June 22 Linkfest

June 23, 2007

Economy:

Another Asian Contagion May Be Only a Bad Currency Trade Away: Ten years after the collapse of Asian governments’ overvalued currencies in 1997, the remedies they embraced to prevent a recurrence may have only traded one set of risks for another. Their “never again” determination has led them to new extremes: artificially low currencies, a record $3.4 trillion in reserves and export-dependent economies. (Bloomberg)


Must read Big Picture post how about how the government is lying to us about inflation:
Delving Deeper into the Inflation Issue: Consider what happens when the BLS looks at rent/OER: “They supposedly net out utility payments. So if your rent payment stays constant but utility bills go up, that yields a lower net implied rent. In other words, utility prices going up caused rental prices and CPI to go down.”

But that’s just the tip of the iceberg. Consider the even more bizarre concept of OER as representative of the entire home-dwelling US public. More than three times as many people OWN THEIR OWN HOMES then rent their abodes. So why do we use Rental Measures for measuring shelter inflation? (The Big Picture)

The strong Euro is causing lots of angst in Europe. There is a growing social and political movement against the Euro in a few countries in Europe, Italy and France in particular:
France’s Sarkozy Lashes Out Anew at Strong Euro: French President Nicolas Sarkozy criticised euro strength anew on Wednesday, saying there was no reason why the euro zone should be the only region in the world to be handicapped by an overly strong currency.


In an interesting and somewhat unusual view of a strong currency, Sarkozy argues that a strong Euro decreases the purchasing power of France:
“An overly low purchasing power is the fault of competition from countries with low salaries; of social, environmental, monetary dumping; of the Chinese currency which is too low; of the euro which is too strong; of charges which are too high; of interest rates which are higher than inflation; of house prices which have risen a lot.” (Reuters)

As Mercury Rises, Motorists Get Burned: (Will’s Blog)

Rate Rise Pushes Housing, Economy to “Blood Bath”: The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, the National Association of Realtors reported.

“It’s a blood bath,” said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. “We’re talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.” (Bloomberg)

Inflation:

Commodities Boom Driving Inflation in Latin America: High international commodities prices are becoming a double-edged sword for Latin American countries. After boosting economic growth for years, the high prices are making food more expensive and stoking fears that inflation could accelerate. (Reuters)

Agricultural Commodities – Biofuelled: Every morning millions of Americans confront the latest trend in commodities markets at their kitchen table. According to the United States Department of Agriculture, rising prices for crops–dubbed “agflation“–has begun to drive up the cost of breakfast. The price of orange juice has risen by a quarter over the past year, eggs by a fifth and milk by roughly 5%. Breakfast-cereal makers, such as Kellogg’s and General Mills, have also raised their prices. Underpinning these rises is a sharp increase in the prices of grains such as corn (maize) and wheat, both of which recently hit ten-year highs. Analysts are beginning to ask, as they have of oil and metals, whether higher prices are here to stay.

When demand was growing more slowly, farmers could meet it through gradual improvements in their yields. But to cope with today’s boom, yields will have to rise much faster, or farmers will have to bring more land into production.

Both are possible. Greater adoption of genetically modified strains of corn and wheat, for example, could improve yields. But they are expensive and politically controversial. There is also quite a bit of fallow land to be sowed, especially in developing agricultural powers such as Brazil and Ukraine. But those countries are far from the biggest markets and their idle land tends to be found in areas with poor transport links. A strong price signal will be needed to overcome such obstacles and induce extra supplies.

Neither seems very likely in the near future. This week America’s Congress is debating whether to double its targets for biofuel production.

At the same time, the oil price rose to its highest level in ten months, thanks to a strike and other disruptions in Nigeria. The chaos in the Niger delta, it turns out, has a surprising amount to do with the price of eggs. (Economist)

General Interest:

China Blocks Flickr Photo Sharing Service: Flickr’s blockage in China, which seems to affect only the actual photo files, rather than the entire Web site, ironically arrived almost exactly as Wikipedia was suddenly freed from a long stretch in the big house. Several weeks ago, users posted photos of public protests of a new chemical plant in Xiamen, which led to flickr’s current blockage. (MarketWatch)

Investing & Trading:

