RBNZ OCR announcement out tomorrow

Good time to have your finger ready on some trading strategies to take advantage of NZ's relatively high (compared the rest of the West) interest rate.

Macro data downloader

Found a nifty tool today that lets you download macro data sets directly into excel. There are loads of stats, such as the PPI, GDP and breakdowns of many stats into their component parts.

There's also a built-in graphing tool - even easier than excel's built-in graphing options, although you can use those as well.

The data are downloaded from a mediation server at the St. Louis FED, which in turn downloads data from various sources like other feds, OECD and probably the IMF and world bank. It took me a few minutes to play with and get working - nice and simple.

It's built on top of VB. It opens up plenty of possibilities of extending this to other data sets and sources. Even those data sources that already provide downloadable values in CSV or XLS, it's nice to be able to bring things together in a single spreadsheet if you're doing things like top-down business cycle analysis. The hard work is done on the intermediation server. If you wanted data from a new source, you'd need to create a screen scraper for each one that isn't covered by one of the existing data suckers. A RESTful API on some of the IMF, world bank and central bank sites would be nice but that's just pie in the sky. I'm sure automated data tools exist but only available with a hefty subscription fee (I'm one of the poors at present). I'm surprised that a free tool like from the FED seems to be the only one around since the originating sites don't charge for this stuff in the first place.

Link: http://research.stlouisfed.org/fred-addin/

EDIT: Got a reply back from the maintaners. NZ data is already on their servers but needs to be added to the plugin. Data here:

FRED Data on New Zealand
http://research.stlouisfed.org/fred2/tags/series/?t=new+zealand

vocab nerd quiz

Anyone know the difference between extrinsic and exogenous?

extrinsic seems to be about an effect or factor originating externally; the latter is about an effect existing (but not about its origination) externally. NFI

Eastern Bloc Corruption

After my recent visit to Ukraine for a few days, it gave me a chance to visit the country with a bit of a fresh look. After the mountains of cases that you tend to read at b-school, it makes you more inquisitive and questioning of what goes on around you at least from an economic and financial standpoint.

Corruption is all-pervasive in the country, with shit flowing down from the top, ie from the president, right down to the lowly cops on the beat (pun intended). The good people at transparency international (www.transparency.org) compile a widely disseminated corruptions perceptions index and their respective rankings, see Gazprom Valuation and some mention here: Hermitage Captial Management although I was specifically looking for a mention from an article on the economist that mentions a study describing how much of a drag that corruption has a drag on market capital valuations on the Russian stock exchanges (think it was around a 20% discount).

Corruption is a monster that encroaches on many parts of peoples' lives. The part that lately interests me is the effect on capex recovery times and retail prices. The logic goes something like this:

1. An entrepreneur wants to set up shop in an economy heavily subjected to corruption
2. Planning and permissions are subjected to bribery fees, costs and charges to "expedite" the permit process [PRICE DISTORTION 1]
3. Retail establishment is set up
4. a) Depending on the depth of corruption, the business may either be extorted additional funds by local police, mafia (with some connection to the state) or similar government additional agency during its time of operation. [PRICE DISTORTION 2]
    b) an alternative to (a) above is where the property is completely appropriated by one of the agencies mentioned above, either for compliance failure or some similar excuse

Price distortion 1 is probably the most common and thus the most predictable; I've heard estimates of upwards of 20% of the capital cost of a venture may need to go do additional "facilitation costs". However it is the second price distortion that I think is causing an impact on retail prices. Certainly prices in the east aren't reflective of the low price of labour in that country. Goods in Kiev were similarly or higher priced than their counterparts in the West. And import duties and transport costs just don't pass as a good enough excuse considering the size of the country's markets and their proximity to Europe.  And obviously locally produced goods with local input goods should be fairly priced.

The second price distortion I believe causes higher retail costs due to the owner needing to recover his capital investment as soon as possible before his business is closed down (unlikely), appropriated (more likely) or continuance-of-business fees are extorted (most likely). The driving factor of the retail price impact is how fast capital recovery must happen. For a bar, its life cycle is typically only a few years due to the nature of its fickle clientele. Thus prices need to be much higher than a average quality restaurant, which can spread the cost of bribes over a lower period. It is also likely to attract less bureaucratic attention than a bar or a club. Those restaurants that are in a building, say a hotel, would enjoy some implicit protection from the owner of the hotel and thus would be under less price pressure.

Time to do a bit of looking around to see what studies have been done....

hmmm, i should start using this thing again

The world needs to hear my internal monologue. He's really good to talk to

Riyadh, Kingdom of Saudi Arabia

It's high time I wrote a blog update. Especially since there's heaps to write about after being in Saudi for a week. The last few weeks have been pretty low key on the work front. Every now and then there'll be a big spurt of travel - Mallorca for a couple of days, Rome, Paris and London. These places are all repeats (except Mallorca), so while I'm not tired of the Eurowandering yet, it's not as interesting as going somewhere new. Most of Europe all seems the same - the churches, cobbled streets, closed shops on Sundays and bad weather. To conceptualise what a European town or city looks like, I take Frankfurt to be the perfect example. There's snow, nothing to do on Sunday apart from the gym or shag the missus. People will tell me to appreciate what's different about the place. That's like these telling me that having a baby is a wonderful experience and that every day is "difference". I'm sorry, but I just don't get it. A lot of these places just seem like people holders. When was the last time you heard of someone going to Luxembourg for a dirty weekend away.

