Good News! - 25th March

Happy?
*Good news! – during his latest press conference Obama has everything under control he says – and he’s got a “strategy” to get the US and the world out of trouble – pheww…we can all relax now. Oh wait, what’s that investors keep saying…”talk is…? No really, here’s hoping super-Obama-man can save us all. On a similar note – and in a very different style – UK’s Gordon Brown is touring the world drumming up support for his latest plan to also help save the world ahead of the G20 in London next week. Sorry Gordon, there-can-only-be-one-hero in this story.
*But wait, what exactly are we trying to achieve by “saving the economy” and ensuring hard-working individuals can go back to their lives where they covet all that their neighbour has and is never happy with the possessions and belongings that they succeed in attaining – were people really that happy in the boom years? Maybe we should all learn from a recent Chinese survey (kindly sent to me by a client in Abu Dhabi - a very happy people there no doubt) that shows people who earn between RMB 500-1500 per month (US$80-220/mth or AED 300-800/mth) have the strongest sense of “happiness”. Of course, defining happiness is difficult, but it might be we are trying to achieve something we shouldn’t really be aspiring for!
*One of my favourite money-managers in the Gulf (an exquisitely philosophical individual capable of opening the eyes of any visiting analyst) called this some time ago – professing that when a people (the Japanese for example) have achieved all there is to in life and an almost near-utopia, there is little to excite them by way of trying to improve further. But are they happy?

*Poor old Japan receives confirmation that exports are nowhere near recovering (take a look at BDIY falling over last 10days again as well) with a near 50% drop in February – further signals that although markets are concerned with US bail-out plans and capitalism vs isolation the economy is still in very dire straits and consumers are simply not consuming – certainly not cars and electronics. There are an estimated 1bn cars sitting in loading docks around the world searching for a new owner – that’s a lot of rust. Continuing Japan’s unfortunate woes, GDP will now likely contract at a similar record level to last qtr (-12.5%). Nikkei is shrugging this aside for now (much already priced in), trading flattish for the day after making a recovery in the pm session.

*Asia’s woes continue, and in an interesting signal following the Coca-Cola (failing to buy Huiyan juice) debacle last week that China is tightening the ease with which foreign companies and investors may operate on the mainland, a new ruling will come into effect which will prohibit the private buying and selling of stakes in Chinese state-owned shares of financials from 1st May – no more block trades. Another sign China is no longer moving along a path of greater openness for foreign acquisitions in the current isolationist environment. CSI300 falling -2% but not limited to the previous news.
*Also on China, after they re-iterated support for the US$, there was then a call upon the IMF to back more fully a “super-sovereign reserve currency” – noteworthy because there is increasing chatter around China’s patience over US$ and everyone knows it won’t be pretty if and when they do start letting go of close to the $1trn in US Treasuries.

Gloomy G20
*Now that Bernanke and Geithner have unveiled their masterplan, attention is firmly focused on the outcome of the upcoming G20 summit next week in London – ECB leaders are keen to take advantage of the recent admission by Mervyn King that the UK “cannot afford” any more stimulus packages – Sterling was not affected heavily yesterday, but this was more a reflection of recent reversal of trades on US$ than anything else, so worth watching what FX traders will think of this.
*Let’s hope that the dismal environment of the East-End of London (Canning Town - those that have been there will know exactly what I’m talking about) will not overburden our respected global leaders and depress them even further to leave us with no hope of a sunny and positive conclusion.
*Also in the UK, a surprising shock return of inflation has been reported, as soaring prices meet consumers on the back of the recently weak GBP – shoppers there are apparently faced with higher prices for fruit and vegetables across the country’s supermarkets – is it really a surprise considering all the good/tasty/quality produce in the UK is imported? I also don’t have to tell you that when one country’s currency is weak, certain parts of its industry will do well as they export more, and those that enjoy importing exotic fruits or need their vegetables out-of-season from Waitrose will suffer.

Delaying=Cancelling?
*Further to the note last week discussing property prices and the general downturn in real-estate across the GCC, Dubai’s Nakheel has announced today the “delay” of retail units in its $3bn mall expansion plans by 12mths. They say this is another attempt to keep its "short-term business model aligned to meet market demand". This follows the announcement of delays to the Worlds of Discovery theme park, Nakheel Harbor & Tower project and Trump Tower on the Palm Jumeirah… and the slowing of work at Palm Jebel Ali and Palm Deira projects.
*Separately, Director General of Department of Finance says urgent action required to shore up Nakheel and Dubai Holding and they will be among first companies to have access to bond proceeds…details should be available within 2 weeks.
*Seems those projects that are being “delayed” are going to have a tough time being taken out of the “for consideration” pile when things turn around – priorities have changed in the last 6mths and the constant stream of unnecessary projects will certainly not return to the GCC anytime soon.