Steer Clear of the Rotting Bond Market: You don’t have to believe in collusion between debt underwriters and the ratings agencies, however, to worry that the system isn’t working. The criticism here is coming from bond professionals who have produced a series of studies showing that pools of debt called CDOs (for collateralized debt obligations) aren’t showing the patterns of return and default that their credit ratings predict. For example, one study shows that tranches of CDOs with the same BBB credit rating, which should trade at roughly similar prices, are instead trading at yields that differ by anywhere from 1.4 to 10 percentage points. At the A and BB levels, the gap is something like 4 percentage points. The U.S. Federal Reserve recently weighed in with a paper that said the ratings for CDOs are riddled with “anomalies.” (Jubak’s Journal – MSN Money)

Four CDOs With Subprime Loans May Have Ratings Cut: Four collateralized debt obligations containing subprime mortgages from 2006 and valued at $3.1 billion may have their credit ratings cut by Fitch Ratings. (Bloomberg)

A good acquisition for a stock I own:
Luxottica buys Oakley:
Chances are that many of the celebrities’ favourite brands are owned by Luxottica, the Italian eyewear group. It is now adding another name, Oakley, the California-based sunglasses maker, to a portfolio that already includes Prada and Chanel. And it is paying a rather fashionable price to do so.

The $2bn, or $29.30 a share, deal does make sense, though. The luxury goods market is booming and, despite a substantial capital expenditure programme, Luxottica has spare cash to invest. It already distributes Oakley sunglasses through its retail outlets and wants to expand in North America, where it made two-thirds of its €4.7bn sales last year. Luxury sunglasses are becoming increasingly popular in the region. According to Luxottica’s chief executive, only 15 per cent of sunglasses sold in North America cost $30 or more, but the proportion is growing. (Financial Times)

Housewives Outmaneuver UBS, Deutsche Bank Trading Yen: Yukiko Ikebe, a 59-year-old housewife in Tokyo, in April was indicted for evading about 139 million yen in income taxes while earning 407 million yen trading foreign-exchange, according to the Tokyo District Public Prosecutors Office.

“She must have earned more money than us,” joked Yuji Saito, head of the foreign-exchange sales department at Societe Generale SA in Tokyo. “I said to my colleagues, `let’s find her and hire her!”’ (Bloomberg)


Real Price Gouging At the Pump

June 21, 2007

I usually roll my eyes at people who make allegations that oil companies are gouging consumers. Most of these people have no evidence, just outrage at the high profits oil companies earn when prices are high. This article from MSN Money actually makes some solid points and shows how gas stations (not necessarily oil companies) are ripping off consumers in the summer months:

As Mercury Rises, Motorists Get Burned: As the temperature rises, gasoline expands, and the amount of energy in each gallon drops. Because gas is priced at a 60-degree standard and gas pumps do not adjust for temperature changes, motorists often get less bang for their buck in warmer weather.

Almost a century ago, the industry and regulators agreed to define a gallon of gasoline as 231 cubic inches at 60 degrees. But as the mercury rises and gasoline expands, it takes more than a gallon of gas to produce the same amount of energy. The opposite is true when gasoline contracts in colder weather.

Gas retailers ignore the temperature swings and always dispense fuel as if it’s 60 degrees. As a result, gas is an average of about 5 degrees warmer than the federal standard, according to a study analyzed by Dick Suiter of the National Institute of Standards and Technology.

In frigid Canada, where cold temperatures were giving consumers an edge, many gas stations voluntarily backed a program to add pumps that automatically adjust volumes based on temperature.

During the energy crisis in the 1970s, tropical Hawaii decided to set a base fuel temperature of 80 degrees, meaning that consumers there get more bang for their buck because retailers now dispense 234 cubic inches of gas per gallon rather than 231. The federal government is considering a similar change as well. The National Conference on Weights and Measures is to vote in July on whether to allow temperature regulation by retailers.

The upcoming decision is worrying some fuel distributors, who say the new equipment could force some independent dealers out of business. NATSO, a trade group representing truck-stop owners, estimates that each retrofitted pump could cost between $1,500 and $3,800.

“The average truck stop has 20 pumps,” said Mindy Long, a spokeswoman for the group. “The burden on them would be phenomenal.”

