Short the Market!

As the Sensex and Nifty surge to all-time highs and giddy pundits predict that Narendra Modi’s projected rise to the Prime Ministerial gaddi will send the markets into the stratosphere, I would like to hand out an outsider tip: short the market!

Most of the money inflating the Indian indices has come from foreign institutional investors (FIIs), and if reality bites on the 16th, we can expect a torrid flow back and a radical correction in the markets and the value of the Rupee.

That will create a sense of panic and doom and lay the whammy on those trying to put together a non-Modi government.

Perhaps that, rather than the fabled “animal spirits” of foreign investors, is behind the ballooning markets.

Look at it from the point of view of the Powers that be, the Permanent Members of the UN Security Council.

The United States and China are engaged in a delicate pas de deux, the one pushing for a process that would bring in a multi-party democracy in Beijing and the other insisting that the existing Beagle Boys gang is best for the Chinese people.

(I think Michelle Obama and kids pushed the American message with great delicacy on their recent trip to China but had little success – even after the Pentagon tried to assuage Chinese fears of losing Tibet by flicking the kill switch on one of our B-15 troop transports. It also seems to me that Beijing’s mad dog behavior towards Japan and Vietnam is intended to signal its readiness to take off the gloves.)

At this suspenseful stage, neither Beijing nor Washington wants a regime in New Delhi capable of an assertive foreign policy.

Britain, France and the Russian Federation all have important arms supply relationships with India that would not be improved by having a strong and stable government in Delhi.

Additionally, Britain’s hopes of investing in India its ill-gotten trillions from organized crime, especially the “illicit drugs” trade out of Afghanistan, depend on weakness in Delhi.

Going by recent developments, I think the main conduit for those investments is going to be the TATA group. Its Chairman emeritus has just been given a knighthood of “the order of the British Empire” – yes, the same one that killed about 500 million Indians in less than 200 years – and his successor’s background is in infrastructure (the sector into which most FII money will probably go). Also,Voltas, a TATA company, continues to signal that the Brits will not want for toadies when they come, again.

In combination then, my tip to savvy investors is to short the market for the aftermath of the 16th, and go long on TATA Infra.

Making Sense of Syria

Tarzie Vittachi, a Sri Lankan journalist who in his final years was the bemused occupant of a high United Nations office, once summed up with his characteristic terse wit, a central truth about international affairs: “Everything is about something else.”

And the “something else” always varies with the telling.

The Vittachi Conundrum and the Rashomon Effect are vivid at present in the coverage of Syria; no two analysts have quite the same story about what is happening and why.

The mainstream media view of the long-suppressed Sunni majority battling a brutal minority regime of Alawite Sh’iah is undeniable; but it is hardly a black and white picture. Most of the freedom fighters (7 of 9 groups engaged in the civil war), are intolerant Islamists, and some are barbaric; the world will not soon forget the grisly image of a rebel fighter eating the liver of a dead opponent.

Clueless UN Debate

The United Nations is engaged in its annual "General Debate" in New York. It is the opening ritual of the gathering of the organization's 193 members, meant to map the world's problems and set the context for the work to be done in the next three months.


In theory, a "Report on the Work of the Organization" from the Secretary-General is meant to give focus and substance to the talk. That does not happen, for the Report has for decades been a scissors and paste job reflecting the morally challenged world view of weak-kneed UN bureaucrats.

As a result, the debate is a collection of national speeches, each centred on the concerns of the ruling elite, without coherence or focus. Attempts to give it focus by setting a "theme" for the debate ("mediation" this year), have been ineffective. The only focusing factor is media coverage by the major news agencies, all Western except for Xinhua, which caters to the global underdog with its own special blend of propaganda and (mis)information.

For the rest, the media, represented at the UN by some 600 correspondents (some more notional than real), report what they are paid for; that is to say, they report mainly for national outlets with very narrow interests.

Not surprisingly, the net result is a "debate" out of Bizzaro World, providing a fractured, incoherent view of a deeply troubled time.

In keeping with tradition, the debate began this year with speeches by Brazil (represented for the first time by a woman, newly elected President Dilma Rousseff), and the United States in the person of President Barack Obama, one sounding the keynotes for the underprivileged majority of the world's countries, the other the view of the most powerful member State.

The global media majors focused on one element in the US speech, Washington's refusal to back a bid by the Palestinian Observer Delegation to upgrade its membership to that of full statehood. They genuflected disbelievingly in the direction of Brazil's call for Security Council reform.

