The Leather Apron Letter 05-03-2013

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Leather Apron LetterFoundedin 1727 by Benjamin Franklin, the Leather Apron Club was a club for mutual improvement whose purpose w

to debate questions of morals, politics, philosophy, and business affairs.

May 3, 2013Subscribe at LeatherApronLetter.com

https://twitter.com/darrenrovell/status/329062346586726402

Great stat: Tiger [Woods] has averaged $93,363 for every ROUND he has played on the PGA Tour.

In other golf news...

The Government Accountability Institute, which has mined the records of the White House calendar, says President Obam

"has spent a total of 474.4 hours (or 47.4 10-hour workdays) in economic meetings or briefings of any kind throughouhis presidency" while he "has played 115 total rounds of golf and spent 86 days on vacation, for an estimated combin

total of 976 hours."

Comments: So does that mean I owe Obama $10.7 million for his work in office???

1) The recent debacle in paper gold has led to a tightness in the physical market as buyers rush to take advantage of the

lower prices...CME Chairman On Gold: People Dont Want Gold Certificates, They Want the Real Product

Whats interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down signi

cantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tan

gible real gold. Thats going to show you, people dont want certificates, they dont want anything else. They want the

real product .

Comment: A strange admittance from a guy whose living is based on the trading of paper productshttp://www.telegraph.co.uk/finance/personalfinance/investing/gold/10028183/Gold-buyers-forced-to-go-on-waiting-

list.html

Investment company Physical Gold said there were waiting lists of three weeks for some coins, and four to six weeks f

gold bars. "Previously all would have been available within a few days," the company said. The company said that it h

seen a 50pc increase in enquiries about purchasing gold and a 35pc increase in sales, with people buying tax-free gold

coins. "We are now starting to experience physical gold shortages," said Daniel Fisher, CEO of Physical Gold.

http://www.bloomberg.com/news/2013-04-16/gold-bears-scarce-in-india-as-selloff-lures-shoppers-to-bazaars.html

Gold buyers in India, the worlds biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff tha

plunged bullion to a two-year low may be overdone. With the sudden crash in prices a lot of buying is happening acro

India as people are thinking of it as a golden opportunity.

Fact of the Week

Articles of the Week
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ff-lures-shoppers-to-bazaars.htmlhttp://www.bloomberg.com/news/2013-04-16/gold-bears-scarce-in-india-as-selloff-lures-shoppers-to-bazaars.htmlhttp://www.bloomberg.com/news/2013-04-16/gold-bears-scarce-in-india-as-selloff-lures-shoppers-to-bazaars.htmlhttp://www.bloomberg.com/news/2013-04-16/gold-bears-scarce-in-india-as-selloff-lures-shoppers-to-bazaars.htmlhttp://www.bloomberg.com/news/2013-04-16/gold-bears-scarce-in-india-as-selloff-lures-shoppers-to-bazaars.htmlhttp://www.telegraph.co.uk/finance/personalfinance/investing/gold/10028183/Gold-buyers-forced-to-go-on-waiting-list.htmlhttp://www.telegraph.co.uk/finance/personalfinance/investing/gold/10028183/Gold-buyers-forced-to-go-on-waiting-list.htmlhttp://www.zerohedge.com/news/2013-04-30/cme-chairman-gold-%E2%80%9Cpeople-don%E2%80%99t-want-gold-certificates-they-want-real-product%E2%80%9Dhttp://news.investors.com/ibd-editorials/042913-653967-president-promises-to-pivot-to-economy-jobs.htmhttps://twitter.com/darrenrovell/status/329062346586726402


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2) AAPL made news this week floating its first bond offering in 20yrs at low rates...another indication of the global rea

for yield in a no yield world...http://online.wsj.com/article/SB10001424127887324482504578454691936382274.html

Apple Inc. sold the largest corporate-

bond deal in history Tuesday, a $17 billion offering investors hungrily gobbled uThere was $52 billion worth of orders for the deal, making it one of the most hotly desired bond deals Wall Street has

ever seen, said bankers at Deutsche Bank.

The technology company was able to borrow at rates nearly as low as the highest-rated triple-A firms in the world. Itborrowed $5.5 billion for 10 years at an annual yield of 2.415%. It also issued three-year debt at 0.511%, five-year debt at1.076% and 30-year debt at 3.883%. And Apple sold floating-rate bonds that mature in three and five years at rates of 0.05

and 0.25 percentage point over the three-month London interbank offered rate, an industry benchmark.

Comments: Funds buy AAPL stock to receive a dividend which they use to lend back to the company at a 25bps spread

order for AAPL to pay the fund in divvies...the circle of life.3) Another interesting yield chase..http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/

Hedge fund executives who descended on Miami last month for a conference on unpaid property taxes were treated towaterfront cruises of estates owned by Madonna, Shaquille O'Neal, and Elizabeth Taylor. But unlike those celebrity residees, the houses the profit-chasing investors were hunting at the gathering have a prosaic facade: tax liens.

Far from the mansions of Greenwich, Conn., houses owned by homeowners struggling with delinquent property-tax bare sparking a gold rush by the elite money pools. Leading the recent lien-buying surge is Fortress Investment Group, the $billion alternative investments company now working with former executives who drove J.P. Morgan's prior rush into thebusiness from2008 through mid-2011.

