Horror Movie Ending - 24th March

Horror-movie-ending?
*So what was a good start to the week was hit out of the ballpark to make for a great start to the week and one of the best performing days across US markets in recent history (S&P +7%, DJIA +6.84%). Geithner’s first outlining of the administration’s efforts to end uncertainty over the financial sector’s toxic assets back in early February brought about a period of greater uncertainty and further selling – this time, his private-public initiative has succeeded in pushing markets up for their 4thbiggest gain since the 1930s (S&P Financials rose +18%). The buying on the rumour continued into buying on the fact in a rare showing of faith in the Treasury Secretary. Both he and Bernanke will face another grilling today in front of Congress. Today, Asia did well to continue the rally with most markets climbing higher for the 9th out of 12 trading days. Europe so far more muted following the furious trading, UK down with resource stocks getting hit on profit-taking. US futures slightly off and taking a break – DJIA -66pts, S&P -8.1pts for now. Oil slightly off today (-0.84%) but still above $53/brl and Gold easing slightly to $934 (-1.7%). Currencies see further weakening of US$ vs Eur and GBP.
*Worrying piece of news that hedge funds expecting even larger withdrawals of cash this year, more than $200bn some estimate (vs $155bn last yr) – may further dent any risk-taking appetite.
*AIG’s senior managers (9 out of 10, who’s the 10th guy who didn’t get the memo I wonder?) agree to return their bonuses, just a matter of time before the rest of those targeted mercilessly follow-suit.

*We are getting close to that moment where everyone feels markets are returning to form and that only good news will start to flow, and as much as I would like to back this horse and put myself in the “it’s-all-over-let’s-celebrate-camp” I am hesitant as one is when watching a horror movie and knowing that although the bad guy as been beaten to a pulp, shot a thousand times and lying apparently dead on the ground, that moment will still occur where he will suddenly arise for that one last stab at killing the victim - a cheap shot at the best of times but always successful in getting the nerve-frazzled audience to jump and react even when they know it’s coming!
*I only hope this is not the case when the inevitable end to the short-squeeze occurs and investors then grapple to find the next push forwards. Some ugliness in the markets may yet jump out of the shadows.

Gulf Swings Again…
*The Gulf’s climate is getting very warm now, and markets themselves are hotting-up following a series of injections and announcements over the last few weeks to help assuage any fears and uncertainties to the future of the region’s major financial institutions.
*The latest was Gulf International Bank’s bailing-out yesterday by the member states of the GCC (they jointly-own one of the world’s largest buyers of toxic assets in the last few years before the crunch!). An estimates $4.5bn was the necessary infusion there. More important than the sum involved, the sheer fact that the GCC were able to work together and consolidate the losses.
*Dubai CDS spreads have narrowed dramatically since those dangerous days of standing at the abyss and being dared to jump in by Abu Dhabi, narrowing from 1000bps last month to 650bps today. *Doha’s stock market has returned +24% since hitting its low earlier this month (there is much further to go here). The only disappointment still Kuwait as it deals with its own political mess.

Beer-eally Unfair?
*Everyone’s talking about Dubai’s increasing conservatism, what with the new law that may come into effect banning kissing in public or holding your girlfriend’s hand in inappropriate venues. Others are complaining about “evil” speed cameras that seem to take pleasure in catching you totally unaware as you edge past 120kmh for the 1st time in months at the worst possible moment. Others are more interested in why prices across Dubai (and in selected industries across the Gulf) are still too high though. With no more cause for concern through inflation and an all but destroyed real estate market and tourism industry, it is still baffling as to why authorities here continue to want to extract from residents their pound of flesh and more. Restaurants remain very over-priced for the quality you receive and the service that you have no choice but to put up with - anyone else find themselves repeating themselves several times in the space of a minute to ensure their order has been correctly noted, but with a feeling of disappointing inevitability in the pit-of-your stomach that despite your best efforts to clarify and simplify you will still receive cheese on your “no-cheese please” burger, and you will almost certainly get that salad with the dressing drizzled-all-over rather than on-the-side, and those croutons you didn’t want – aarghhh!..exceptionally frustrating right?

*Many in Dubai are still amazed at the prices (and difference in price within Dubai) for a cooling and refreshing beer. A bottled-beer on the Palm for example will set you back 18-22DHS (depends what brand you fancy) which is relatively well-priced for Dubai, but the same choice of beer will set you back 32-36DHS a 15minute drive-away in Burj Dubai Downtown’s Souk Al Bahar. Both are residential areas, and both bars that serve the beer are not in hotels - which is the main reason why most other establishments are able to get away with the excuse of sometimes charging even 45DHS for a beer (they do serve good nuts it must be said, especially the nuts at the Monarch Hotel’s cigar bar – mmmm).
Why are we made to pretend we are sitting on the equivalent of the Gulf’s Puerto Banus and pay similar prices when we are still bombarded by the sounds of bulldozers and construction vehicles daily and every hour? Relevant prices should be provided for the relevant environment. There have been many improvements in recent months, and plenty of changes have made Dubai a much more pleasant living-environment, but a path of price-correction must still be traveled on.

*Where does Dubai get-off allowing this type of price discrepancy? You would maybe expect it in a city that has a population of 20million people or so and a myriad of income levels not to mention vast choices of areas for people to dwell and relax in. Not the reality that is still Dubai for now which is a tiny population made up mainly average income earning ex-pats all looking for a cheap drink in 2 or 3 main locations.
In London, a beer in a pub in Shoredtich will cost you the same as a beer in pub in Fulham (not much more than 22DHS). In New York, a vodka-martini in the meat district is very close in price to another at Union Square. It will definitely cost you much less than a vodka-martini at Neos in the Address. Neos is also in Burj Dubai Downtown, where you aren’t even ALLOWED to order a normal vodka and have to choose between the likes of an extortionately priced Stoli Elite (70DHS per shot) or a you-know-I’m-not-that-thirsty-anymore Ciroc (granted, you don’t have to go to Neos for a drink every night and it is situated in a premium hotel, but it’s still not right when you consider other top-hotels/bars around the world have a full choice of brands always available).

*Down the road (1 hour’s drive) and in Abu Dhabi you will pick-up the same imported beer for a 30% discount at even one of the swankier hotels out there. Don’t even get me started on what you would pay in Ajman. Isn’t it time Dubai maybe admits that is ripping-off those that decide to live here and install some sort of two-tier system (like Venice for example) which provides different menus and prices depending on whether a customer is a tourist or a local – why should those living in Dubai be forced to eat and drink in hotels and pay the very same prices tourists are forking out – tourists are on holiday and in a very different frame of mind and know they will not be paying ridiculous prices for longer than their 7 days basking in the sunshine – the locals have no escape!

*Why do two identical beers in two near-identical bars in a city of barely 1m people manage to vary to such a degree? It’s enough to give you beer-goggles before you’ve even finished the first bottle. There are more and more places where you can eat and drink without feeling you have been rudely violated and taken advantage of, and this is one of the best knock-on effects of a newly humbled Dubai. Many agree (as do I) that the city will survive and then again thrive once the global economy has gotten over its hissy-fit. In the meantime, it would be nice if it started providing even more of the reasonably priced establishments popping up sporadically - I know a few, call in for the list.