Oil and sustainability. They seem to be the key words for today, tomorrow and next week. Oil has been the talk of investment circles for the last few days, as it spiked back to $60/brl even faster than it takes most hedge-fund managers’ to fill their tanks at the local petrol station. OPEC has today confirmed it will maintain production targets (for the second meeting in a row) as they anticipate demand to continue to push the future delivery price of their prized commodity higher in the near-term. Saudi’s Al-Naimi seemed keen to maintain the price appreciation that Crude has enjoyed since its low back in December ’08. Oh, and one more thing, please don’t talk about OPEC being a “cartel” – they seem quite sensitive about this label and are concerned the public are provided with a negative image of the 12-member “organisation” - Note to OPEC marketing manager – you have a tough job ahead of you if your remit is to get people thinking highly of you.
Sustainability is the other watch-word. Focusing on the market rally and its longer-than-anticipated performance – catching more and more people by surprise but now inducing too great a sensation of the old “I-feel-like-I’m-missing-out” effect
Here are some key moments we’ve experienced in the last three months: 10 year yields have risen 109 basis points since the low posted on 18th March. This low came on the back of the Fed’s quantitative easing announcement (i.e. printing A LOT of money). Crude Oil has rallied 89% since the February low. The low to high move in the S&P so far, between March and May, has been 62 days and 39%. In addition the 200 day moving average stands at 934. We had a very similar situation back in May 2008 where signs of a swift market recovery after the rumblings of late 2007 appeared to be well and truly on their way to full development – and look what happened there, yep, September-Nov 2008, and then Jan-March 2009.
Important to remember that although this rally has been very welcome, most of it is a direct result of the TARP funds being re-distributed through the US financial system. The funds the banks were provided as a life-line have invariably found their way into the capital markets – an effect exactly in line with what the US, and other global administrations, wanted to engineer. While a 39% rally is great, let us not forget that it is still 42% off the 2007 highs – a figure which makes it one of the worst bear markets in history.
Passport Control – a hint at what lies beyond?
Having traveled a little this week, I couldn’t help but wonder how much one might be able to forecast on the back of a few simple observations at a country’s passport control border.
Much of a traveler’s first real interaction with the culture and “local-workings” of a new country they are visiting, is initiated on the very first moment they walk through the (quite varied) airport arrivals hall and eagerly shuffle their way up to the “will-they-or-won’t-they” let me in point of entry. Most points-of-entry occur at a country’s international airport – there are of course sea-ports, railway stations and other border crossings etc, but I’d like to focus on several varying airport passport control desks for now.
A traveler to London’s Heathrow will understand that they are about to enter one of the most monitored-populations in the world, as they are confronted by an extremely cold-and-ferocious-looking gaggle of border crossing agents, sat behind misleadingly open and informal desks. What most do not notice are the barrage of closed-circuit television cameras that are pointing at every angle as passengers shuffle through the snaking lines, while their faces are captured, processed and analysed by sophisticated software capable of detecting abnormal levels of body-heat, pupil-dilation and other tell-tale signs of a nervous demeanour – taken here to mean a potential illegal immigrant/terrorist or other unwelcome character.
The first few advertisements a traveler encounters after coming off the plane (and noticing the dismal weather) are busy pushing the usual temporary mobile phone packages, tourism attractions and ubiquitous banking brands (yep, still in this environment) – but a distinct lack of real-estate offers. London has experienced a severe downturn in this economic environment, but the passport control process prepares you for an open, multi-cultured (most of the agents are clearly not of British origin) developed and relatively tolerant society. The only confusing moment for some simple-English-speaking visitors will be the use of a term to denote gratitude that they would normally associate with clinking beer glasses – cheers.
Miami provides a rather different experience. First, you are surrounded by beautiful people all around the arrivals hall, dressed in shorts and t-shirts and lounging around in a very relaxed manner with no clear signage to help you through – strikingly different to the arrival halls of any Asian airport. The heavily-armed and extremely short-on-conversation “homeland”-security guards will speak with you in a terse-like professional tone, with a Latin American twist to the accent. If you are unlucky enough to have any Middle Eastern stamps in your passport you will notice the officer hit a little red-button on his control panel which brings out several of his friends to escort you to the waiting area. There you are quite thoroughly searched and questioned as to why exactly it is you are visiting Miami (no jokes about drugs is advised at this moment). Once they have established you are there to party in the sunshine, and nothing more, they greet you with open arms. Advertisements push the latest sea-front real-estate offers as well as the latest club and restaurant openings.
In the economic downturn, the US has of course suffered immensely. Miami in particular has seen a real-estate-market-fall that shocks even those living in Dubai and Moscow, but the city is still vibrant, relaxed, full-of-flavour and an example of the very assorted environments to be found in the US.
Hong Kong is clinical. Clinical and efficient. In fact, so efficient is the airport arrival process that you cannot help but wonder whether the remainder of your visit will be as problem-free. Apart from only Tokyo, no other city has such a smooth-running mass rail transport system and collection of well-thought-out, designed and executed business and entertainment areas. The city mixes a hectic (and smelly) environment with a fiercely efficacious infrastructure. The hoard of signs and speaker announcements that greet you on arrival at the airport, not to mention the very swift passport-stamping procedure where you must declare yourself “fit-and-disease-free”, make for a great indication of the society awaiting beyond.
Some of the most fun is had in the Middle East. The passport desk is staffed by purely local (and sometimes clueless) young and bored-looking staff. They are not interested in making eye-contact with you at anytime. They will not attempt to speak your language or listen to your protests as they twist and bend your passport relentlessly. There is no real organised queuing system or a care for the world that you have been standing in line for over an hour, fellow travelers literally stuck to your back as you all shuffle one-agonising-step-at-a-time nearing your destination. Everyone is trying to search for that fast-moving line, always one eye on what might look like the smartest guard capable of processing your visa the swiftest – unfortunately for countries like Saudi and other parts of the developing Middle-East, this distinct lack of consideration for other’s time and schedules often continues right through to all other aspects of daily life and business. One of the most worrying indicators that you might be in for a long wait are the many groups of visitors that have taken to setting-up-camp in the long-lines, opening up a mini-picnic for themselves and their families. Not the best sign of a speedy process.
The best example of what is left to come – a friend traveling to somewhere in mainland Africa one recalled a story where after landing in the middle of what looked like a dirt-track, an old pick-up truck came around to collect the baggage from the propeller-powered plane. As the border guard, a large and frightening figure smoking a large cigarette that held more than just tobacco in its contents, flicked through the passport (upside-down) the truck bundled the bags belonging to the passenger onto the back and then proceeded to drive towards what looked like the arrivals hall – a shed essentially. The passenger watched in vain as the truck first drove towards the “hall”, and then right passed it, continuing to drive off into the (apparently beautifully picturesque) distance beyond. Conclusions as to what the raw-continent of Africa has to offer beyond immigration, I’ll leave to you.
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