investment funds.

The International Monetary Fund is expected to raise its global growth forecast this week to 4.8 per cent for 2006, up from a forecast of 4.3 per cent last September. If the growth rate is achieved, it will be the first time since the early 1970s that the global economy has expanded at a rate of more than 4 per cent for four consecutive years. [Of course, there was that nasty little bear market in the mid-'70's].

Commodity analysts with the Macquarie Bank group have just made significant upward revisions to their copper, zinc and thermal coal forecasts for 2006, 2007 and 2008.

The main driver of the copper upgrades was the continuing disruption to supply. The refined zinc market is expected to remain in deficit by about 400,000 tonnes in 2006 - enough to run inventories down to record low levels.

Yet these upward revisions still put the markets at levels lower than they are now.
Copper, for example, is forecast to average $US5587 a tonne this year, $US5208 a tonne in 2007 and $US4409 a tonne in 2008. Cash copper is now trading at $US6242 a tonne.

Similarly, zinc is forecast to average $US2712 this year and $US2866 next. It is now trading at $US3078 a tonne.

The thermal coal market is expected to hold its level of about $US51 a tonne over the year but slide to $US45 in 2007, then $US40 in 2008.

"Our central expectation remains that this potential conflict [Iran] will be avoided, but the risks add to the near- to medium-term path of oil prices. The economic implications are stagflationary."

Stagflation occurs when sluggish economic growth is coupled with a high rate of inflation. In recent years, the global economy and corporations have weathered the jump in the cost of energy, transport and other raw materials. Inflation in most developed nations has so far remained benign.

Tuesday, April 18, 2006

Go on, Yanks, leave home without it

The British press are having a bit of fun with this one, which hasn't gone unnoticed Down Under. (But I think the really fun part was missed by all of them, and you can find this little Easter egg of delight at the bottom of this post, and as a teaser, this is some of it: "Mostly all of the young people wear eyeglasses in Taiwan.")
Philip Sherwell writes for news.Telegraph:

Loud and brash, in gawdy garb and baseball caps, more than three million of them flock to our shores every year. Shuffling between tourist sites or preparing to negotiate a business deal, they bemoan the failings of the world outside the United States.

The reputation of the "Ugly American" abroad is not, however, just some cruel stereotype, but - according to the American government itself - worryingly accurate. Now, the State Department in Washington has joined forces with American industry to plan an image make-over by issuing guides for Americans travelling overseas on how to behave.

Under a programme starting next month, several leading US companies will give employees heading abroad a "World Citizens Guide" featuring 16 etiquette tips on how they can help improve America's battered international image.

Business for Diplomatic Action (BDA), a non-profit group funded by big American companies, has also met Karen Hughes, the head of public diplomacy at the State Department, to discuss issuing the guide with every new US passport. The goal is to create an army of civilian ambassadors.

The guide offers a series of "simple suggestions" under the slogan, "Help your country while you travel for your company". The advice targets a series of common American traits and includes:

• Think as big as you like but talk and act smaller. (In many countries, any form of boasting is considered very rude. Talking about wealth, power or status - corporate or personal - can create resentment.)

• Listen at least as much as you talk. (By all means, talk about America and your life in our country. But also ask people you're visiting about themselves and their way of life.)

• Save the lectures for your kids. (Whatever your subject of discussion, let it be a discussion not a lecture. Justified or not, the US is seen as imposing its will on the world.)

• Think a little locally. (Try to find a few topics that are important in the local popular culture. Remember, most people in the world have little or no interest in the World Series or the Super Bowl. What we call "soccer" is football everywhere else. And it's the most popular sport on the planet.)

• Slow down. (We talk fast, eat fast, move fast, live fast. Many cultures do not.)

• Speak lower and slower. (A loud voice is often perceived as bragging. A fast talker can be seen as aggressive and threatening.)

• Your religion is your religion and not necessarily theirs. (Religion is usually considered deeply personal, not a subject for public discussions.)

