Category Archives: Daily Headlines

Emerging and Frontier Markets

Diverging Markets Focusing on Financial Media Strategy

Several factors have converged in recent years to increase demand for strategic communications expertise in the financial industry. As a result, many firms accustomed to maintaining a low profile and focused solely on returns are now engaging in more public conversations, often demanding engagement with financial media. There is a growing consensus that the potential longer term costs of remaining detached from public engagement outweigh the shorter-term benefits.

In response to this shift, Diverging Markets is now concentrating its efforts on designing and implementing communications campaigns in economics and finance.

At present, we offer strategic knowledge and tactical expertise for the following:

  • Crisis communications / Reputation management
  • Digital communications / Social media strategy
  • Guest writing articles / White paper campaigns
  • Event marketing / Media training

We are actively seeking partners, clients and other interested participants.

I can be reached as always by email at and by twitter @DivergingMarket.

Twas the Night Before Taper: A Wall Street Holiday Poem

After several months of silence, Mustafa Mond, whom we last heard from in April, has resurfaced. Today, Mr. Mond offers us this holiday poem:


By Mustafa Mond

Twas the night before Taper, when all through the Street
Not a whale was stirring, not even a veep.
The earnings were prepped by accountants with care,
In hopes that bonuses would be much more than fair.

The bankers were settled all smug in their spreads,
While Fed interventions entranced all their heads.
And Barack with his selfie, and Michelle with hers too,
Readjusted their cameras to spy just on you.

When out in the markets there arose such a cry,
Barry sprang from West Wing to see what was nigh.
To the news wires he flew like a bat of hell,
Knowing hestill had the masses to quell.

Markets were speeding, out of control,
The VIX off the charts—who spiked the punch bowl?
When, what to his wondering eyes should appear,
But a great big helicopter with pallets in the rear!

With an exhausted driver, tired of dollar-yen,
And a new co-pilot, it must be St. Ben.
Faster than a flash crash his beneficiaries came,
And he whistled, and shouted, and called them by name!

“Now Blankfein! Now Dimon! Wells Fargo and Citi!
On Gorman! On Moynihan! NYSE and BONY!
To the highest of highs! ‘Til market bears have fled!
After all, in the long run, we’ll all be dead!”

The yield-hungry traders scrambled for carry,
Locking in profits before the curves vary.
And up to the market-top prices arose,
While Barack’s disapproval relentlessly grows.

And then, with the microphones set to full blast,
The media watched carefully for any contrast.
Trading floors went silent, as they are apt to do,
As Fed chairman testimony makes sense to so few.

He spoke all in jargon, acronyms and indices,
Durables and deficits and payrolls and factories.
A big pile of assets he still wants to backstop:
A mortgage, a bankruptcy, a credit default swap.

His data—how thorough! Statistics—such authority!
And his protégé, this Yellen, confirmed with a majority!
His post-Fed retirement expectantly awaits,
No doubt duly hedged for much higher interest rates.

Europe and China, oil exporters like Canada,
The Saudis and Russia, and fiefdoms like Panama,
Listened closely for signs of any new shocks,
But at least they have product–unlike tech stocks!

He was measured, cogent, lacking Greenspan’s grandiloquence,
But the reaction, as always, was irrational exuberance,
As he made quite clear that ZIRP would continue,
And Wall Street rejoiced–“to the discount window!”

Thus ended St. Ben’s last public report
As chairman of the lender of last resort:
Tapering delayed, until 2014,
When St. Ben will no doubt be far from the scene.

He sprang to his chopper, having completed his duties,
Leaving risks to be rated by S&P, Fitch and Moody’s.
And on his way out, they asked, “what of safety nets?”
He cried, “Happy Holidays! And good luck with your debts!”


The press as a lagging indicator, continued

Folha de Sao Paulo has made this easy for us. Here are a couple of Economist covers, four years apart:

2013.09.26 Brazil Economist cover

Honestly, when it’s not so tiresome, it’s actually amusing how blind people can be. I honestly have too many previous ramblings on this topic to list them all but if you’re interested, you can find them somewhere among these.

Also, there’s this:

Chart of the Day: World Population Growth vs History of Technology

This was just sent in from an unidentified reader. I do believe there is such a thing as being “too meta” but when shifts are so visibly pronounced, as they are here, it’s worth taking a moment to stop and think about.