Poor countries, places is where you have the fun. I'm looking forward to the day that I can go up to the mountains of Pakistan and blow a goat to pieces with a rocket launcher for $120USD. Or charging around the back streets of Shanghai looking for dodgy DVDs dodging mad chinese drivers. Although I guess you can get the mad drivers in Europe too - just go to Antwerp :-)

The other good thing about these places is the poorer the country's airline, the better it fits in to my tardy, "you're bloody lucky to make it" schedule. Usually I'll miss a flight here and there and the good thing about PIA, Saudi Arabian Airlines or even Alitalia is your ticket is really just a voucher to fly. Miss your flight and they'll have no worries to put you on the next one maybe with an upgrade to boot. "Sorry that you missed your flight, sir". That's right. Try the same act with Lufthansa and you'll be booted out the door with a sharp "nein" while they proceed to scribble your name on to their black list of unworthy customers. So as to be expected, I rang Saudi Airlines at midday when I was due to fly 10 hours prior, and I had a new booking in 2 minutes. Ta!

Riyadh is pretty cool. It does match up to the media hype about being reasonably strict implementing Sharia law. My mate Arafat who lives here insists that the country is modernising rapidly. He says I wouldn't recognise the place if I came back in a year's time. Meanwhile, the country only just approved its first cinema in the more liberal city of Jeddah. Although separate queues families and singles still exist at most Starbucks, McDonalds and Tikka Curry houses. Even in the family eating section of the mall food court has partitions that you can put around your family's table. Privacy is serious business and watch out if anyone sees you mis-eat your shwarma. But I dare say a large part of what Arafat says is true, which makes what it *used* to be, a rather draconian place.

The country is offically ruled by King Abdullah however internally, the country's leadership and laws is a hybrid between the Wahabbis and the monarchy. Back in the early 70s, King Faad was trying to modernise the country faster than what the conservative population was happy with. The religious elite wanted no business in their rapid westernisation and occupied the mosque at Mecca. Now apparently the monarchy used some elite guards and put the wrong gas cantisters. Instead of tear gas, it was "waste those dudes" gas and most of the occupiers were killed. In the aftermath, a "gentlemans aggrement" was reached where the sharia law would be administered by religious elites and everything else by the monarchy. So when the shops close down five times a day for 30 minutes' prayer time (Salar), this is a fatwa.

The entertainment side is a bit lacking, but there are a couple of people I know already who I can go out with. Arafat and I cruised out for a couple of hours of pool the other night. And I went out with another collegue for a BBQ last night with a bunch of Westerners. And most cool is the two squash courts in the hotel. Was like the hotel in Abu Dhabi that I stayed at for two months. AAaah, room 629.

Time to head back to the hotel and post this on the intertubes.

A couple more weeks travel

I had to head down to Dubai the week before last. Those religiously aware types may know that it was Ramadan. My collegue/buddy who arranged the trip down there apologist profusely for organising a trip during the Islamic fasting time. Ramadan lasts for about 40 days and if you observe it, it forbids you from doing a whole bunch of stuff between sunrise and sunset. To make sure you follow the social mores, the hotel I was staying at passed a memo under my door giving me the lowdown.

In public, you may not chew gum, wear singlets, eat food, drink or do PDA (public display of affection). Obviously the public wasn't too fussed and was happily grazing on their turkey club sandwiches on the beach as they were getting into each other. As with anywhere warm and beachy, there was the usual assortment of Dutch and Germans with a sprinkling of Italians. The flights aren't too bad to Dubai from Milan - around 300 euros if you book far enough in advance. And most hotels have cheapie rooms during Ramadan. The cool thing about Ramadan is since the arabs are fasting all day, they get tired and sleepy quickly (they're not allowed to drink any water or smoke cigarettes either). My job down there was to give the fullas down there some advanced training on their equipment, but only until 2pm. Then it was home time, or rather cruise down to the beach and work on the tan. On Thursday (their start of the weekend), it was 1pm. Although most of the days I had to work on other European stuff at the same time, thus I stayed mostly white.

I got a chance to go into the Burj Al Arab hotel for dinner. That's the one which is shaped like a sail and the one with the photo of Andre Agassi playing tennis on the top. The only restaurant (there are 6 inside) that I could reserve a table at was 75 euro per person. The food was good, but was a pretty small seafood buffet on the bottom floor. Afterward, we cruised up to the bar at the top for a few cocktails - a really fantastic view from the top - it reminds me of going to a jazz bar in Shanghai at the 75th floor. Overall it wasn't as extravagant as I expected it to be. No gold encrusted pimp jewels nor diamond studded bottle openers. The palace in Abu Dhabi apparently is more opulent.

But it was a good 5 days down there and got a few thousand Alitalia frequent flyer miles. They're probably one of the best airlines out there for their frequent flyer program. It takes very few points to fly a long way.

The following week I cruised off to Paris for some more training, which I'll cover another day.