• If you talk politics, talk - don't argue. (Steer clear of arguments about American politics, even if someone is attacking US politicians or policies. Agree to disagree.)

Keith Reinhard, one of New York's top advertising executives, who heads BDA, said: "Surveys consistently show that Americans are viewed as arrogant, insensitive, over-materialistic and ignorant about local values. That, in short, is the image of the Ugly American abroad and we want to change it."

The guide also offers tips on the dangers of dressing too casually, the pluses of learning a few words of the local language, use of hand gestures and even map-reading.

Of course, US foreign policy - and perceptions of it - currently has the biggest impact on the image of Americans abroad. President George W Bush recognised this when he appointed Ms Hughes, a close confidante, to head the country's public diplomacy push. But Mr Reinhard and his colleagues are convinced that individual Americans can also make a difference.

They also want to highlight the positives in foreigners' impression of the US as a land of opportunity, freedom, diversity and "can-do spirit" by boosting business and domestic travel to America.

"In many parts of the world, America is not getting the benefit of the doubt right now. People prefer to dump on us instead. But for many people, corporate America is their main point of contact, and that's where we come in."

Business for Diplomatic Action, which was formed in 2004, has already distributed 200,000 -passport-sized guides tailored to college students going abroad.

The group's next target is to raise funding for a colourful pictorial World Citizen's Guide For Kids for children on school or youth group trips. However, a spokesman for the National Tourism Agency for Britain said last night: "Americans have a certain reputation which, for the majority, is undeserved. These guidelines sound like good common sense but they're not something the majority of our American visitors need. As tourists, they're out to enjoy themselves and have a good time. We continue to welcome them."

We hosted an old friend and her new-to-us husband and kids for a dinner at our house on their visit to Sydney a few years back. He was a big exec, serially employed by many of the top S&P 500 type corporations. He was talking about his company trying to open up Asia. I tried to tell him about the Pacific way, the delicacy of "face", the importance of nurturing relationships, etc.

He wouldn't have a bar of it, nosiree bob. "We'd tell 'em what we want, what we expect and what we'd give 'em." Wham, bam, thanky Mam. He saw no value in taking the time it can take to establish a business, or even to "do" business, in this part of the world. I think he had that serial job mentality and quarterly report driven vision of the world. Never saw him again out this way. He was a hard driven man and I'm sure Asia would have driven him mad. If he'd have survived to tell the story.

By the way, that little Guide is punching way above its weight. I'm sure there must be some Bush Texas connection and that it was not an inside State Department thing.
Just look at this website:
Five of us, students in the Temerlin Advertising Institute at SMU [Southern Methodist University] in Dallas, worked with our professor. We reviewed everything BDA collected, and then asked students their opinions about studying abroad, before and after their trips. Then we spent weeks researching everything published in hard copy and online about traveling abroad. We took all that and made a guide we hope you find useful. happy travels to you all
The strength of their scholarship is also telling. Only by saving that website as text and reading it in Notepad did I discover the following invaluable information that these kids had amassed:

