India's tortoise must turn on the speed - My thanks to a subscriber for this interesting column (link may require registration, PDF in Subscriber's Area) by David Pilling for the Financial Times. Here is the opening:

When Indians talk about China, many fall back on what is essentially a tortoise-and-hare rendering of their relative performance. The story goes something like this: "Sure, China has its 30-year record of double-digit growth, its gleaming skyscrapers and its eight-lane superhighways. But India has the 'soft architecture', the democracy, the rule of law and the freedom of speech that provide shock absorbers and make its economic prospects more enduring." The implication is that, while authoritarian China may have raced out of the traps, sooner or later it will falter. India, playing the long game, will keep up a measured pace and one day surpass it.

If India is indeed the tortoise, its performance is all too convincing. In 1991, the year Indian reforms got going, its per capita income was roughly the same as China's. Today, China's is more than three times higher. It is not that India has been terribly slow. Indeed, in the 1990s, it finally sloughed off its lacklustre "Hindu rate" of growth and began to expand at a halfway decent clip of 5.5 per cent a year. From 2000, that notched up higher still - to about 7.5 per cent. The only problem - when it comes to comparisons - is that China has done even better, expanding at 10 per cent a year over the same period. By the magic of compound growth, it has streaked ahead.

One does not need to accept the tortoise-and-hare analogy to believe that India, too, has a reasonable shot at double-digit growth. This year, it is expected to grow at about 8.5 per cent. Even Manmohan Singh, the quietly spoken prime minister who - as finance minister in the early 1990s - helped dismantle some of the obstacles to rapid expansion, has said 10 per cent growth is a reasonable medium-term proposition. Last week, K.M. Chandrasekhar, the government's cabinet secretary, became the latest official to conjure up the double-digit genie, saying it would become reality if only the farming sector could be prodded into a modest 4 per cent growth.

Morgan Stanley's Stephen Roach, who has just returned to New York after three years in Asia, has long stressed India's potential. For years, he says, it has had a "better micro story" than China, with its world-class companies and entrepreneurs, its large English-speaking and IT-competent workforce, and its prudently regulated banking system.

My view - India's government almost certainly knows what it needs to do in terms of reforms which can speed up development and offer economic opportunities to a far larger proportion of its huge population. However it is not a command economy, for better or worse at this stage of its development, and the challenges of steering what is by far the world's largest democracy are daunting.

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Email of the day (1) - More on India's monsoon:

"The monsoon is getting undue attention, lending credence to my observation, that India's Government and development, is highly dependent on Karma. This further reinforces the belief, that India's perennial dependence on the monsoon, is a fait accompli. This is highly convenient for the Government. Less Government is better, so the Indian Government feels that none at all, is best.

"A well developed agricultural sector, often leads to industrial aspirations and there was a 'natural' progression from one into the other, throughout history. India has a cash rich industrial sector, which is not allowed to enter the agricultural sector, by ( archaic? ) laws. Government has compartmentalized the industrial and agricultural sectors. This is reflected in the reality of the Indian country. The prosperity of the cities are not allowed to overflow into the countryside. Small wonder than, that "Government clueless on price rise", is the headline in Times of India, that screams out of the first page. (I will send that article to you separately)

"Reliance, for example, who is into retailing of fruits and vegetables, would love this backward integration. This desperately needed capital is leaving the country (in search of takeovers) while the Government, managements and the SENSEX are dancing in joy about the achievements of the Indian companies.

"India is flattered by being portrayed as a leading future force - it is time for this nation to go back into the future."

My comment - Many thanks for this on-location insight, which is certain to be of interest to many within the Collective.

Who owns America's Government Debt? - My thanks to a subscriber for these informative graphics from the US Treasury. Note: you may need to resize to read the labels.

The debt totalled $12.8 trillion as of March 2010, and we can be certain that it is higher today. $8.89 trillion of this debt is held by the USA, with the Federal Reserve and US intra-governmental holdings accounting for 61.2% of this portion.

Just imaging how much higher US government debt yields would be without quantitative easing. Today, everyone fears deflation but does anyone really think that all this debt will not lead to higher inflation over the long term?

My personal portfolio: A top-10 long-term investment has been sold - Details and charts are in the Subscriber's Area.

Additional commentary by Eoin Treacy

Something's got to give: Platinum price needs to support reality - Thanks to a subscriber for this bullish report by Eugene King and colleagues focusing on platinum,. The full report is posted in the Subscriber's Area but here is a section:

We believe that PGM prices will increase and remain at levels well above historical trends. On our calculations, two factors are driving prices higher: (1) continuing cost inflation means that a platinum price of c.US$2,100/oz will be required by the 85th percentile producer by 2014; and (2) our supply-demand analysis suggests that the market will enter another period of sustained deficit from 2010. We believe that the industry will likely react by bringing back high-cost supply to close the gap, but we see the need for investment in new build capacity. To incentivise new capacity expansion projects in South Africa and Zimbabwe, our analysis suggests that the platinum price needs to rise to US$2,650/oz by 2014/15 to enable acceptable returns. We see the price spiking in the interim to above US$2,800 on short-term supply problems. With no realistic alternative scale production outside South Africa or Zimbabwe and with demand growing, we expect prices to move to support the economics of the industry.

My view - Platinum and palladium have both occupied positions of leadership during the bull market of the last decade and have offered helpful timing tools to those watching the development of their medium-term uptrends. Since mid-2009, palladium has been a clear upside leader in terms of the timing of its advance, the uptrend's consistency and its percentage gain. By early May, palladium was clearly accelerating. It encountered resistance in the region of the 2008 high and pulled back to the mean. This pullback also marked the beginning of a more difficult period for gold, silver and platinum.

This section continues in the Subscriber's Area.

Email of the day (1) - on gold in other currencies:

"Looking at the past it was clear that buying gold in dollars was the best play. Any thoughts for what currency would be best going forward? Many thanks"

My comment - Thank you for this interesting question. Gold has performed spectacularly well over the last decade against a wide number of currencies but how one ascertains which currency it has performed best against will depend on when you begin your comparison. I suspect that the answer will depend in large part on how you view gold. If one thinks of the yellow metal as simply another investment vehicle to trade in and out of then your perspective will be different to someone who sees gold as another currency or store of value. In addition one can use gold and its value as measured in other currencies as an analytical tool.

Investors and traders have taken an interest in gold, particularly over the last few years because of its relative strength in times of crisis and the fact that it has managed to churn out a positive US Dollar return on consecutive years. From their perspective, gold will be an asset to partake in when the time is right just like any other.

This section continues in the Subscriber's Area.

Commodity report - The full report appears iSubscriber's Area.

My view - Many industrial resources experienced a very sharp pull back from their April highs, lead and zinc hit medium-term peaks in January, and have since pulled back below their 200-day MAs. However, all six exchange traded metals found support in June and have rallied steadily since.

This section continues in the Subscriber's Area.

Email of the day - on an addition to the Chart Library:

"I wonder if Eoin could add a chart to the library for a structured call product Soc Gen Acceptance World Uranium 27/07/15 ISIN XS0311761158. As you always say - its in the charts. Thanks as always for your insightful observations and Eoin's wonderful charting facilities!"

My comment - We would both like to thank you for your kind words. The Soc Gen warrant you mention has now been added to the Chart Library. The World Uranium Total Return Index (URAX) of uranium shares on which it is based is also in the Chart Library.

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