Growth of World Pop v History of Tech

Plain English: It’s Not What You Say, It’s What People Hear

This video stands to have an immediate impact on your income if you have anything to do with politics, journalism, public relations, branding, marketing or communications of any kind.

This video stands to have an ancillary impact on your income if you were not included in any of the above professions.

Note that the impact is not zero for anyone.

To wit:

“Any of you in corporate America who use the word, ‘brand’, please stop. Now. And don’t use that word again. Because brand is people like me creating words that have no meaning, trying to sell things that people probably don’t need and trying to explain things that aren’t important. Brand is cheap, brand is fake. Trust is everything, trust is real.”

“The rule of expectations is probably the most important when it comes to business or politics, which is that it is better for people to expect less and get more than it is for them to expect more and get less.”

Those are just two examples of what’s in there.

The speaker is Frank Luntz, an occasional contributor to Fox News. If you have a problem with that data point, consider that his advice and research is applicable across the political divide.

And now I’m gonna drop an even bigger BUT on you: it’s an hour long. Suck it up. Today’s Friday. Consider it an hour you won’t spend watching [insert latest trendy TV hit show here].

Trust me, this’ll have a far bigger impact on your bottom line.

The source link is here.

A May Day Special: Why To Travel When You’re Young

terraqueous-globeI rarely republish in full something from another source, but excerpting this would really not do it justice. Fortunately, Andrew Henderson of Nomad Capitalist has granted us permission to do just that:

Why to travel abroad while you’re young… or not so young

I was talking to about travel with a close friend of mine recently. I was showing him the twenty or so countries I’ll be living in or visiting in the next year or so, and I could tell he was intrigued.

His mind was blown when I said my hotel room in Siem Reap, Cambodia would cost $9 a night. Private room. Private bath. Free wi-fi and breakfast. No forced labor in the afternoons.

Then he went on to tell me how he had all the opportunities to travel when he was younger. He could have taken the summer after high school to backpack through Europe with friends. Then he could have taken a year exploring the world before going back to grad school. Then he could have taken time off from work to go to England with his friends.

But he never did.

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Chart Of The Day: How 37 Banks Merged Into 4

Thanks to Alan Haggard, we have this quite striking chart today:

How 37 banks merged into 4

Diverging Markets Turns One Year Old

2013.04.12.annual-reviewActually, at this point we’re at one year and one month but I was too caught up in other stuff to do this last month.

So I’ve been looking at the site metrics for the first year of operation from March 4, 2012 to March 3, 2013.

Here’s the breakdown of where readers are visiting from:

2013.04.12.Diverging Markets Home Countries

The “Others” category I have the full list of but it’s too long to put here. What I can say is that it runs 169 countries and territories long. Of the 193 member states of the United Nations, I suppose it’s easier to count the countries not on there, a task I may take up next year at this time.

Also, it seems there are a quite a lot of visitors from the “not set” category. Someone more familiar with the inner workings of Google analytics and firewalls could probably explain this better, but I’m willing to bet China comprises a fair proportion of this category.

Looking at the city breakdown is way too unwieldy to do in its entirety, but here are the top 20, in order:

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Plain English: Some Thoughts On Bernanke’s LSE Speech

2013.03.26.Bernanke Plain English-helicopter benBernanke gave a speech at the London School of Economics yesterday which is grabbing a lot of attention. Those who have heard or read some of his other non-Fed public lectures over the past few years will recognize that he spent about half of it reviewing some of his favorite historical lessons, mostly sourced from his pre-Fed academic work. But there were some new statements to add to this mix. My interpretation of some of the key themes:

  • The current financial crisis is in fact a classic panic: a systemwide run of “hot money” away from assets whose values suddenly became uncertain.
  • That said, there were some different bells and whistles this time, notably the introduction of new financial instruments, more varied actors beyond just banks and (in my opinion) most vitally, a scale and complexity altogether new.
  • Currency war, which Bernanke chooses to refer to as, “competitive depreciation of exchange rates”, is similarly not new.
  • The accommodative monetary policies central banks around the world have been implementing (read: zero interest rate policy) to support growth do not constitute competitive devaluations, currency wars or whatever term you prefer. The primary reason for this is that domestic demand counts for a lot more than exchange rate meddling and in any event when competitive economies both devalue their currencies, whatever effects result from these devaluations effectively cancel each other out.