David Zussman, a Newport Beach, Calif.-based investor in foreclosed homes, calls the buying frenzy by hedge funds"reminiscent of junk bonds."

The investing has only accelerated amid a federal antitrust probe of past bid-rigging at some auctions and a pullback lyear by large banks from the market. Still, some hedge funds are finding help from Wall Street, as big banks that sold risky

mortgages in recent years, including Wells Fargo (WFC) and Capital One (COF), extend low-interest credit to buy liens.

Here's how it works: Several times each year, municipalities in 28 states, plus Washington, D.C., Puerto Rico and theU.S. Virgin Islands, auction off scores of property tax liens, also called certificates, to investors. The rules and rates vary, bhomeowners typically have from six months to two years to pay back the notes, plus interest, or lose their homes to the invtors. Less than 1% of sales go that foreclosure route, said Brad Westover, executive director of the National Tax Lien Asso

ation, which sponsored the Miami conference. Investors immediately pay the municipalities the taxes owed, then over timecollect that amount plus interest from the homeowner.

With buyers identified only by numbers or unrelated names, the fragmented, unregulated industry is opaque. Even themarket's size is debated -- $15 billion a year, according to Howard Liggett, the chief executive of Distressed Real Estate Cosulting Services, or $5 billion a year, according to the National Tax Lien Association, a trade group. While returns are a cloly kept secret, investors typically make between 2.5% and 10% a year, or in the low teens for larger buys."The hedge funds are chasing yield in this business" says Albert Friedman, a principal at Alterna Capital, an alternative in-vestment firm in Boca Raton that buys tax liens.
http://www.leatherapronletter.com/http://online.wsj.com/article/SB10001424127887324482504578454691936382274.htmlhttp://online.wsj.com/article/SB10001424127887324482504578454691936382274.htmlhttp://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://money.cnn.com/quote/quote.html?symb=WFChttp://money.cnn.com/quote/quote.html?symb=WFChttp://money.cnn.com/quote/quote.html?symb=COFhttp://money.cnn.com/quote/quote.html?symb=COFhttp://money.cnn.com/quote/quote.html?symb=COFhttp://money.cnn.com/quote/quote.html?symb=WFChttp://finance.fortune.cnn.com/2013/05/01/tax-liens-hedge-funds/http://online.wsj.com/article/SB10001424127887324482504578454691936382274.htmlhttp://www.leatherapronletter.com/


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4) So with all this yield chasing, what is the smart money doing???http://beijingperspective.com/post/49309111637/private-equity-its-time-to-sell

Apollo Management Leon Blackat the Milken Institute conference:

We think its a fabulous environment to be selling. Apollo has sold about $13 billion in assets in the last

15 months. Were selling everything thats not nailed down, and if were not selling, were refinancing.

Comments: Sell when prices are dear and refi when debt is cheapa recipe for success.

5) Art Cashin research note (UBS):

If you want to buy shares of a stock, then you need cash to do it. If you don't have the cash, then you may be able to

borrow against some sort of collateral, unless you know someone nice enough to lend to you unsecured. The latter option -

margin borrowing - has become increasingly popular, at least among investors who use brokerage firms that are members of

the NYSE. In March, margin debt marched higher yet again, by more than $13 billion. Free credit, on the other hand, shran

by more than $8 billion. Free credit is the amount of "cash" that is available for investors to withdraw from their accounts.

Taken together, that means that investors' available cash (free credits minus margindebt) was reduced by approximately $22

billion. That available cash figure now stands at negative $92.2 billion. The only time period in history that exceeds this

amount were the months between December 1999 through September 2000. The other two times in recent history that the b

ance exceeded negative $75 billion, June 2007 and March 2011, both preceded major corrections. But as we've seen with s

many indicators, studies and price patterns over the past few months, what we're seeing now is different. This market has

thumbed its nose at some formerly-extremely-consistent patterns, so that is a caveat against looking at this data and betting

against the market with abandon.

Comments: As Cashin notes, indicators and price patterns are tough to read in a QE driven world...1.2 trillion here, 1.4

tillion there (Japan) and you start talking about real money (and a tough market to short)SpooWeekly
http://www.leatherapronletter.com/http://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://beijingperspective.com/post/49309111637/private-equity-its-time-to-sellhttp://www.leatherapronletter.com/


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6) Speaking of QE...lets all hope Abenomics works!!

In a country overrun with pop singers and teen idols, one girl group is standing out from the crowd by ignoring love songsfocusing on national economics. It's also tying the length of their skirts to the rise and fall of the Nikkei Index ($JP:N22

0.76%).

The group is called Machikado Keiki Japan -- which Tokyo-based website RocketNews 24 says translates into English as

"Street Corner Conditions Japan."

Machikado is apparently a big supporter of what's being called "Abenomics" -- the term some observers use to describe the

dramatic government stimulus and money printing recently implemented by Japan's new Prime Minister Shinzo Abe.