Lobbyists are paid to represent their constituents, but this Mindy Long must have no shame. Her argument is essentially this: “it would be a phenomenal burden on gas stations and truck stops to treat their customers fairly.” Hahaha!

Her argument is even more ridiculous because, according to the article, gas stations in Canada have retrofitted their pumps. The reason they did so is that they were giving consumers too much gas (because the gas is denser at lower temperatures). So it’s ok for gas stations to retrofit their pumps so they do not get ripped off but it’s a “great burden” for them to retrofit their pumps so the consumer doesn’t get ripped off.


Linkfest

June 17, 2007

Investing:

Finding Arbitrage Plays in the New Forever Stamp: Buy them now, use them forever. That’s the promise of the U.S. Postal Service’s “Forever” stamp, which went on sale April 14. (Bloomberg)

A safe-money bet? Think Canada: Afraid that the U.S. dollar is in a long-term decline? Want to protect the value of your portfolio over the long term? Looking for bigger gains than you’ll get from loading up on Swiss francs or burying gold bullion in your backyard?
Try Canada. I can’t think of a better place to stash part of a long-term retirement nest egg than in Canadian stocks. I’ll give you three in this column to add to your long-term retirement portfolio after the current sell-off has run its course. (Jubak’s Journal – MSN Money)

Barron’s Round Table: Marc Faber interview: In January you also recommended shorting the 30-year bond. We presume you’re still bearish: Yes, although near-term these bonds are oversold. It is a great error to think that in an economic slowdown, the rate of inflation automatically drops. Don’t tell me your cost of living is increasing only 2% a year.

As for a new idea, I’d try to short the U.S. retailers, excluding Wal-Mart…It won’t do as badly as the rest of the industry. There will come a time when middle-class households exact their revenge and do better relative to the Wall Street crowd. The problem with Wall Street is this: If you take away the fees earned by structured products and investment banking and mergers and acquisitions, there won’t be much left. I admire Wall Street and the banking system, which when faced with collapsing co

mmission rates invested structured products from which to earn so much. But one day it will dawn even on financial institutions, and on state pension funds, that they are paying a high fee for a very large basket of hedge funds. Some hedge funds are superstars. But out of 7,000 hedge funds, not all are superstars. And it’s not just hedge funds. The whole system is geared to taking a lot of money out of the pockets of clients. Where are the customers’ planes? (Barron’s)

Economy:

Yen Drops to Lowest Versus Dollar Since 2002 on Treasury Yields: The yen fell to the lowest against the dollar since December 2002 and declined against the euro as Treasury yields near the highest in five years encouraged investment outside Japan. Japan’s currency dropped against all of its 16 most active counterparts tracked by Bloomberg on an increase in carry-trade purchases of higher-yielding assets financed by borrowings in the yen. (Bloomberg)

Carry Over: Time Might be Running Out on the Carry Trade: It is amazing how many people follow a strategy that, in theory, does not work. They do so, of course, because practice outranks theory. And the carry trade, the borrowing of low-yielding currencies to buy high-yielding currencies, has worked in practice. (Economist)

Misc:

Drink Up: LUXEMBOURG glugs more than 15.5 litres of alcohol per person in a year, more than any other country. One explanation is that the duty on alcohol is relatively cheap in the tiny nation, encouraging booze tourism from its more heavily taxed neighbours. No such explanation for the Irish, however, who quaff 13.7 litres a year, according to the World Health Organisation. European countries, with their cultural acc

eptance of alcohol, tend to dominate the top places. In America, where stricter minumum-age requirements apply, the average person drinks 8.6 litres a year. (Economist)

Fat, Glorious Fat, Moves to the Center of the Plate: These are times of bold temptation, as well as prompt surrender, for a carnivorous glutton in New York.