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A Dissection Of Market Manipulation In The Diamond Industry

Priceonomics put up a stunning take last week on the market mechanics of diamonds which spurred a lot of reactions. Worth reading in full, and here are some excerpts to give you an idea:

“Americans exchange diamond rings as part of the engagement process, because in 1938 De Beers decided that they would like us to. Prior to a stunningly successful marketing campaign 1938, Americans occasionally exchanged engagement rings, but wasn’t a pervasive occurrence. Not only is the demand for diamonds a marketing invention, but diamonds aren’t actually that rare. Only by carefully restricting the supply has De Beers kept the price of a diamond high.”

And this:

“In finance, there is concept called intrinsic value. An asset’s value is essentially driven by the (discounted) value of the future cash that asset will generate…A diamond is a depreciating asset masquerading as an investment. There is a common misconception that jewelry and precious metals are assets that can store value, appreciate, and hedge against inflation. That’s not wholly untrue.

Gold and silver are commodities that can be purchased on financial markets. They can appreciate and hold value in times of inflation. You can even hoard gold under your bed and buy gold coins and bullion (albeit at a ~10% premium to market rates). If you want to hoard gold jewelry however, there is typically a 100-400% retail markup so that’s probably not a wise investment.

But with that caveat in mind, the market for gold is fairly liquid and gold is fungible – you can trade one large piece of gold for ten smalls ones like you can a ten dollar bill for a ten one dollar bills. These characteristics make it a feasible potential investment.

Diamonds, however, are not an investment. The market for them is neither liquid nor are they fungible.”

And this:

“We covet diamonds in America for a simple reason: the company that stands to profit from diamond sales decided that we should. De Beers’ marketing campaign single handedly made diamond rings the measure of one’s success in America. Despite its complete lack of inherent value, the company manufactured an image of diamonds as a status symbol. And to keep the price of diamonds high, despite the abundance of new diamond finds, De Beers executed the most effective monopoly of the 20th century.”

Read the rest here.

InfoGraph of the Day: Chinese Companies and Risk in Africa

This is really impressive and makes me really rethink my previous notions of a political risk framework, particularly in the context of Africa. No more preface necessary:

2013.03.14.China risk in Africa

Sourced from Africa-Asia Confidential.

Basic Strategy For Hyping An Investment Trend

2013.03.11.PlanetHypeI’ve seen this happen so many times, I could teach a class on it:

  1. Take a small data sample of something that confirms the view you’re determined to promote;
  2. Regardless of how rigorous the methodology or how representative the sample size, declare that this is indicative of a broader trend–forest for the trees or some such thing;
  3. Willfully ignore any aspects of this declaration that remotely contradict your view;
  4. Deny/insult/discredit/lash out at anyone who tries to take an even-handed view on it;
  5. Begrudgingly concede that nothing is perfect but that a positive attitude is what counts;
  6. Neglect to make clear the very pertinent fact that you have a vested interest–financially, politically, reputationally–in a positive outcome which therefore inhibits your own objectivity;
  7. If your lawyers insist, loosely outline the caveats to your opinion and bury them somewhere where they are least likely to be noticed (“past performance is not indicative of future results” is the boilerplate here);
  8. Debunk the caveats by paraphrasing points 1 and 2 and emphasize the probability your forecast will prevail;
  9. Lather;
  10. Rinse;
  11. Repeat.

Now, let’s consider a brief list of where we’ve seen this template applied in the recent past:

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TRANSCRIPT: Nomad Capitalist Report Radio Show Interview

terraqueous-globeI was interviewed for the weekly Nomad Capitalist radio show over the weekend, hosted by Andrew Henderson. On the agenda: the Africa-China relationship, putting the hot-or-not test to Frontier Markets and the nuances of investing in Mexico. Here’s the link and here’s the mp3:

And here’s the transcript:

Andrew Henderson:   I want to start with a piece that you touched on recently, commodities, and emerging markets’ domination of reserves of commodities, explain that a little bit and let’s get into what exactly that can tell us.