Algeria (Official: Arabic. Other: French, Berber dialects)- In Algeria the traditional symbol of manhood is a moustache.
Argentina (Official: Spanish. Other: English, Italian, German, French) - People who live in Argentina eat more beef per capita than any other people.
Australia (English, native languages) - The film industry in Australia is one of the largest in the world.
Austria (Official: German, Slovene(official in Carinthia), Croatian (official in Burgenland), and Hungarian (official in Burgenland)) - Dating in Austria, one might expect to "go dutch." Unless it's a special occasion, men and women split the costs of their dates evenly.
Bahrain (Arabic, English, Farsi, Urdu)- Citizens of Bahrain are among the most well educated people in the Gulf region.
Bangladesh (Official: Bangla, also known as Bengali. Other: English)- Some of the people here use their chins to point at things.
Belgium (Official: Dutch, French, and German) - In Belgium, talking with your hands in your pockets is considered rude.
Belize (Official: English. Other: Spanish, Mayan, Garifuna (Carib) and Creole)- The world's largest barrier reef is located in Belize.
Benin (Official:French. Other: Fon and Yoruba in the south and at least six major tribal
languages in the north.) - Many people in Benin love hot and spicy foods.
Bolivia (Official: Spanish, Quechua, and Aymara) - Some rural women wear bowler derby hats. Bosnia/Herzegovina (Bosnian, Croatian, and Serbian ) - Women here dye their hair; they rarely let their gray hair be seen.
Botswana (Official: English, Setswana ) - It is very rude to raise your voice in anger when you are in public.
Brazil (Official: Portuguese. Other: Spanish, English, French) - Few children ever leave
home before they marry.
Bulgaria (Bulgarian, and secondary languages correspond with your background) - To say "yes" shake your head side to side; for "no" nod your head up and down.
Burkina Faso (Official: French. Other: 90% of the population speaks native African languages
belonging to the Sudanic family) - Even though French is the official language of Burkina Faso, only 15-20% of the people speak it.
Cambodia (Official: Khmer. Other: French and English) - To greet someone in Cambodia place your hands together in prayer position at chest level.
Cameroon (Official: English and French. Other: 24 major African language groups.) - Cameroon has 240 local languages in addition to French and English.
Canada (Official: English and French.)- Canada has one of the highest immigration rates in the world, resulting in much cultural diversity.
Chile (Spanish) - Two Chileans have received Nobel Prizes in literature.
China (Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue (Cantonese), Wu (Shanghaiese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects and minority languages) - Even though China is barely larger than the U.S. in land size, the population is four times larger.
Colombia (Spanish) - 90% of the world's emeralds come from Colombia. [Betcha that fooled ya]
Costa Rica (Official: Spanish. Other: English) - A normal breakfast consists of black beans and rice.
Croatia (96% speak Croatian, 4% speak other languages including Italian, Hungarian, Czech, Slovak, and German) - All levels of education are free to the citizens of Croatia.
Cuba (Spanish) - Feel free to interrupt a friend or acquaintance in the middle of a conversation because it is not considered rude.
Cyprus (Greek, Turkish and English)
Czech Republic (Czech) - Czechs remove their shoes before they enter someone's home.
Denmark (Danish, Faroese, Greenlandic (an Inuit dialect) and German) - Denmark has always been a monarchy.
Dominican Republic (Spanish) -Dominoes is a national past time in the Dominican Republic. Ecuador (Official: Spanish. Other: Quechua and other Amerindian languages) - It is not unusual to arrive anywhere from 10 minutes to an hour late to an event.
Egypt (Official: Arabic. Other: The educated know English and French.) - A man will only shake a woman's hand if she sticks her hand out first.
El Salvador (Spanish, Nahua (among some Amerindians)) - People in El Salvador think it is rude to point with the index finger.
England (English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about 60,000 in Scotland)) - People in England watch more television than any other nation except people in the United States.
Ethiopia (Amharic, Tigrinya, Oromigna, Guaragigna, Somali, Arabic, other local languages and English is the foreign language taught in schools.) - People eat a porridge meal made of corn, barley, oats, or sorghum everyday.