They’re porky times, fatty times, which is to say very good times indeed. Any new logo for the city could justifiably place the Big Apple in the mouth of a spit-roasted pig, and if the health commissioner were really on his toes, he’d draw up a sizable list of restaurants required to hand out pills of Lipitor instead of after-dinner mints. (New York Times)

Wal-Mart theft: $3 billion a year? Shoppers at Wal-Mart stores across America are loading carts with merchandise — maybe a flat-screen TV, a few DVDs or a six-pack of beer — and strolling out without paying. Employees also are helping themselves to goods they haven’t paid for. The hit is likely to rise to more than $3 billion this year for Wal-Mart Stores (WMT, news, msgs), which generated sales of $348.6 billion last year, according to retail consultant Burt Flickinger III. (MSN Money, AP)

Tainted Food:

The Week magazine has a great briefing about food imports. This is a must-read:
The Dangers of Imported Food: Each month, federal inspectors turn back tons of tainted food imported from abroad, but experts say that far more gets through. How worried should we be about our food supply? (The Week)

F.D.A. Tracked Tainted Drugs, but Trail Went Cold in China: Ten years later it happened again, this time in Panama. Chinese-made diethylene glycol, masquerading as its more expensive chemical cousin glycerin, was mixed into medicine, killing at least 100 people there last year. And recently, Chinese toothpaste containing diethylene glycol was found in the United States and seven other countries, prompting tens of thousands of tubes to be recalled. (NYT)

1,000 Tube of Toothpaste Seized: The Food and Drug Administration earlier this month issued a worldwide alert of toothpaste from China because DEG levels of 1 to 4 percent were found in brands of Chinese toothpaste that the FDA banned June 1. (Pacific Daily News)

Taxes:

The Next Audit Scare: The IRS is planning to Revive Its Random-Audit Program in Hopes of Foiling Tax Cheats; What to do if you’re chosen. (WSJ)

Carried Away: The argument centres on one long-established discrepancy—the gentler tax treatment of capital gains than annual income. Now it is benefiting people in private-equity firms (and to a lesser extent hedge funds), who receive a large part of their pay in the form of “carried interest”—usually 20% of investment gains. In America these are taxed at the 15% capital-gains rate, rather than 35% income tax. In Britain the benefits are even more generous. Those who hold an investment for two years can pay 10% on the gains, compared with a 40% rate of income tax. (Economist)

Rubin, Summers Say Fund Managers Should Pay Higher Tax Rates: Congress should more than double tax rates for many hedge fund managers and private equity partners who classify their pay as capital gains, former Treasury secretaries Robert Rubin and Lawrence Summers said. (Bloomberg)


Friday, June 16, 2007: Trois Pistoles vs. Bloomingdales 59th Street

June 16, 2007

Today’s game was the Trois Pistole’s first true victory.

The game was held at Field #7 in the North Meadow of Central Park. It was scheduled to start at 5:30 and we barely assembled the team by the 5:45 cutoff point. When I arrived at 5:10, the entire Bloomies team was already there practicing; it looked like they had been there for a while too.

A word about the other team: they were intensely competitive but lacked the skills to match. They made this pitcher extremely tense with their overt desire to walk… instead of hit. In slow pitch softball, the idea is to have fun: when I get up to bat, I want to hit the ball, not watch perfectly good pitches float over the plate. Alas, Bloomies did not share the sentiment.

After starting out the first couple of innings behind by a few runs, the Pistoles‘ staged an impressive comeback. Samantha is the clear MVP of the game. Her strong hitting and excellent base-running is the reason we won tonight!!

Another standout performance: Michael Bolger showing up early even though he could only stay for a few minutes because of dinner plans. His selfless sacrifice ensured that we were eligible to play.

By the 6th inning the score was 15 to 12 in our favor. Due to time constraints, the Ump announced that this would be the last inning: Bloomies would have to score a bunch of runs or the game was over. In softball, scoring 2 runs is quite simple, especially if you get a couple of people on base. After walking a batter, and allowing a base hit, it was not looking too good.

With impressive infield play we kept them to 1 run and the game was over. The drama was just beginning, though. The Bloomies were a feisty and cantankerous bunch: they yelled and screamed because we were late and thought they should have been awarded a victory because of it. Regardless, the rules are clear that team’s are given a 15 minute window in which to assemble. The confrontation resulted in a yelling match between us, Samantha, Bloomies, and the Ump. There was no argument though, we had won fair and square.

This narrative does not do our victory justice, so please feel free to comment freely. Also, Flickr friends can follow this link for all the softball pics.


Softball

June 12, 2007

I was hoping to write a story of the Trois Pistole’s first-ever softball victory tonight. Alas, it wasn’t meant to be: not a single member of the other team showed up!