The coverage of the Palestine item was entirely without meaningful background. Not a single major spent any time on what the Palestine issue is really about, how it was manufactured, and the uses to which it has been put. It was as if they were covering a football game. Who ran the ball, who kicked in the goals. Except, of course, there are no goals in this endlessly futile game.

Not that the major interventions on the subject provided any historical perspective. Nicolas Sarkozy of France offered to host a time-bound negotiating process to resolve the problem of statehood without spending a second on the deeply negative French/British role in the region. Britain's David Cameron was similarly lacking in hindsight.

On another aspect of Britain's manipulative record in the region, he credited the UN (i.e. Britain and France), for avoiding a "Srebrenica" in Libya. He forgot to mention that Mouammar Gadhafi was a British proxy, replacing "King Idriss" who its Secret Intelligence Service had earlier placed on the throne of Libya.

In general, the debate was soporific.

Manmohan Singh made a pitch for international cooperation to face the current spate of global economic problems. It had as much impact as Antigua and Barbuda calling for compensation for the slave trade out of Africa.

Could Myanmar Be The First Case of RTP?

At the Summit of the United Nations General Assembly in 2005 world leaders agreed that in the event a national government failed to protect its population from "genocide, war crimes, ethnic cleansing and crimes against humanity," the "international community" could step in and do so. That "Responsibility to Protect" (RTP) principle has not been invoked anywhere, not in the Democratic Republic of the Congo, where several million people have been killed in a continuing struggle for the country's rich resources, nor in the Sudan, where ethnic cleansing has been in progress in full view of a watching world. But there is corridor talk at the UN of invoking the principle to get international aid workers into Myanmar to help with the deadly mess left by Typhoon Nargis.

Talk of such action is far-fetched, if only because China would veto any Security Council action to invoke RTP in the case of Myanmar, but the country's envoy at the UN seems nervous at the possibility. At an informal meeting of the General Assembly on Friday (16 May), at which Secretary-General Ban Ki-moon briefed delegates on his so far ineffective efforts to even talk to the junta's ranking General, Ambassador Kyaw Tint Swe accused France of sending a warship to the Bay of Bengal. French Ambassador Jean-Maurice Ripert denied the accusation, saying that the ship was only carrying 1,500 metric tons of food and relief supplies. He told reporters that the ship also had the capacity to establish a field hospital, which could be put ashore by helicopter or by the small boats capable of navigating the shallow waters of the Irrawaddy delta.

Whether an attempt to deliver aid from the ship will be made without the authorization of the junta in Yangon is a matter of speculation. If it is indeed made, and meets armed resistance, the response could sidestep the Security Council. If there is no resistance, a more pervasive aid effort could be set in motion without the junta's ukase. The case for international action is being clearly laid by French and British comments on the situation. On Friday French UN envoy Ripert told journalists that the Myanmar government's failure to allow foreign aid could "lead to a true crime against humanity." On Saturday, British Prime Minister Gordon Brown told the BBC that the refusal of the junta to "allow the international community to do what it wants to do" was "inhuman treatment of the Burmese people."

The possibility of international intervention without its permission is bound to weigh on the junta as it receives a third letter on Sunday from Ban Ki-moon, this one carried by UN Humanitarian Affairs chief John Holmes; the first two letters were sent through the Myanmar mission at the UN, and neither has brought a reply. Ban has failed repeatedly to reach Myanmar's "Senior General," Than Shwe by phone.

The latest assessment from the UN is that only about 500,000 of the approximately 2.5 million victims of Typhoon Nargis have received any form of aid.

Part of the problem might be that the junta itself is in the middle of a power struggle; 74-year old Than Shwe had surgery to remove an intestinal tumor last year (in Singapore), and is clearly on his last legs. Who will succeed him as head of the Orwellian "State Peace and Democracy Council" is not clear. The current "second in command" is reported to not have "political support," though it is anyone's guess what exactly that means in a country where a popular democracy movement has been brutally put down for decades.

The UN's diplomatic efforts at the moment seem to be focused on getting ASEAN countries to take the lead in pressuring Myanmar to open up to foreign aid. Ban Ki-moon is said to harbor hopes of visiting the country himself once a certain "comfort level" has been established in relations with the regime.

Something Fishy in French Bank Scandal

There's something fishy about the revelation today that a rogue trader, Jérôme Kerviel, had caused the French bank Société Générale, one of the largest in Europe, to lose $7 billion in the futures market. Kerviel was reported to be a "computer genius" who engineered a series of "elaborate, fictitious transactions."