Comments: Catchy lyrics: Monetary easing, construction bonds! Let's revise the Bank of Japan Law! Let's aim for 3%

economic growth! Abe bubble let's go!7) How's all that QE affecting the US???http://4closurefraud.org/2013/04/30/presenting-the-housing-bubble-2-0/

It was just seven short years ago that the prices at the epicenter of the housing bubble, Los Angeles, CA rose by 50% every months as the nation experienced its first parabolic move higher in home prices courtesy of Alan Greenspan's disastrous pocies: a time when everyone knew intuitively the housing market was in an epic bubble, yet which nobody wanted to pop be-cause there was just too much fun to be had chasing the bouncing ball, not to mention money. Well, courtesy of the real-timreal estate pricing trackers at Altos Research, we now know that the very worst of the housing bubble is not only back, but iat levels not seen since the days when a house in the Inland Empire was only a faint glimmer of the prototype for BitCoin.

Exhibit A:

The red line is the 7 day rolling average of median LAhouse prices per Altos. It is up 50% since the beginning ofthe year. One can only stand back and stare.

Exhibit B:The Gretschbuilding, an old guitar factory turned condo building in Williamsburg, just had a crazy week: Crainsreports

that three units sold in all-cash transactions, each one setting new highs on a per-square-foot basis. The units in questionswere two adjacent two-bedrooms on the ninth floor, selling for $1.4 million and $1.5 million, and a larger two-bedroom on

10th floor selling at $2.5 million all at an average of $1,150 per square foot. It needs to be cash, it needs to be over askand (the listing) will never see the light of day,the broker had told all the buyers.According to Crains, Williamsburg codos are currently averaging $794 per square foot, with high-end condos like Northside Piers bringing in closer to $1,050 p

foot. The broker who handled the Gretschsales at 60 Broadway cant seem to believe it herself: Its unbelievable whats ing on out there, she told Crains. Our question is, can the high sales weve been seeing lately be a bubble based on low

mortgage rates if the buyers are paying record-setting prices with all cash? 3 Condos Sold in Williamsburg at Record Price[Crain's]

Great job Bernanke & Co. You have succeeded at rolling up the housing, credit, bond, tech and equity bubbles all in

one.
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8) What do our European friends think of QE??

The European Central Bank cut its benchmark interest rate to a record low on Thursday, but remained unwill

to deploy more powerful weapons that many economists say are needed to jolt the Continent out of recession.

The central bank, meeting in Bratislava, trimmed its main rate to 0.5 percent from 0.75 percent. The move was seen bmany as mostly symbolic, to avoid the impression that the bank and its president, Mario Draghi, were sitting on their hands as

recession spread across the euro zone.

Mr. Draghi promised to continue letting banks borrow as much as they wanted at the benchmark rate for 'as

long as needed,' and at least until mid-2014. That was a longer time commitment than the E.C.B. has offered in the pa

And he said the bank was exploring ways to increase the supply of credit by reviving the moribund market in Europe asset-backed securities ones in which mortgages or other loans are bundled and resold to investors. Mr. Draghi suggested t

the European Investment Bank could be a vehicle for stimulating demand for asset-backed securities, but did not give details.

Analysts said the investment bank might provide partial guarantees to packages of small-business loans, which comm

cial banks could then use as collateral for European Central Bank loans at 0.5 percent.

But Mr. Draghi said the central bank would not buy such securities itself, thereby ruling out any equivalent of

so-called quantitative easing form of stimulus practiced by the United States Federal Reserve or the Bank of England.

The E.C.B. remains hamstrung by a charter that obliges it to defend price stability above all else and forbids it fromproviding financing to governments. Mr. Draghi has been willing to stretch that mandate, as he did last summer with his promto buy government bonds in unlimited amounts to keep borrowing costs under control. So far, his expression of resolve has be

enough to keep speculators at bay without any actual bond purchases by the bank.

But despite his pledge at that time to do 'whatever it takes' to save the euro, Mr. Draghi does not appear willi

to risk an outcry in Germany by throwing out the rule book altogether. And he must contend with the European Centr

Banks 23-member Governing Council, which includes the heads of all 17 national central banks in the euro zone.

9) But if they dont act things could get a bit testy.Europe's Scariest Chart Leaves 1 in 4 Young People Unemployed

While near record low sovereign bond spreads and near record high

equity prices have been taken as vindication by the European elites that

all is well and 'we just need a little less fauxsterity' to be done with this

crisis; the data, as it so often does, says the exact opposite. European

unemployment just broke above 12% for the first time ever and

European youth unemployment remains miserably above 24%.

And while 1-in-4 under-25s unemployed is a bad enough statistic in

terms of likely emergence of social unrest, the individual countries are

in general deteriorating once again at a faster rate. French youth unem-

ployment has risen for 13 months in a row to a record 26.5%; Spain (at

57.2% of under-25s unemployed) is catching up fast to Greece's stun-

ning 59.1%; but perhaps the most concerning for the broader economies is the fact that Italy's youth unemployment has now

topped that of Portugal at 38.4%. The only nation to see a drop in its youth unemployment was Ireland - which fell back mo

estly to January levels. Not a rosy picture, but then again, it doesn't matter

Comments: Eurozone policies and structure make it difficult for individual countries to maneuver and rebalance...
http://www.leatherapronletter.com/http://www.nytimes.com/2013/05/03/business/global/03iht-euro03.htmlhttp://www.nytimes.com/2013/05/03/business/global/03iht-euro03.htmlhttp://www.zerohedge.com/news/2013-04-30/europes-scariest-chart-leaves-1-4-young-people-unemployedhttp://www.zerohedge.com/news/2013-04-30/europes-scariest-chart-leaves-1-4-young-people-unemployedhttp://www.zerohedge.com/news/2013-04-27/europes-fauxterity-three-simple-chartshttp://www.zerohedge.com/news/2013-04-27/europes-fauxterity-three-simple-chartshttp://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaoshttp://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaoshttp://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaoshttp://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaoshttp://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaoshttp://www.zerohedge.com/news/2013-04-27/europes-fauxterity-three-simple-chartshttp://www.zerohedge.com/news/2013-04-30/europes-scariest-chart-leaves-1-4-young-people-unemployedhttp://www.nytimes.com/2013/05/03/business/global/03iht-euro03.htmlhttp://www.leatherapronletter.com/