Nevertheless, our team of NYC professionals made a very impressive appearance: the entire team made it to the field early for a 5:30 game… on a Monday afternoon!

The field (if you could call it that) was on Houston Street & FDR drive. It is a tiney space between the highway and the East River. Left field was so shallow it would’ve been easy for even the worst hitter to hit a home run on every at-bat!

The umpire patiently waited around until 5:45 when he called the game in our favor. After that, we practiced for a few minutes and then went to the bar for happy hour.

We were drinking and carrying-on for about three hours until we requested the check. It came to $550. We felt this was a bit high but nobody really thought too much of it. On closer inspection, Kara noticed that a veggie burger — which we didn’t order — had made its way onto the tab. We presented this evidence to the waitress who re-crunched the numbers and presented us with a bill for only $260!!

So with two losses and two forfits, we are well on our way to the playoffs. Enjoy the pictures!


June 9 Linkfest

June 9, 2007

Investing:

The Consequences of Asia Rising: Perhaps the most important lesson to be learned from the Asian experience is that economic growth is not a zero sum game where the winners take jobs and opportunities away from the losers. The growth of China, India, and Indonesia is helping all the countries in Southeast Asia. Singapore gets more shoppers from neighboring countries and Hong Kong believes it will remain the financial capital for a burgeoning China since its open and transparent markets can attract more investors.

Similarly the U.S. has much to gain from the growth in Asia. Brand names are very important to the Asians and the consumer market in these developing countries is just opening up.

If we shut ourselves off from developments abroad, we will be the major ones to suffer. Opportunities abound in these developing markets. You can be sure that if the U.S. does not catch them, others most certainly will. (Yahoo! Finance)

U.S. economy’s fate in Saudi hands: Saudi Arabia is running the U.S. economy.
I’m not sure the Saudis want the task, but they’ve got it. Because the United States still doesn’t have a national energy policy, we’ve thrown decisions about how fast our economy grows and whether our standard of living rises or falls into the hands of Saudi Arabia’s oil ministry. (Jubak’s Journal – MSN Money)

How Ethanol Bites you in the wallet: Ethanol is attractive as a solution to high gasoline prices because it promises a free lunch:

* U.S. farmers would grow corn.

* U.S. ethanol companies would turn the corn into ethanol.

* U.S. consumers would go about business as usual.

* And everyone in the U.S. would be less dependent on foreign oil producers.

* But, repeat after me: There is no free lunch.

So far, this not-so-free lunch has resulted in higher food prices and rising U.S. dependence on fertilizers produced by, you guessed it, foreign oil and natural gas producers.

The costs are just starting to work their way through the U.S. and global economies. But it’s none too early for investors to revise their portfolios to take account of the costs of this free lunch.

On June 4, corn (No. 2 Yellow, Central Illinois) sold for $3.77 a bushel. A year ago, the price was just $2.25 a bushel. That’s a 67% jump in price in a year. (The futures markets say prices will stay here, too, with corn for December delivery selling at $3.83 a bushel on June 4.) (Jubak’s Journal – MSN Money)

Economy/Inflation:

Years of Global Growth Raise Inflation Worries: For the past decade, low-priced labor from China, India and Eastern Europe has helped much of the world enjoy economic growth without the sting of inflation. Now that damper on prices is beginning to reverse — and global inflation pressure is starting to build. (WSJ)

General Mills Raises Price on Line of “Big G” Cereals: General Mills Inc. is expecting consumers to pay more for fewer Cheerios. By reducing the size of its cereal boxes, General Mills will be selling less for more. The new, smaller boxes will mean a low single-digit percentage increase in the price per ounce of such well-known cereal (WSJ)

Hot Commodities Ignite “Agflation” fears in Europe: Red hot agricultural markets are pushing food prices up in Europe, putting central bankers on alert for a new phenomenon economists have termed “agflation”. (Reuters)

Bank of England May Need to Move Faster on “Sticky” Inflation: The Bank of England, which left interest rates unchanged yesterday, may have to move faster to curb the U.K.’s worst bout of inflation in a decade. (Bloomberg)