What's fishy is that the bank, which has known about the fraud since the weekend and has dismissed his supervisors, had not, by late Thursday, filed a criminal complaint against the absconding officer himself. Nor has it said anything about how Kerviel financed the huge positions he took in the market -- it had to be a very considerable amount -- and how he could have done it alone. The International Herald Tribune quoted C. Ricardo Esteves, executive director of Banco Hipotecario of Argentina: "It is not credible. One person responsible for this? I just don't believe it."

The announcement of the loss ate up most of Société Générale's healthy pretax profit for 2007 of $8.07 billion, forcing it to seek a multi-billion infusion of new capital to avoid a collapse. In addition to the loss caused by the fraud, the bank announced that it was writing off another €2.05 billion in fourth quarter losses linked to exposure to the US housing market.

For Société Générale, the timing of the whole affair could not have been worse, coming as stock markets tanked around the world and then revived dramatically as the US Federal Reserve announced a surprise cut in interest rates.

It almost seems as if someone is deliberately pushing the world financial system towards a catastrophic collapse.

Signs of Growing Power Struggle in Asia

There are more signs of a growing but still murky Euro-US power struggle centered on Asia (for the background to which see earlier post on Anglo-Saxon Empire). Items:

• President Bush on a tour of the Middle East made nice with a series of Arab tyrants. In Saudi Arabia he brandished a ceremonial sword and walked hand-in-hand with the Crown Prince. The New York Times reported that in Egypt Bush "lavished praise on President Hosni Mubarak ... emphasizing the country's role in regional security while publicly avoiding mention of the government's actions in jailing or exiling opposition leaders and its severe restrictions on opposition political activities." Other stops on Bush's tour were in Bahrain, Kuwait, and the United Arab Emirates.
  
• President Sarkozy of France has just signed an agreement with the United Arab Emirates to establish a permanent French military base there. It will have about 500 air, naval and ground personnel. They will gather intelligence and provide "security," ostensibly against threats from Iran. In Saudi Arabia Sarkozy lauded the country for its strong religious foundation. In oddly uncharacteristic remarks for an icon of middle-age gallic libido and sophistication, Sarkozy spoke of God "who does not enslave man, but liberates him, God who is the rampart against unbridled pride and folly of men." He too left with a Saudi sword.
• In Afghanistan, British politician Paddy Ashdown is set to take over as the UN Secretary-General's Special Representative AND political head of the multinational NATO operation in the country. (Although Afghan President Hamid Karzai has reservations on the appointment, it is expected to be announced shortly.) This is the first time the UN and NATO will field a joint head of mission. It is especially significant, coming on the heels of the expulsion from Afghanistan of a senior British political officer for having unauthorized negotiations with the Taliban.
  
• Ashdown will have under him a newly appointed commander of the 40,000-strong NATO force in Afghanistan: General David McKiernan, currently commander of US forces in Europe. In 2003 McKiernan oversaw ground operations in Iraq when a US-led invasion toppled Saddam Hussein.
  
• The US, which has 14,000 of its troops serving under the NATO flag and another 12,000 separately, has been critical of the performance of the European troops in Afghanistan. Earlier this week US Defense Secretary Robert Gates drew the ire of the Dutch government by saying that its troops in the country were not trained for counter-insurgency operations. The NATO troops in southern Afghanistan, where the Taliban are resurgent, are mainly Dutch and British.

In some ways the situation in Asia is reminiscent of the early days of colonialism, when various European Powers contended for influence by establishing bases and alliances with local regimes. It also harks back to the time towards the end of World War II when President Franklin Roosevelt began to pressure the Europeans to get out of Asia. In the two decades after that war European colonial rule in the region was effectively ended; the US became the dominant extra-regional Power, relying on the British to provide on-the-ground know-how and contacts. Pakistan's Directorate of Inter Services Intelligence (ISI), which the British established in 1947 during their management of the first "India-Pakistan war" over Kashmir, had a key role in that scenario. It helped organize the shock troops -- the Mujaheddin of Afghanistan -- to fight the continuing "Great Game" to contain Russian power; it helped manipulate the oil-rich Muslim world through the Organization of Islamic States; and it helped destabilize Non-Aligned India. In the process it parented the South Asian variant of "Islamic terrorism," and became the God-Father of the drug trade out of Afghanistan. The multi-billion proceeds of the drug trade made the ISI and the terrorist movementsit supported independent of all of Pakistan's governmental structures, setting the scene for the current scene of turmoil in the region.

The power struggle now shaping up marks the end of the era of Europe's unquestioned acceptance of US supremacy. With India, China and Russia as new power factors in Asia, with the ISI as a wild card, the Europeans are making a bid to reassert their independence. Buckle your seat-belts.