Ulysses de la Torre:     Thanks for having me. If it’s the graph I think you’re talking about, it’s not a graph, it’s actually a map, which I pulled from Glencore, which, given Glencore’s footprint in this universe, shouldn’t be surprising that they should come up with something like this. And what it basically shows is a map of the world and how all of the key commodities are dominated in one form or another by underdeveloped markets. When I look at it, the first thing I see is that one of the big obstacles here is nothing more than logistics and infrastructure. And this is something that’s frequently lost on foreign investors trying to research this from afar because these are elements of an economy that you cannot fully understand without experiencing it. It’s one thing to be stuck in a traffic jam that takes you two hours to make a trip that normally takes one hour, but it’s entirely another thing for a truckload of raw materials to take three days to drive a couple hundred miles because of anything from bad roads, military checkpoints, bandits, local territorial disputes, on top of your basic traffic problems. This adds significantly to transport costs and who ultimately foots the bill for this added cost is often a point of dispute that can manifest in a lot of ways that North America and Europe haven’t really had to think about in decades, since before most of us were even alive.

AH:                             You talk a lot about Africa and I want to get into some of the specifics that are going on there. There’s a big media play that China is recolonizing Africa and so many of the resources plays, even the financial sector plays, let’s talk about Africa, because that’s one area to hone in on for these resources, it’s very resource rich, it’s fast growing, but it’s more than just China, let’s talk about who the players are in Africa and what’s going on there, give us the introductory sketch to Africa.

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Drop Everything, Read This Now: Too Big to Jail, Too Big for Trial

Two items of highly recommended reading when you have a chance—one is the cover story from the current issue of the Atlantic Monthly, “What’s Inside America’s Banks?” by Frank Partnoy and ProPublica’s Jesse Eisinger; and the second is Matt Taibbi’s latest, “Gangster Bankers” in Rolling Stone.

Excerpting really won’t do either of these justice, so just put aside a few minutes while on the commute home or while waiting for the kids to finish ballet or during a flight delay or whatever other spare minutes you find yourself with and just read these. Both of them.

There will be a quiz on Friday.

And while you’re reading them consider this: isn’t strange that some of the very same investors who seem to have no problems buying in to the opacity of the US and European banking systems get cold feet when you bring them an openly high risk-high reward investment proposition in a less conventional market?

Sort of reminds me about some of these studies that show how psychopathic tendencies are linked to an inability to process fear.

Anyway forget about what the ratings agencies say. There’s risk everywhere. I guess the difference is that people prefer risks closer to home, even if they don’t understand them. Though by Partnoy’s and Eisinger’s accounting, it appears the tables are turning on this front too…

Here’s the link again to the Atlantic article and here’s the link again to the Rolling Stone article. You know, in case you didn’t believe me the first time. Or thought I wasn’t serious. I could not be more serious. Seriously.

Also, I am officially in love with Elizabeth Warren:

Quote of the Day: Howard Marks on Gold

Really, nothing else needs to be said:

There is nothing intelligent to be said about gold. Nobody can tell you the right price for an ounce of gold. People will tell you it should go up or go down. To make any intelligent statements about investments you have to know what the right price is. You can’t do that with an asset like gold, which doesn’t produce any cash flow. So you can buy it out of superstition or ignore it because you are an atheist but you cannot buy it with an analytical foundation.

Source link here.

Chart of the Day: Investment Banks’ share of Emerging Markets

Is this really the best way to communicate this?

2013.02.14.IB market share in EMs

Sourced from Bloomberg.

Central Banking Today: Game Theory Now More Than Ever

Take a look at this recent column from PIMCO’s Mohamed El-Erian and try to tell me otherwise:

With many other policy makers essentially missing in action, central banks find themselves in leadership roles not out of choice but necessity. Given imperfect tools, their involvement entails, to use the US Federal Reserve chairman Ben Bernanke’s phrase, “benefits, costs and risks”. They believe that macroeconomic benefits will outweigh the collateral damage; and they hope that they will buy sufficient time for others to respond properly and for economies to heal endogenously.

The dilemma of modern central banking was captured well last week by incoming BoE governor Mark Carney in his testimony to the UK House of Commons Treasury committee. While recognising the risks of further QE, the current Bank of Canada chief argued that central banks should act to avoid sluggish growth raising the natural unemployment rate via hysteresis.