Globalization Creates Secular not Cyclical Inflation: The conclusion that this round of inflation is cyclical rather than structural is ridiculous. It brings us to the central debate – is globalization inflationary or deflationary? As the article implies, the growth of low-cost India and China has been a deflationary force on labor prices and certain manufactured goods. While this is undoubtedly true, this growth also has created inflation in many other sectors of the global economy. (Will’s Blog)

General:

Why So Many Suicides in Japan: Japan’s agriculture minister hanged himself Monday amid allegations of bid-rigging and padding government expenses. The following day, an executive allegedly linked to one of the scams leapt to his death. In 2005, 32,552 people killed themselves in Japan—one of the highest suicide rates among industrialized nations. Why are there so many suicides in Japan? (Slate)

Iran Adding Attack Boats in Persian Gulf: Iran is increasing its fleet of small attack boats capable of challenging warships and disrupting oil traffic in the Strait of Hormuz, the sea route for two-fifths of the world’s daily supply of crude oil, the U.S. Navy says. The boats — up to 70 feet long and capable of speeds up to 57 miles per hour — are armed with torpedoes and rocket- propelled grenades as well as cruise missiles and also are used to lay mines. The U.S. estimates Iran has 5,000 sea mines. (Bloomberg)

Gay Lawyers Come Out as Clients Demand More Diversity: The number of openly gay, lesbian, bisexual and transgendered lawyers increased by more than 50 percent from 2002 to 2006, according to the National Association for Law Placement. (Bloomberg)

Hong Kong Winters May Vanish in 50 Years: Hong Kong’s winters could vanish within 50 years, with the number of cold days declining virtually to zero due to global warming and urbanization, the head of the city’s weather observatory warned on Friday. (Yahoo! News)

Personal Finance

More Advice Graduates Don’t Want to Hear: While there may be a debate among economists about how much 50- and 60-year-olds should be saving for retirement, there is little dispute about how much the young should save: more. (NYT)


Globalization Creates Secular not Cyclical Inflation

June 8, 2007

Excerpt from a Financial Post article today:

When Tata Consultancy, the giant Indian computer services firm, says it is hiring 5,000 workers in Mexico because rising wages are pushing up costs at home, it is little wonder investors are beginning to get queasy about inflation.

Only a month or so ago most economists figured the U.S. Fed would cut interest rates to fight off spreading housing doom. Now even long-standing bears Merrill Lynch and Goldman Sachs have rubbed out their forecasts for U.S. cuts, the European Central Bank is hinting at further increases after yesterday’s hike, the Bank of Canada is poised to pull the rate trigger, and investors are beginning to worry that even low-cost giants such as India and China are losing their disinflationary might.

But before markets succumb fully to a good old-fashioned inflation scare, it is worth taking a dispassionate look at where global inflation is actually heading. While it may be heading up after several years of gangbuster global growth, the uptick is likely more cyclical than structural.

The long-term forces that have been holding inflation down — globalization, the adoption of free-market policies and more sophisticated central bank policies — are unlikely to unravel overnight. (Though the biggest dividends from falling inflation may behind us.)

The conclusion that this round of inflation is cyclical rather than structural is ridiculous. It brings us to the central debate – is globalization inflationary or deflationary? As the article implies, the growth of low-cost India and China has been a deflationary force on labor prices and certain manufactured goods. While this is undoubtedly true, this growth also has created inflation in many other sectors of the global economy.

India and China are consuming massive quantities of energy and other commodities. Since the supply of commodities is not unlimited (unlike the capacity of Chinese companies to produce junk for Walmart), their prices have risen dramatically across the board. As they grow richer, they become accustomed to a higher standard of living and they have more money to spend on food and other consumables. This is why we’ve seen increases in everything for which supply/capacity is not very elastic: energy, food, metals, transportation, construction, etc. The net result is a dramatic increase in aggregate demand.

Globalization has also had a major impact on asset price inflation. The increase in trade (and a host of other factors) has led to a massive increase in the money supply. Much of this new money has sloshed into stocks, bonds, real estate and other “assets.”

As prices for energy, food, shelter, and commodities rise, it’s only a matter of time before wages rise along with them. We are seeing this in a dramatic fashion in India and China, where wage growth in many sectors is in the double digits.

This phenomenon is not a cyclical trend, it is a structural trend and one we will be facing until India & China are done “emerging” and become mature economies.