Finland (Official: Finnish, Swedish Other: Sami- and Russian- speaking minorities) - A common activity is going to the sauna.
France - (Everyone speaks French, and the regional dialects (Provencal, Breton, Alsatian, Corsican, Catalan, Basque, Flemish) are rapidly declining.) - In France the number of pets outnumber that of children.
Gambia (Official: English. Other: Mandinka, Wolof, Fula and other indigenous languages) - You can not eat and drink at the same time, so drinks are not served until after the meal.
Germany (German) - Instead of crossing your fingers for luck, Germans squeeze their thumbs. Ghana (Official: English. Other: African languages (i.e. Akan, Moshi-Dagomba, Ewe, and Ga)) - When a guest leaves they are accompanied to the bus stop, taxi stand, or given a ride home. Greece (Official: Greek. Other: English, French) - In Europe, the correct form for waving hello and goodbye is palm out, hand and arm stationary, fingers wagging up and down. The common American wave means no - except in Greece, where it is an insult.
Guatemala (Spanish and Amerindian languages) - When you hail a taxi, the bigger the hand motion the longer distance you have to go.
Guyana (English, Amerindian dialects, Creole, Hindi and Urdu) - In Guyana, younger people address most adults or elders outside of their families as auntie or uncle.
Honduras (Spanish and Amerindian dialects) - At the age of 15, young women are brought into society with huge parties.
Hong Kong (Official: Chinese (Cantonese) and English.) Many Hong Kong Chinese use a Western name for business purposes.
Hungary (Hungarian) - Almost 80 percent of the women in Hungary work outside the home. Iceland (Icelandic, English, Nordic languages and German) - The people of Iceland have one of the highest life expectancy rate in the world.
India (Official: Hindi (primary), Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit. Other: English, Hindustani) - There are at least 300 languages spoken in India.
Indonesia (Official: Bahasa Indonesia. Other: English, Dutch and local dialects.) - If you touch the top of someone's head in Indonesia, they will most likely be very insulted.
Ireland (English (primary) and Irish (Gaelic)) - Until 1995, the constitution in Ireland made divorce illegal.
Israel (Official: Hebrew. Other: Arabic is used officially for the Arab minority and English is the most commonly used foreign language) - Israel does not have a written constitution.
Italy (Officail: Italian. Other: German, French and Slovene.) - Placing a finger under your eye and pulling down on the skin slightly means that you think someone is smart.
Jamaica (English, patois English) - When you are in Jamaica and you respect or approve of an idea hit fists with a person.
Japan (Japanese) - In Japan, it is considered rude to look at a person directly in the eye for more than a few seconds.
Jordan (Official: Arabic. Other: English, among upper and middle class) - Women's jewelry is a symbol of wealth and financial security.
Kenya (Official: English and Kiswahili. Other: various indigenous languages) - Kenyans are more likely to trust you if you look them in the eye.
Kuwait (Official: Arabic. Other: English.)
Laos (Official: Lao. Other: French, English, and various ethnic languages) - Two-thirds of the population is Buddhist.
Lebanon (Official: Arabic. Other: French, English and Armenian) - In Lebanon people do not ask about someone's religion because that would mean you're categorizing someone.
Lithuania (Official: Lithuanian. Other: Polish, Russian) - Basketball is the most popular sport in Lithuania.
Luxembourg (Luxembourgish (national language), German (administrative language), French (administrative language)) - All citizens over the age of 18 are required to vote. And they enjoy one of the highest standards of living in the world.
Madagascar (Official: French and Malagasy) - Madagascar is an island the size of Texas, inhabited by a wide variety of plants and animals that only exist there.
Malaysia (Official: Bahasa Melayu. Other: English, various Chinese dialects, Tamil, Telugu,
Malayalam, Panjabi, Thai and several indigenous languages in East Malaysia) - Let's go fly a kite! Kite flying is a favored past time activity for many people in Malaysia.
Mali (Official: French. Other: Bambara and African languages) - People in Mali are obligated to take care of extended family members, people end up taking care of an average of 10 people. Malta (Official: Maltese and English) - Limestone is Malta's only natural resource.