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10) But if Euro countries had the ability to control their own destiny they might be able to revive their economies...Mexico

devalued the peso and flushed the system in 94/95which (along with some much needed reform) set the stage for this...http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2

Not so long ago, if you believe what you read in the papers and see on TV, Mexico was the next Afghanistan. It waspoor, lawless, and plagued by drug violence, a failed-state-in-the-making whose problems and people would soon cascade ovethe border. In early 2009 a U.S. Joint Forces Command report speculated that, in the next quarter-century, Pakistan and Mexiccould prove the most worrisome flash points for American security. According to a study by Roberto Newell for the Wilson Cter, more than 60 percent of all stories about Mexico in major U.S. papers were negative in 2007; that figure had risen to morethan 80 percent by 2010. A survey of U.S. attitudes toward Mexico in 2012 found only 14 percent of respondents called it agood neighbor. Type Why is Mexico so into Google (GOOG) and the first four adjectives suggested are dangerous,violent, bad, and poor.

In the last year, however, Mexicos image has witnessed a dramatic transformation. In the eyes of U.S. media and polcymaking elites, the countrys gone from being the next Afghanistan to the next China. The new narrative crescendoed with thswearing-in last December of President Enrique Pea Nieto. Journalists covering the event learned, among other things, thatyears of effective economic policies and an embrace of free trade are turning Mexico into a solidly middle-class society. TheFnancial Times called Mexico, whose economy grew 3.9 percent in 2012, an Aztec tiger.

Mexico, with all its challenges, represents a success story in global terms. After the 1995 peso crisis roiled inter

tional markets, Mexico started practicing what Washington only preaches: living within its means. The Organisation ofEconomic Co-operation and Development now classifies Mexico, the worlds 14th-largest economy, as a majority middle-clasociety. Average income has doubled in the past 15 years; a quarter of the countrys homes were built within the past two decades; and the average number of school years Mexicans attend has doubled in the past four decades. Mexico is the worlds topper capita consumer of Coca-Cola (KO) and has more Walmarts (WMT) per person than the U.S. Mexicos consumer market

vital to large companies ranging from Citigroup (C) to Procter & Gamble (PG) to Ford (F) and GM (GM).

Mexican Index (1995-

Current)
http://www.leatherapronletter.com/http://en.wikipedia.org/wiki/1994_economic_crisis_in_Mexicohttp://en.wikipedia.org/wiki/1994_economic_crisis_in_Mexicohttp://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://www.businessweek.com/articles/2013-05-01/mexico-the-stranger-next-door#p2http://en.wikipedia.org/wiki/1994_economic_crisis_in_Mexicohttp://www.leatherapronletter.com/


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11) Continuing on the macro theme, Jeremy Grantham (head of GMO) released his always thoughtful quarterly

tome...Business Insider does a good job summing it upEven the greatest civilizations like Rome eventually fell. Citing research, Grantham told Charlie Rose that civilizatio

have an average lifespan of around 250.

Probably the greatest agreement among scholars, though, is that the failing civilizations suffered from growing hubriand overconfidence: the belief that their capabilities after many earlier tests would always rise to the occasion and that growin

signs of weakness could be ignored as pessimistic, he writes.

Fortunately, we might not be doomed. Grantham sees two things that might save us.

Declining Fertility

In nearly every major economy, fertility rates have been falling.

Cheaper Renewable Energy

Renewable energy sources are expensive.

But thats quickly changing. Here are some projections.

For once, all of the innovations, corporate start-ups, and risk tak-ing the best part of the capitalist system work to decrease ouruse of depleting hydrocarbons and therefore to increase ourchance of stabilizing our civilisation before the cliff edge is

reached, writes Grantham.

The bottom line is that if we put our minds to it we can overcome normal inertia and abnormally powerful vested interests thoppose necessary change, he writes. Whether we can move fast enough on these fronts and at the same time reduce the outpof greenhouse gases to avoid going off the cliff is simply not knowable for certain, but every minute saved and improvement

made, betters our odds. Let the race begin.

Comments: Read the full 10 page documenthere...
http://www.leatherapronletter.com/http://www.businessinsider.com/jeremy-grantham-1q-2013-letter-2013-4http://www.businessinsider.com/jeremy-grantham-1q-2013-letter-2013-4http://www.gmo.com/websitecontent/GMO_QtlyLetter_1Q2013.pdfhttp://www.gmo.com/websitecontent/GMO_QtlyLetter_1Q2013.pdfhttp://www.gmo.com/websitecontent/GMO_QtlyLetter_1Q2013.pdfhttp://www.businessinsider.com/jeremy-grantham-1q-2013-letter-2013-4http://www.leatherapronletter.com/


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12) Examining Granthams solution to doom...http://monetaryrealism.com/solar-is-about-to-change-our-world/

Ive been getting into Solar lately the fall in prices

has been absolutely shocking over the last 2-4 years. We are

seeing price drops closer to 20% per year after several dec-

ades at 6% price drops per year. 6% year is a fantastic rate of

decreases, but 20% is simply astonishing.

