Friday's Top 10: Craig Simpson on Putin is no Hitler; regulating monopolies; Europe going down Japan's road; gold and reserves and Money for Nothing

Today's Top 10 is a guest post from Craig Simpson, senior analyst for interest.co.nz.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz. And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. The argument that has prevailed in both Europe and the United States is that Vladimir Putin is no Adolf Hitler; by giving him everything he can reasonably ask for, he can be prevented from resorting to further use of force writes George Soros in an article for The New York Review of Books.

The opinion piece titled 'Wake up Europe' outlines Soros' view on the challenges Europe faces from Russia. He also notes that Europe and the United States - each for their own reasons are determined to avoid any direct military confrontation with Russia, and Russia is taking advantage of their reluctance to engage. It is important Ukraine remains independent as the collapse of Ukraine would be a tremendous loss for NATO, the European Union, and the United States.

Soros expands to say a victorious Russia would become much more influential within the EU and pose a potent threat to the Baltic states with their large ethnic Russian populations. Instead of supporting Ukraine, NATO would have to defend itself on its own soil. This would expose both the EU and the US to the danger they have been so eager to avoid: a direct military confrontation with Russia. The European Union would become even more divided and ungovernable. 

2. Jean Tirole this month received a Noble Prize in Economics for his work examining the difficulties in regulating firms with substantial market power. Mr Tirole's research is as relevant as ever, thanks to growing concern over the weight tech titans are throwing around in their corners of the economy.

An example of a firm throwing its weight around is Amazon and its treatment of book suppliers. Specifically the treatment Hachette a major book publisher has received. The two parties failed to come to agreement over a pricing model of e-books. Publishers have been trying to negotiate a minimum price for e-books and Amazon who are a major source of distribution for books is playing hardball and using its monopolistic position to squeeze suppliers. This behaviour has drawn strong criticism from Economist Paul Krugman. Krugman reckons "Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America".

Krugman believes "Amazon is not really in the bookselling business at all; it's in the buzz business:Book sales depend crucially on buzz and word of mouth (which is why authors are often sent on grueling book tours); you buy a book because you’ve heard about it, because other people are reading it, because it’s a topic of conversation, because it’s made the best-seller list. And what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it - but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place".

3. Is Europe heading down the same road as Japan? Despite some clear differences in economic situation and policy response, comparisons between the current situation in Europe and Japan’s painful experience of low growth and deflation continue to be drawn, says Louis-Vincent Gave from GaveKal Capital. Gave suggests private sector lending must be a focus for the ECB going forward if the situation is to differ from that in Japan, where credit growth was non-existent or in contract from 1995 to 2013.

Gave acknowledges the eurozone situation is particularly fragile, due to the huge debt burdens and policymakers should not ignore the potential deflationary pressure that slowing growth in China will exert.

4. Small Wairarapa vineyard scoops top Pinot Noir trophy in Europe. As a 'Pinotfile' (a lover of Pinot Noir) I was excited to hear a NZ vineyard had scored a top international trophy for Pinot Noir. Lansdowne Estate scooped the coveted Bouchard-Finlayson Trophy at the 2014 International Wine and Spirits Competition (IWSC) for its 2010 Pinot Noir. The vineyard also won two bronze medals for its pinot gris, and two silver for its syrah.

The Bouchard-Finlayson Trophy is similar to wining an Oscar for acting so it is a big deal for NZ Pinot and the small family owned vineyard.

5. John Mauldin examines gold and why the Swiss were such big sellers. At the beginning of 2000 the Swiss National Bank held 43% of the country's total reserves in gold, today that number is 8%. At the beginning of 2000, the Swiss National Bank (SNB) held roughly 2,600 tonnes of gold in its reserves and that equated to approximately 8% of total global central bank gold reserves. After a revision of the country's constitution and becoming signatories to the Washington Agreement on Gold Sales, the genie was released from the Swiss gold storing bottle.

The Swiss National Bank went from being one of the soundest central banking institutions on Earth to just another in the morass of apologist financial institutions that lost sight of their mandates while grasping for a Keynesian free lunch, egged on by a new breed of politicians who knew nothing of the principles of sound money or, if they did, were happy to put them to the back of their minds as they extended their hands.

6. Nanoparticle Platform project. The entreprenurial folk at Google are at it again. This time they are endeavouring to fashion nanoparticles - particles about one billionth of a meter in width -that combine a magnetic material with antibodies or proteins that can attach to and detect other molecules inside the body. The idea is that patients swallow a pill containing these particles, and after they enter the bloodstream they attempt to identify molecules that would indicate certain health problems. A wearable device could use their magnetic cores to gather them back together and read what they’ve found.

Venturing into health science is not entirely new for Google as earlier this year the unveiled a contact lens that enables diabetics to monitor blood glucose levels through the tears in their eyes. As with this contact lens, Google does not intend to sell its nanoparticle pills and accompanying wearables. Instead, it will work with third party medical companies to bring the technology to market.

7. Big business cronyism. At least that is what Australian Greens MP Adam Bandt has labelled the Australian government’s decision to decline calls to hold a royal commission into the Commonwealth Bank’s financial planning arm. Finance minister Mathias Cormann announced the government does not believe a Royal Commission is necessary. Instead the government endorsed the bank’s internal Open Advice Review process as a “comprehensive” solution to addressing client concerns.

CBA's financial planning arm has been riddled with scandals over the past couple of years with stories hitting the press of financial planners working for the bank allegedly forging client signatures and then being able to resign rather than be fired for misconduct. The bank had been engaging with up to 400,000 financial planning customers who may have lost money because of shoddy advice.

8. Anyone who has lived, worked or is friends with me knows I absolutely despise marketing terminology and corporate speak. I am a simple guy and believe a spade is a spade. Job titles which are creative but don't actually tell you what someone does is another thing that grinds my gears.

As many readers and novice investors will know, the world of finance is riddled with terminology and phrases which can be deemed 'useless' and Michael Kitces, a leading financial planner and commentator in the US, has come up with some terms he thinks should be banished. No doubt there are thousands of other terms or definitions we would all like to relegate to the bin as well.

Here is an example of what Kitces would like to ban: I’m a contrarian. I’m all for contrarian investing, but there are so many opinions out there today that it’s nearly impossible to be a true contrarian anymore. You will always be able to find someone that disagrees with you these days. As James Osbourne (@BasonAsset) put it on Twitter last week: “I don’t know” may be the last true contrarian investment strategy.

9. Social media has been buzzing with eulogies to mark the end of QE3. Some of the comments via various twitter feeds have been less than complementary about the Fed, well as much as you can be in less than 140 characters.

In honour of the end of QE3 the good folk at www.marketwatch.com have put together a playlist of songs to mark this occasion. As you would probably have guessed Money for Nothing by Dire Straits made the list and so too did Livin' on a Pray by Bon Jovi. Enjoy.

10. Clarke & Dawe