Mauritius (Official: English and French. Other: Creole, Hindi, Urdu, Hakka and Bhojpuri) - Mauritius has rare species of birds that exist nowhere else in the world.
Mexico (Spanish,
Mayan, Nahuatl, and other regional languages) - Mexicans have two last names: one from the father and one from the mother.
Micronesia (Official: English. Other: Trukese, Pohnpeian, Yapese, Kosrean, Ulithian, Woleaian, Nukuoro, and Kapingamarangi) - It is common for people to offer food to visitors or people passing by and it is an insult to refuse unless you are full.
Mongolia (Khalkha Mongol, Turkic, Russian) - Mongolia's nickname is "Land of the Blue Sky," because of the great weather, in an average year there are 257 cloudless days.
Morocco (Official: Arabic. Other: Berber dialects and French which is often used in business, government, and diplomacy) - In some homes, it may be considered impolite to finish eating before your host.
Mozambique (Official: Portuguese. Other: indigenous dialects) - While in Mozambique be prepared to travel by foot or public transportation, because only the rich own cars.
Namibia (Official: English. Other: Afrikaans is used by most of the population, German, Oshivambo, Herero and Nama) - In general the rural homes in Namibia do not have telephones.
Nepal (Official: Nepali. Other: about a dozen other languages and about 30 major dialects, and English.) - The Nepalese think that wanting personal space, or to spend time by yourself is strange.
Netherlands (Official: Dutch and Frisian) - The Netherlands has more than 600 art museums. New Zealand (Official: English and Maori) - New Zealander's usually do not tip because the employer is responsible for their wages.
Nicaragua (Official: Spanish. Other: English and indigenous languages) - When you visit a home in Nicaragua, say hello to everyone and wait to be invited to sit down.
Niger (Official: French. Other: Hausa and Djerma) - If you want to get someone's attention in Niger you should snap or hiss.
Nigeria (Official: English. Other: Hausa, Yoruba, Igbo (Ibo), and Fulani) - Greet someone in Nigeria, before beginning a conversation.
Northern Ireland (English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about 60,000 in Scotland)) - In Northern Ireland, it is unacceptable to date more than one person at a time.
Norway (Official: Bokmal Norwegian and Nynorsk Norwegian. Other: Sami- and Finnish)- In Norway, 40% of the Parliament and almost half of the cabinet positions are filled by women. Pakistan (Official: Urdu. Other: Punjabi, Sindhi, Siraiki (a Punjabi variant), Pashtu, Balochi, Hindko, Brahui, English and Burushaski.) - It may be inappropriate for a man to hold a woman's hand in public, but men are often seen walking down streets holding hands.
Panama (Official: Spanish. Other: English) - Panamanians are what we would call "close talkers;" they sit or stand close together while they talk to each other.
Paraguay (Official: Spanish and Guarani) - Soccer is the most popular sport in Paraguay.
Peru (Official: Spanish and Quechua. Other: Aymara, and many minor Amazonian languages) - Around half of the people in Peru live in poverty.
Philippines (Official: Filipino and English. Other: eight major dialects - Tagalog, Cebuano, Ilocan, Hiligaynon or Ilonggo, Bicol, Waray, Pampango, and Pangasinense) - The Philippines became independent from the United States on July 4, 1946.
Poland (Polish) - If someone in Poland blinks both eyes at you, they may be expressing romantic interest.
Portugal (Official: Portuguese and Mirandese) - If you are in Portugal and you would like to say that something is very good pinch and shake your earlobe.
Puerto Rico (Spanish, English) - Women do not change their last names after they get married in Puerto Rico.
Qatar (Official: Arabic. Other: English) - Most adults in Qatar wear perfume.
Romania (Official: Romanian. Other: Hungarian, German) - In Romania, you should only call very close friends or family members by their first names.
Russia (Russian) - New Year's day is generally Russians favorite holiday.
Saudi Arabia (Arabic) - Rarely do women interact with men outside of their families.
Scotland (English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about 60,000 in Scotland)) - Scotland is the birthplace of golf, it was invented in the
Senegal (Official: French. Other: Wolof, Pulaar, Jola and Mandinka) - It is very important to people in Senegal that you are well dressed in public.