20% is an impressive number, but putting it into context

will make your jaw drop with astonishment. My calculations

show that if solar maintains 5 more years at current 23%

rates per year price drops, solar power will be cheaper than

using existing coal plants. Thats right it will be cheaper to

build new solar plants than to use existing coal plants.

...we can expect some solar to be cheaper than existing coal in 2016. Thats when the levelized cost of newly in-

stalledPV solar should be cheaper than using an existing coal plant. Thats not far away at all. And then just a few years after

that, PV solar could become much, much cheaper than coal. Imagine 10 years at 18% drops in price. Where would the priof PV Solar be then? It will be about 50% of the price of coal. I hate to speculate, but imagine PV solar drops at 18% peryear for 20 years? Solar will be about 1/10th the cost of coal. Basically, people will start begging for Solar power in just a

few years, because it will be so much cheaper than coal power.

13) http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

Over the last 30 years, researchers have watched as the price of capturing solar energy has dropped exponentially.Theres now frequent talk of a "Moores law" in solar energy. In computing, Moores lawdictates that the number of compo-nents that can be placed on a chip doubles every 18 months. More practically speaking, the amount of computing power you c

buy for a dollar has roughly doubled every 18 months, for decades.

So is there such a phenomenon? The National Renewable Energy Laboratory of the U.S. Department of Energy has watched slar photovoltaic price trends since 1980. Theyve seen theprice per Watt of solar modules (not counting installation)

drop from $22 dollars in 1980 down to under $3 today.

Whats driving these changes? There are two factors.First, solar cell manufacturers are learning much as comput-er chip manufacturers keep learning how to reduce the cost

to fabricate solar.

Second, the efficiency of solar cells the fraction ofthe suns energy that strikes them that they capture is contin-ually improving. In the lab, researchers have achieved solarefficiencies of as high as 41 percent, an unheard of efficiency30 years ago. Inexpensive thin-film methods have achievedlaboratory efficiencies as high as 20 percent, still twice as high

as most of the solar systems in deployment today.

TAN Solar ETF

Comments: Has declining prices, increasing efficiencies, and industry consolidations bottomed the market???
http://www.leatherapronletter.com/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://monetaryrealism.com/solar-is-about-to-change-our-world/http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://en.wikipedia.org/wiki/Moore%27s_lawhttp://en.wikipedia.org/wiki/Moore%27s_lawhttp://en.wikipedia.org/wiki/Moore%27s_lawhttp://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://www.wolframalpha.com/input/?i=.16+*+.82%5Ex+%3D+.045http://monetaryrealism.com/solar-is-about-to-change-our-world/http://www.leatherapronletter.com/


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14) How about the forgotten alternative energy.Uranium poised for another boom?Fukushima resulted in knee-jerk reactions in a number of countries that seemed to put the whole future of nuclear po

er at risk. Japan shut down all its other nuclear reactors, Germany and Switzerland resolved to completely phase out nuclearpower, and any decisions to go ahead with new nuclear power stations almost anywhere will have been affected by inherent feof further nuclear disasters on the scale of Chernobyl and Fukushima

But the world is increasingly power hungry and fuels like coal, and perhaps to a lesser extent oil, generate excessivatmospheric pollution and are seen to be contributive to global warming, while non-polluting power generation systems likewind farms and solar energy cannot really provide enough new energy at anything like a reasonable cost and we are alreadystarting to see a beginning of a return to nuclear power plant construction, but perhaps more caution being applied to power pl

location in particular the technology itself is seen as highly robust.

While Germany and Switzerland remain committed to phasing out nuclear energy altogether, they are in danger of beunable to meet energy needs as plants are gradually phased out, while Japan, which has already seen rolling blackouts due to tshutdown of its nuclear plants, has already decided to restart some of them, while the new government there is perhaps more fvourably inclined to resurrect the other shutdown facilities and even perhaps build new ones.

But, looking ahead it is China that, as with almost any other metal and mineral, is likely to be the key growth marketwhich will drive the uranium supply sector into serious production deficit. In an effort to both service its huge energy needs,while at the same time reduce the horrific atmospheric pollution which covers many of its cities in an almost impenetrablegloom, it has plans to build up to 100 or more nuclear power plants over the next 20 years. While immediately post-Fukushimput these plans on hold for further examination it has since decided to go ahead with expanding its nuclear power capability.

There are a number of other countries looking at developing nuclear power programmes, with some major plant buildenvisaged. India, Korea, the Middle East, Russia to name just some. But with uranium already in a supply deficit situation ac-cording to the World Nuclear Association (WNA), and low prices meaning that many new production and expansion projectshave been shelved, and exploration virtually disappeared, then it is hard to see where the uranium is going to come from to mexpanding demand.

Overall the WNA notes that there are currently 435 nuclear reactors connected into national grids (although this incluJapans 50 power plants), a further 67 are under construction, 164 on order or expected to come on stream in 8-10 years, and 3proposed (expected to be approved and on stream within around 15 years.

