The Markets
Russian President
Vladimir Putin sure has stirred up a hornets’ nest. Why is annexing the Crimean
peninsula and, possibly, Ukraine such a priority for the Russian leader? When
asked, Putin has indicated Russia’s military influence is necessary to protect
Russian-speaking populations in Ukraine. However, The Economist has a different take on Putin’s actions:
“Russia’s
economic stagnation has exposed the limits of Mr. Putin’s political and
economic model, which relied on rising oil revenues and allowed him to buy the
support of the elite and the acquiescence of the population at large. Real
disposable incomes, which rose by 12 percent in 2007, on the eve of the war
with Georgia, are forecast to rise by 3 percent this year. The Kremlin faced a
choice between political liberalization and mobilization of the country by the
means of war and repression. Mr. Putin has chosen the latter. Confrontation
with the West is one of the main goals of Mr. Putin’s operations. Any sanctions
imposed will allow him to blame Russia’s economic downturn on the West, though
that may not placate the ruling class, with its cash stashed abroad in property
and bank accounts.”
No matter what
Mr. Putin’s motivation really is, he faces clear opposition from the
international community. Last week, a United Nations Security Council
resolution was introduced which stated Sunday’s referendum in Crimea – a vote
to determine whether Crimea would remain part of Ukraine or join Russia – had
no validity and could not form the basis for any alteration of the status of
Crimea. The resolution was supported by 13 of 15 member nations. China
abstained from voting and Russia vetoed the resolution.
Perhaps more
importantly, the economic consequences of Russia’s actions have been quite
harsh. According to Barron’s, the
ruble has fallen to a record low against the U.S. dollar. As a result, the
Russian central bank has spent $28 billion to support the currency and has
increased short-term interest rates by 1.5 percentage points, pushing yields on
10-year bonds to nearly 9.75 percent. In addition, capital is fleeing Russian
markets. During the past three weeks, the MICEX equity index, in U.S. dollar
terms, has lost about one-third of its value relative to its 2013 high.
Russia’s failure
to back away from Crimea unsettled U.S. markets last week and gave the Federal
Reserve pause when its holdings of U.S. Treasury securities for foreign and
official accounts fell by more than $100 billion (for the week ended Wednesday).
Since Russia had threatened to sell its U.S. Treasury bonds if sanctions were
imposed, some believe the drop was Russian muscle-flexing. Others suggest
Russia hasn’t divested itself of its U.S. holdings; it simply moved them
outside of the United States so the assets wouldn’t be vulnerable to sanctions.
How quickly do we adopt new technology? More quickly all
the time, it seems. MIT Technology Review
looked at the time it took for nine different technologies to fully saturate
the U.S. market. They started back in 1876 and looked through 2010, breaking
the process into three phases:
- Traction: The period
from consumer availability to10 percent market penetration
- Maturity: The period
from 10 percent to 40 percent market penetration
- Saturation: The period from 40 percent to 75 percent market penetration (the point at which new demand typically slows)
Some
innovations, like the original telephone and electricity, took time to saturate
markets. Alexander Graham Bell’s patented telephone took 25 years to gain
traction, another 39 years to reach maturity, and almost a full century before
the market for landlines was saturated. Electricity also was slow to reach
saturation. Both technologies were hampered by infrastructure issues, like running
enough cable and wire to provide services to businesses and homes.
Newer
technologies have been and are being adopted far more rapidly. Television took
more than a decade to gain traction, but progressed through maturity to
saturation in less than a decade. The mobile phone caught on a lot faster than
landlines, becoming mainstream in less than half the time. That’s nothing
compared to smart phones which took about 10 years to reach maturity. Tablets
appear to be catching on even faster. In fact, in a separate 2012 article, MIT Technology Review pointed out,
“Mobile devices outsold PCs last year for the first time, and top smart-phone
apps need little more than a year to win the kind of audience it used to take
technologies decades to reach.”
The
mobile revolution is progressing rapidly, and some businesses still need to prepare.
According to Forrester Research, as
reported via CSO.com, about 15
percent of employees are accessing sensitive data that may include client
information, non-public financial data, intellectual property, or corporate
strategies from their own devices rather than those provided by their
employers. As a result, many firms need a more scrupulous identity management
strategy, not to mention a chief mobility officer.
Weekly Focus – Think
About It
“Success
is not final, failure is not fatal: it is the courage to continue that counts.”
--Winston Churchill, British Prime
Minister
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