Serbia-Montenegro (Serbian and Albanian) - The Serbian Orthodox Church teaches people that each family is guarded by a patron saint.
Singapore (Official: Chinese, Malay, Tamil, and English) - In Singapore, conforming to social norms is expected and often is legally enforced. On a lighter note, water sports are very popular.
Slovakia (Official: Slovak. Other: Hungarian) - We cross our fingers to wish for luck; in Slovakia they hold their thumbs.
Slovenia (Slovenian and Serbo-Croatian) - When entering a home in Slovenia you should at least offer to remove your shoes.
South Africa (Official: Afrikaans, English, Ndebele, Pedi, Sotho, Swazi, Tsonga, Tswana, Venda, Xhosa, Zulu) - South Africa is the wealthiest country in Africa, however, there is a large income difference between the races.
South Korea (Korean, English)- According to our friends in South Korea, if you are visiting or working in Asia then use chopsticks or learn fast. When you do, you will be highly regarded. Spain (Official: Castilian Spanish. Others (all official regionally): Catalan, Galician, and Basque) - Spaniards are what we would call "close talkers," standing close to each other when talking and frequently touch each others arms.
Sri Lanka (Official/National: Sinhala. National: Tamil. Other: English) - Every full moon constitutes a holiday in Sri Lanka.
Sweden (Swedish and small Sami- and Finnish-speaking minorities) - Sweden's foreign policy is
built upon neutrality and nonalignment.
Switzerland (Official: German, French, Italian and Romansch) - Every man who is "physically fit" serves in the army.
Syria (Official: Arabic. Other: Kurdish, Armenian, Aramaic, Circassian, French, and English) - While in Syria pass things with your right hand or both hands, but never pass anything with just your left hand.
Taiwan (Official: Mandarin Chinese. Other: Taiwanese (Min), Hakka dialects) - Mostly all of the young people wear eyeglasses in Taiwan.
Tanzania (Official: Kiswahili or Swahili, English. Other: Kiunguju (name for Swahili in Zanzibar), Arabic, and many local languages which is usually people's first language.) - In Tanzania, mothers are referred to by mama followed by their oldest son's name.
Thailand (Thai, English, ethnic and regional dialects)- In Thailand, it is actually illegal to leave the country with an image of Buddha.
Tibet (Tibetan)- When you want to greet someone in Tibet, simply stick out your tongue. Tunisia - (Official: Arabic. Other: French) Time is relative in Tunisia, "tomorrow" could mean next week.
Turkey (Official: Turkish. Other: Kurdish, Arabic, Armenian, and Greek) - If you are saying hello to a small group in Turkey, address each person individually.
Uganda (Official: English. Other: Ganda or Luganda, other Niger-Congo languages, Nilo-Saharan languages, Swahili, and Arabic) - Taking something from someone with both hands shows appreciation.
Ukraine (Ukrainian, Russian, Romanian, Polish, and Hungarian) - Ukraine is known for it's artistic Easter egg painting.
United Arab Emirates (Official: Arabic. Other: Persian, English, Hindi, Urdu) - Expatriates make up nearly 70% of the United Arab Emirates population.
United States (English and Spanish. There is no official language in the United States.) - In 2003, 7,300,667 passports were issued in the U.S. In the 2000 presidential election, 60% of U.S, citizens who were of voting age actually cast a vote.
Uruguay (Spanish, Portunol, or Brazilero (Portuguese-Spanish mix)) - Beginning at the age of 18, all citizens of Uruguay must return to their place of birth to vote.
Venezuela (Official: Spanish. Other: various indigenous dialects)- When shopping in Venezuela try asking how much something costs by rubbing together your thumb and index finger while rotating your palm upward.
Vietnam (Official: Vietnamese. Other: English, French, Chinese, Khmer, Mon-Khmer and Malayo- Polynesian) - The Vietnamese find it very rude to touch people on the top of their head.
Wales (English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about 60,000 in Scotland)) - The sport of choice in Wales is rugby.
Yemen (Arabic) - People do not date in Yemen and marriages are usually arranged.
Zambia (Official: English. Other: Bemba, Kaonda, Lozi, Lunda, Luvale, Nyanja, Tonga, and about 70 other indigenous languages) - People in Zambia consider it an honor to have guests in their home.
Zimbabwe (Official: English. Other: Shona, Sindebele, and several tribal languages) - Respect is shown by lowering yourself. That is way when a superior enters the room no one stands up.