The WNA puts 2013 uranium demand at a little over 66,500 tonnes of uranium, while current mine output is around55,000 tonnes, but the shortfall is largely met from secondary sources of which the most important is the recycling of highly e

riched weapons grade uranium from Former Soviet Union nuclear weapons stockpiles.

Uranium U308 Swap (2007-Current)
http://www.leatherapronletter.com/http://www.mineweb.com/mineweb/content/en/mineweb-europe-and-middle-east?oid=188453&sn=Detailhttp://www.mineweb.com/mineweb/content/en/mineweb-europe-and-middle-east?oid=188453&sn=Detailhttp://www.mineweb.com/mineweb/content/en/mineweb-europe-and-middle-east?oid=188453&sn=Detailhttp://www.leatherapronletter.com/


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15) Alternative energy may be the future but the world still runs on oil...with flat global production (discussed in previous

LALs) oldmethods are being tried on virgin fields.Elliott Roosevelt Jr., a grandson of U.S. President Franklin Delano Roosevelt, grins and leans toward visitors in his D

las office to describe his biggest discovery in 53 years as an oilman.

After nursing a single 10-barrel

-a-day well in a desolate stretch of west Texas for two decades, Roosevelt, 76, is embr

ing a technique he says can liberate a third of the 1.8 billion barrels of petroleum stuck a mile below, Bloomberg Markets magzine will report in its May issue.

Roosevelts method, known as carbon dioxide-enhanced oil recovery, or CO2 EOR, may speed up Americas re

surgence as a fossil-fuel superpower -- and do so under a president elected as a green-energy champion.

Unlike fracking, in which drillers blast water, sand and chemicals into wells to shatter shale and release oil and

gas, CO2-enhanced drilling induces a chemical reaction that makes oil less sticky and helps it flow from microscopic

pores in the rock. CO2 costs about $35 per metric ton in west Texas, and drillers recycle it as many times as possible to dis-lodge more oil.

Such drilling has the potential to unlock 100 billion barrels of recoverable U.S. reserves, says Kuuskraa, presidenof Advanced Resources International Inc. in Arlington, Virginia. U.S. reserves total 222.6 billion barrels this year, the EIA say

John Thompson, director of the Fossil Transition Project for the Boston-based Clean Air Task Force, says creating de

mand for carbon dioxide is an environmental benefit of drilling residual oil. He says residual zones are large enough to absohalf the CO2 from Americas power plants over 30 years, and he advocates tax incentives for oil companies to expand

CO2 EORand help develop other pollution-busting technologies. I hope Elliott Roosevelt makes a lot of money, Thompso

says. I hope other people replicate his model and take much more CO2 out of the atmosphere than would otherwise happen.

Global Crude ProductionStuck between 80-90m bpd

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16) How about those commodity currencies??Is the Aussie Safe to Short?From The Macro Man (TMM)...Lets start with the big picture of Aussie capital flows and what is holding up the currency.

First, it appears that portfolio flows have slowed down somewhat. There are some tentative signs of a slowing of re-

serve accumulation ex Japan and Australia has not seen material net inflows for a couple of quarters.

TMM are big believers in normalization of current account balances as bea sign of the world getting better and this does appear to be happening. So, if reseassets are generally going down and the eurogroup does not do anything insane fowhile, perhaps having had their false idol of Reinhardt and Rogoff smashed by a bof basic spreadsheet math then there should be less net flows and much less flow

to Australia.

Second, what about European bank deleveraging? This provided a substatial tailwind to shorts in 2011 but has also tapered off as of late. BIS data seems toindicate that Eurobank exposures to Australia are now low enough that it is unliketo be a key driver and anecdotal evidence from our trip down here indicates thatmost eurobanks that are leaving the market are down to their last couple of hundr

million dollars of loans. The loan auction-palooza of 2011 appears to be a long w

away now.

Third - what about all that mining investment? This is a bit more conten-tious and frankly much more important of a driver of flows in the last year andgoing forward. The rolloff of projects appears to be very steep after 2014 withnot much in the pipeline. Now, TMM know there is more to life than gas, coal andiron so we thought we'd look at the contractors sector of the AS51 for clues as to

what their development pipeline looked like (see the steep declines on the right).

Ohh er. Not pretty. Worst hit are coal and iron ore oriented names but therest are not exactly in great health - maybe that has something to do with public

sector sources of revenue being closely tied to resources like Queensland: Onepartner of a insolvency advisory in Australia described what was happening in theHunter Valley and Bowen Basin, both major coal mining areas as "a nuclear

winter setting in".Not a lot of room for interpretation there.

Putting that lot together TMM feel that Aus$ is vulnerable to an old fashioned sharp move lower in a thatshouldnthavehappen

style that is pure "Gold".