The fundamental problem is that central banks are pursuing too many objectives with too few instruments. That is why outcomes consistently fall short of their expectations; and also why talk of exit is repeatedly shelved.

Absent better support from other policy makers, central banks will be dragged deeper into policy experimentation. Meanwhile, with incentive structures failing to align properly, perverse reactions are clear – from persistent (and, in Europe’s case, increasing) policy complacency elsewhere to distorted market functioning leading to potentially harmful resource allocations.

Then there is the biggest issue of all: the effects of unconventional monetary measures are likely to become volatile and highly binary if a growing number of central banks around the world feel they have no choice but to join the current western policy stance.

A larger global shift to expansionary monetary policy would enhance the probability of triggering “wealth effects” and “animal spirits”: the two channels through which policy-bolstered asset prices translate into better economic fundamentals. With that, the greater the likelihood of a pivot from “supported growth” to “genuine growth”.

However, relative pricing channels, including currency relationship, would be crippled if too many central banks were to opt for the same policy. Harmful beggar-thy-neighbour effects would amplify damage from artificial surges in asset prices that encourage irresponsible risk taking, fuel “bad inflation” and worsen the risk of disorderly economic and financial deleveraging.

Emerging & Frontier Markets Intelligence 2013.02.06

“The so-called Smart Campaign actually did something – breaking news for this body. They now offer awards to banks if they don’t screw poor people. Time will tell whether this is any more than window-dressing (Smart’s traditional niche). Whether their paymasters Accion will be applying for the certificate also remains to be seen. It would be interesting to see how Compartamos get rated on transparent and fair interest rates, or their latest acquisition CrediConfia who were lambasted by the Mexican media for charging up to 229% to poor taco-vendors. Albeit from an astonishingly low base, and after an inordinate amount of time-wasting, this is at least a step in the right direction.” — Hugh Sinclair

“The key is to remember the price, because buying shares at high valuations rarely makes money and buying low rarely loses money. It is all about risk and the price you pay for that unit of risk. Wonderful as a story may be, you should ensure you are not overpaying for it.” — Investors Chronicle Interview with Sam Vecht, manager of BlackRock Frontiers Investment Trust

“France’s business ecosystem thrives on contradictions — the country has some of the highest labor costs in Europe and restrictive regulations, and yet its companies regularly make the Fortune 500 list; it has highly skilled graduates and engineers but struggles to compete globally; it has an alphabet-soup of agencies intended to support fledgling businesses, but they are so lacking in coherence that they remain unheard of to many; there is a vibrant investor community ready to commit funds, but only once an entrepreneur has a proven track record; and the French embrace money, but not bling.” — Kimiko de Freytas-Tamura in the NYT

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Super Bowl XLVII, Hangover Edition

There was a lot to admire and a lot to mock in last night’s noise riot in fairly equal parts. But amid all the spectacular excess that this annual contest has become, one element of it stood above everything and absolutely blew me away, and it was an advertisement of all things: Dodge’s farmer ad. I swear I am not being paid to pitch this, but I really have not been left so speechless in a very long time. The ad was apparently refashioned from a 1978 speech by the late radio broadcaster Paul Harvey, and it is poetry. Below, the ad that ran last night, followed by a previous visualization attributed to, and a transcript of the original speech.


The transcript of the original speech:

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Intelligence, Super Bowl XLVII Edition

Considering that some three-quarters of the regular readership for Diverging Markets is physically somewhere outside the United States, I thought I’d put a few things on the table today, being the last business day before that annual rite of proud American consumerist gorging otherwise known as the Super Bowl.

Let’s get the game day stuff out of the way first. Deadspin the other day put up a very impressive map which I suppose it retrieved from Facebook showing the geographic clusters of teams’ fans throughout the United States broken down by county.

For the non-Americans among you, consider that it’s a matter of time before Facebook figures out how to do the same thing worldwide for European football, cricket, rugby, Formula One, Aussie rules, hurling, curling and all that other great stuff I never would have learned to appreciate if not for spending half of my post-college life somewhere abroad.

Now then, the map:

2013.02.01.Facebook NFL Map

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