Randomly Noted

(This is a Money Talks column that first ran on Dow Jones Newswires earlier Wednesday)

Thailand is not the new Indonesia but the speed with which the country’s financial markets have calmed down over the recent political upheaval is encouraging.

Political ups and downs are nothing new for Thailand. Recent years have seen the ousting of former prime minister Thaksin Shinawatra, a military coup and frequent protests, and that’s kept investors away, leaving a hardy core of players.

The country’s been off the radar for many global fund managers for a while. Those who have been prepared to put money into Thailand in the first place know the risks involved and are prepared to take them.

That’s why we saw Thailand’s share market jump 5.4% Tuesday, while foreign investors were net buyers of THB1.38 billion worth of shares Monday, the first time they have been net buyers in five sessions. So far Wednesday, the index has slipped 0.2%.

The market had fallen 3.6% Monday last week, and–after a three-day market holiday–another 3.3% Friday, in response to the outbreak of violence between the armed forces and anti-government protesters known as Red Shirts, many of whom are allied with Thaksin.

Things have calmed since, though the protesters have pledged to continue their rally into May, and still demand Prime Minister Abhisit Vejjajiva dissolve parliament and call new elections.

But as players turn optimistic and markets look sharper (the U.S. dollar has fallen to a 23-month low against the baht, apparently leading to central bank intervention to try and curb the baht), the real question for Thailand going forward is longer-term money and whether funds that have previously skirted the country decide it’s time to park money there.

Bangkok must be looking at the investment renaissance that’s taking place in Indonesia with some envy.

Indonesia has not only managed to retain its core of investors, but also draw in fresh money from those who had previously given the country a miss. That’s in no small part due to the relative political stability in Indonesia these days, compared at least to Thailand and with elections coming up in the Philippines.

Thailand though is still some way from being a draw for funds that have avoided it in the past.

For that to happen there needs to be greater continuity in political leadership and for that leadership to put clear strategies in place to entice in foreign money for projects and development, not just markets, and for building domestic demand.

The current political uncertainty, as well as the tendency for Thai leadership in the past to make sudden and counterintuitive policy changes, will keep many funds out for some time yet.

The Securities and Exchange Commission’s civil charges against Goldman Sachs & Co.might be a legislative spur similar to what happened in 2002 that preceded the sweeping Sarbanes-Oxley Act designed to improve the reliability of U.S. public company accounting and auditing.

The SarbOx legislation, ignited initially by the Enron accounting scandal, was not going great guns in Congress until Worldcom came along. After that big company’s accounting fraud was revealed, Congress acted swiftly to pass the law commonly referred to as SarbOx.

It’s a law that was controversial from its inception and remains so today. One Lonon-based financier quipped that statues of the two legislators (then-Sen. Paul Sarbanes and then-Rep. Michael Oxley) who sponsored the bill should be erected in the City of London, because of the alleged number of company listings it chased from New York and to London. 

This time, of course, the pending legislation is the reform of financial regulation after the credit crisis and financial meltdown. There’s been controversy about the treatment of derivatives, among other things and differneces between the two major political parties. The Goldman charges, which the investment bank firmly denies and vows to fight, might accelerate the proceedings and make for easier sailing for the Democratic-based view of the legislation.

Politicians were quick to comment after the Goldman charges. Said Senate Banking Committee Chairman Christopher Dodd, D-Conn., “We don’t need to know the outcome of this case to know that the opaque nature of unregulated asset backed securities fueled the financial crisis.”

A few years ago, you’ll recall, there were groups raising concerns about the U.S. losing competitiveness as a global financial center.

One of the groups involved in the issue said today in the past couple years the U.S. is doing a bit better holding its place. The Committee on Capital Markets Regulation, which calls itself an independent and non-partisan research outfit, said at year-end 2009 there was some improvement here.

Hal Scott, president of the committee and a Harvard Law School professor, noted that figures are still worse compared with historical data. The two-year trend is up. He cited the increased attractivesness of the U.S. in a  global recession. Also at work is possible market reaction to perceived increased regulation in the U.K.