Comments: As the housing sector struggles (see here), China cools, and flows/investment taper off, will the RBA react?? O

will global reflationary policies keep the aussie propped up??..Australian Dollar
http://www.leatherapronletter.com/http://macro-man.blogspot.com/2013/04/is-aussie-safe-to-short.htmlhttp://macro-man.blogspot.com/2013/04/is-aussie-safe-to-short.htmlhttp://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10881222http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10881222http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10881222http://macro-man.blogspot.com/2013/04/is-aussie-safe-to-short.htmlhttp://www.leatherapronletter.com/


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17) http://www.bloomberg.com/news/2013-04-29/greeks-bet-ship-rout-ending-with-most-orders-since-2008-freight.html

Greek shipping companies, the owners of one in six merchant vessels, are ordering the most new iron-ore carri

since 2008, betting the five-year rout in charter rates may be nearing an end.The companies ordered 12 Capesizes last quarter, the most since the beginning of 2008, according to data from Golden De

ny SA, a shipbroker in Piraeus, Greece. Freight swaps, traded by brokers and used to bet on future transportation costs, anticiprates will almost triple by the fourth quarter. Stock in Athens-based Diana Shipping Inc., which owns 33 vessels, will climb 6percent in a year, the average of 11 analyst forecasts compiled by Bloomberg shows.

Ship prices plunged to the lowest in almost a decade in 2012 and charter rates tumbled 99 percent since 2008. Constructiocosts are now so low that owners will probably order $250 billion of new vessels by 2016, according to Pareto Shipping AS, aOslo-based research company. The Bloomberg Dry Ships Index of 12 companies rallied 9.4 percent this year, while the price a new Capesize climbed for the first time in 33 months in March.

Greek owners tend to have an instinct for these things,said Dominic Meredith Hardy, an analyst at Galbraiths Ltd., a 166-year-old shipbroker in London. The fact we are seeing mbuying is certainly a sign that sentiment is turning. They are sensing an opportunity.

Capesizes are earning about $4,900 a day, compared with $229,000 at the peak in 2008. The slump was caused by record o

dering in 2007 and 2008, just before the global economy entered its worst recession since World War II. The fleets expansionnow slowing and Capesize charter costs will advance to an average of $17,500 a day next year, according to nine analyst esti-mates compiled by Bloomberg.

Though the fleet is still expanding, growth will slow and seaborne commodity trade will expand 6 percent annually until2016, Nicolai Hansteen, an analyst at Pareto, told a conference in Copenhagen on April 17.

Supply of the vessels almost tripled in the eight years through 2012, according to data from Clarkson Plc, the worlds largeshipbroker. Orders for new vessels now come to 15 percent of the existing fleet, compared with a record 100 percent in 2008according to data from IHS Fairplay, a Redhill, England-based maritime research company. Some orders probably have beencanceled and the actual number is likely even lower, according to Hansteen at Pareto.

The Greeks traditionally are more successful than most said David Webb, a director at Arrow Chartering (U.K.) Ltd

who correctly predicted rallies in freight rates in 2011 and 2012. They are punting at what they think is the complete bot-tom.

SEAShipping ETF
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18) Can those Greek shippers deliver my fix??Im tweaking for my...milk???For border officials in Hong Kong, baby formula trumps heroin.Since the former British colony on March 1 restricted outbound travelers to two 2-pound cans each, a syndicate has been crac

and more people have been arrested for smuggling milk powder than were detained all of last year for carrying heroin.

The crackdown on milk buyers gives Danone SA, Nestle SA, and Mead Johnson Nutrition Co. an opportunity to increase theimarket share in China at the expense of domestic rivals such as China Mengiu Dairy Co. and Inner Mongolia Yili IndustrialGroup Co.The reason? Mainland Chinese demand, fueled by distrust of locally made food after scandals that included the deaths of at lesix babies in 2008 because of melamine-tainted milk. The U.K. and New Zealand are among countries with limits on milk salas bulk purchases of brands such as Danone (BN)s Aptamil and Mead Johnson Nutrition Co. (MJN)s Enfamil caused local

shortages.

Most of them only have one child, and the child is the most important thing in their life, James Roy, a Shanghai- based analChina Market Research Group, said of Chinese parents, most of whom are subject to the governments one-child policy. The

want to be extra careful.

The crackdown on milk buyers gives Danone, Nestle SA (NESN), and Mead Johnson an opportunity to increase their marketshare in China at the expense of domestic rivals such as China Mengniu Dairy Co. (2319) and Inner Mongolia Yili Industrial

Group Co. (600887)

Sales of baby formula in China grew 29 percent to 95.2 billion yuan ($15.4 billion) last year, more than four times the size of U.S. market, according to industry analyst Mintel Group. Milk powder retails at higher prices in mainland China, which excluHong Kong, Macau and Taiwan.The countrys top five international sellers of formula -- Danone, Nestle, Mead Johnson, Abbott Laboratories (ABT), and WyLLC (WYE) -- will increase their market share by 5 percentage points this year to about 55 percent, China Market Research e

mates.

Milk Powder 5yr chart Mead Johnson5 yr chart
http://www.leatherapronletter.com/http://www.bloomberg.com/news/2013-04-25/milk-smugglers-top-heroin-courier-arrests-in-hong-kong.htmlhttp://www.bloomberg.com/news/2013-04-25/milk-smugglers-top-heroin-courier-arrests-in-hong-kong.htmlhttp://www.bloomberg.com/news/2013-04-25/milk-smugglers-top-heroin-courier-arrests-in-hong-kong.htmlhttp://www.leatherapronletter.com/


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19) A few weeks ago the senate shot down the controversial gun bill.whether you agree or disagree, the recent quarte

earnings of Ruger (released April 29) shows how the American population is reactinghttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipment

surge

Whether it is due to the recent governmental attempt to enforce assorted gun controlling measures in the aftermath of the

Newtown, CT shooting, or, merely driven by the same catalyst that saw a surge in gun sales four years ago, namely the pre

dential election, one thing is certain:America is weaponizing itself at an unheard of pace, with both Sturm, Ruger shipmen

and units produced surpassing 500,000 each in one quarter for the first time in history.

RGR Ruger
http://www.leatherapronletter.com/http://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.zerohedge.com/news/2013-04-29/weaponized-america-sturm-ruger-backlog-doubles-gun-production-shipments-surgehttp://www.leatherapronletter.com/


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20) Continuing our Africa coverage, Foreign Policy picks up the storyNot since the countries of Africa tossed out their colonial masters several decades ago has there been this much opti-

mism andexcitement about the continent's prospects. While China's economic expansion has slowed, and while Europe and thUnited States try to dig themselves out of recession, Africa has not only weathered an up-and-down global economy -- it's beebooming. Consider Nigeria's stock market, which gained 35 percent last year, or Uganda's, up 39 percent. But even more im-portant is that real gains are finally being made on the ground in Africa today -- ones that speak to the possibility of a breakouphase that would lift millions out of utter poverty and great misery.

Let's start with the numbers. According to International Monetary Fund data, sub-Saharan Africa has grown at an annrate of 4.8 percent over the last five years, a period that includes the trauma of the global financial crisis. That means it has ouperformed other developing regions -- like Latin America, for example,at 3.3 per-cent -- and it blows out of the water the advanced economies, which expanded just0.5 percent per year.

This is happening on a continent that has been saddled for decades withthe worst levels of malnutrition, ravaged by preventable and treatable diseases,beset by corruption and rent

-seeking, and scarred by a legacy of foregone opportu-

nities. It is also occurring on a continent thought to be deeply vulnerable to nega-tive external shocks, internal political upheavals, and now, sadly, terrorist move-ments.

No wonder there's so much excitement. Even the most discriminating in-vestors are paying greater attention to Africa, which is all the more remarkablegiven that for decades the place was deemed virtually uninvestable. Now, frombonds to private equity, new vehicles are emerging to channel foreign investmentsinto more of the most promising African economies. How real is the boom? For-eign direct investment in sub-Saharan Africa has leapt from $6 billion in 2000 to$34 billion in 2012. In just the past couple of years, several African countries --

among them Angola, Namibia, Senegal, and Zambia--

have issued external debtfor the first time, allowing them to invest for the future.

We should be cautious, then, in saying that things are sure to be differentthis time around. Yet if one looks closely, cause for hope is on solid analytical soil. Africa's traditional growth story was builtrising prices for international commodities. But this proved neither sustainable nor inclusive, encouraging corruption and an uproductive rentier mentality among the ruling elite. There's a reason we think of Africa when we think of the resource curse.

This time, however, an expanding set of small- and medium-sized enterprises is bringing real economic diversificatioAccording to World Bank statistics, these firms add some 20 percent to the continent's GDP and contribute roughly 50 percenthe new jobs in sub-Saharan Africa.These successful businesses are giving rise to internationally competitive companies, therby providing access to global markets, new business models and technologies, and higher wages and salaries.

This can have a multiplier effect on long-term productivity of both labor and capital. As we've seen in Brazil and Mex-- and now in Ghana and Kenya -- it slows brain drain by providing greater opportunities at home; it encourages nationals to mgrate back home; and it engages the diaspora in enhancing the flow of capital and opening up new cross-border interactions. Tultimate benefit of all this, of course, is the promise of sustaining and nurturing wider prosperity.

Comments: Nothing new here, but interesting to see noteworthy publications pick up on the theme that will playing out fordecades to come.
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16Page 16


Comments: You know its bad out there when it comes to this

Comments: North Korea:All you need to win the war is a large magnet.

Happy Endings of the Week
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17/18



ContributorsContributorsHarris KuppermanHarris Kupperman

Harris Kupperman is the president and founder of Praetorian Capital, a macro themed hedge fund based in

Florida. Since its launch in 2003, the fund has consistently sought to be early in idenfying longer term mac

trends and nding companies that will benet from those trends.Mr. Kupperman is the Chairman and CEO of Mongolia Growth Group, Ltd (YAK: Canada and MNGGF: USA) a

publicly traded company focused on invesng in the rapidly growing economy of Mongolia. For more infor-

maon on Mongolia Growth Group, please visit hp://www.mongoliagrowthgroup.com.Mr. Kupperman is also the chief adventurer ofAdventuresInCapitalism.com, a site dedicated to uncovering

unique opportunies around the world.

Man In BlackMan In BlackM.i.B is an independent trader and consultant to hedge funds.

YodaYodaYoda is an analyst at Praetorian Capital focusing on value opportunies.
http://www.mongoliagrowthgroup.com/http://www.mongoliagrowthgroup.com/http://adventuresincapitalism.com/?page=2http://adventuresincapitalism.com/?page=2http://adventuresincapitalism.com/?page=2http://www.mongoliagrowthgroup.com/


18/18

Leather Apron LetterLeather Apron Letter was designed to foster and encourage the free flow of information. If you have something in

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The Leather Apron Letter 05-03-2013