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Deglobalization.

It’s an ugly, awkward word, both in its construction and, more important, its implication.

It was used today in the monthly macro view produced by bond investor Bill Gross, managing director at the investment firm PIMCO. Gross was talking about the “structural headwinds” facing the global economy that form part of the firm’s “new normal” view of low economic growth.

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The political contributions of publicly traded companies seemed sure to become a governance issue for investors once the Supreme Court ruled in January to dismiss long-standing limits on corporate spending on political advertising.

Sure enough, movement. On Friday, New York City Comptroller John C. Liu trumpeted an agreement with Bank of America that has the bank agreeing to publish its political spending made with corporate funds and by bank-sponsored political action committees.

New York City Pension Funds hold about $600 million worth of common shares in Bank of America.

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It’s the sort of news that provokes the use of the cliche ‘what a difference an x makes.’ You fill in day, month, year or decade for the spot marked by the x.

In this case it’s more than a year but less than a decade.

The news, courtesy of The Wall Street Journal, is that former Federal Reserve Chairman Alan Greenspan will be called to account by the panel charged with examining the causes of the fiscal crisis.

Properly named the Financial Crisis Inquiry Commission, headed by former California Treasurer Phil Angelides, the group is reportedly going to put Greenspan on the hot seat in April.

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The above chart illustrates very nicely what happens to municipal tax receipts when there is high unemployment. It’s from the most recent mid-year budget update from the City of Los Angeles and helps explain why the city has a projected $208 million budget deficit it needs to close.

So, one creative thinker on the LA city council has decided the city should take aim at two of the more derogatory words of our time: swaps and Wall Street. It’s hard to imagine how his proposal could possibly go through. But here it is:

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Bond manager William H. Gross has some tough talk for government debt issuers. If widely agreed, the view expressed by the PIMCO managing director will make the hard task of budget-deficit cutting in the industrial world even harder.

“Just last week Bank of England Governor Mervyn King said that it would be difficult to cut government spending quickly, but that there neeeds to be a clear plan for doing so,” wrote Gross in his monthly investment outlook.

“Not good enough, Mr. King. Don’t care. Show investors the money, not vice-versa,” Gros wrote.

Clearly, soveriegn debt is replacing the credit crunch as global economic issue number one. An extraordinary balancing act will be required of elected officials in deomcracies whose recoveries are extremely fragile but whose budget deficits already have caused worry among investors.

Hards words, if understandable from an investor’s viewpoint. Gross already has had some quite negative things to say about British sovereign debt.

In an extreme situation, and depending on the people in power, a showdown between citizens and creditors in the U.K. or elsewhere will likely be ugly for both groups. See Greece as potentially Exhibit A.

A veteran U.S. central banker has bravely presented us with his own inconvenient truth. It takes an optimist to believe the political will exists in the U.S. to see through his preferred remedy.

In a speech text Tuesday discussing the long-term threat of huge fiscal budget deficits to the U.S. economy and to the independence of the U.S. central bank, Federal Reserve Bank of Kansas City President Thomas M. Hoenig said the following:

“There is no way to avoid some short-term pain in fixing the fundamentals in our economy. It is inconvenient for the election cycle, and it is undeniably terrible to have at least 10% of the labor force out of work. But short cuts now mean people out of work again in only a few years because we again try and avoid difficult adjustments.”

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A mini-flap has arisen around President Barack Obama and the word ‘begrudge’ as it applies to the compensation of top bankers.

Perhaps of more interest in an interview the President recently conducted with Bloomberg BusinessWeek is Obama’s continued support for shareholder ‘say on pay’ provisions, which this blogger has categorized as diversionary and unneeded.

First the flap. Various news reports, including from Bloomberg, led with Obama saying he doesn’t “begrudge” the bonuses awarded the well-known leaders of  top Wall Street firms Goldman Sachs Group Inc. and JPMorgan Chase & Co.

That prompted the White House Blog to post an item with its own lede: “We wanted to clear up some confusion about where the President stands on bonuses and excessive executive compensation.”

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