Friday 31 July 2009

** Chocolatey Scents ** - Thursday 30th July

Global markets continue to rise and rise as the risk-trade continues its dramatic return-to-form, with investors seemingly believing their own hubris surrounding the sustainability of the recovery, even in the face of mounting concerns over consumer debt-default levels and the stubborn indicators of unemployment. Commodities have pulled back a little, with Oil noticeably failing to slick-its-way-past the all-important $70/brl - cries of anguish across the Mid-East, cancellations of extra suites at plush Mediterranean hotels. US motorists also provided with an extra excuse to set-aside their short-lived-love-affair with the eco-car, returning to their manly-gas-guzzling behemoths, capable of dwindling oil-supplies from Persia-across-Kazakhstan with a single tank.
Asian, European and US markets trading slightly higher today so far – all eyes on US jobless claims numbers due to be released later - +575k cons.

Childish about China… So the China bubble is close to bursting is it? After doubling in just over 7-months (and still currently returning +87% YTD on the CSI300), it seemed quite inevitable that the main Chinese market would be in for a bit of a rough ride with the usual bout of profit-taking, coupled with the launch of two large IPOs, one of which (China State Construction Engineering) is the largest globally since Visa’s IPO in March 2008.

China’s market fell -5% yesterday (it rose again today btw). That was no surprise. What was surprising though was the rather uncalled-for and heavily-negative stream of commentary from the international financial press, exceptionally quick to pounce on the one-day fall, seizing the opportunity to hack any semblance of success out of China’s day (both IPOs stormed at their open, yesterday’s closing at +50%).
The general reaction to China’s one-bad-day was like watching a pack of starved hyenas suddenly alone with their prey. Fair enough, every dog has its day, and when the US-financial crisis was at its worst, the Chinese did certainly take some joy in the pain felt across the once magnificent capitalist system.
In the context of the “strategic discussion” taking place throughout this week between the two though, the reaction was an eye-opener, serving only to reinforce the suspicions that under all the kind (and exceptionally smooth) talking by the US administration in welcoming the Chinese leadership to the global-financial-stage, that old overriding factor of human frailty and emotion once more took over. That ingrained instinct to wish the worst upon your closest rival rising to the surface in a shockingly aggressive manner. How does CNBC get-away with calling a one-day move (after almost ignoring the exceptionally impressive China market performance over the last few weeks) as an “absolutely disastrous day…the ring-tolling of the end-of-the-party for China” – huh?? Are they serious? Talk about an overreaction and a slight glimpse into the beneath-the-surface-childish glee at another’s troubles.

Bit of a stink?
Sometimes, world events really just make it too easy. Today, conspiracy theorists will no doubt rejoice and have a new hanger to pin-their-sceptical-coat-on in the financial world. The following could be viewed as an innocent occurrence during a normal trading day in the banking world. Others will view it as a truly-new-low, not to mention despicable and underhand attempt to dissuade customers from obtaining loans and other banking services (in order to finance their homes and feed their families) through US government supported institutions.

The visit of a certain lady to her local bank branch, somewhere in deep Texas, ended with 35 people being hospitalised. According to reports, whilst waiting in line at the bank to discuss her outstanding loans (the bank was unusually busy that day it was noted), the lady decided to spray what was described as a rather “potent” perfume. This first caused a bought of immediate nauseousness amongst her fellow surrounding customers, then continuing to spread throughout the banks ventilation system (that is one strong-smelling substance) resulting in almost 25 bank employees to suddenly feel ill enough to require hospital treatment.

Hold on Hold on. There’s definitely something wrong here. If this had been a report from the Middle East somewhere, then there might just be a chance the concentrated-sweet-smelling-Oud that is so popular in the region would have been able to cause such havoc amongst the more sensitive of noses across Texas, but as it stands, either the “potent” aroma was clearly something more vicious than perfume, or indeed the bank is guilty of stooping to new lows to protect its balance sheet and prevent a run-on-the-bank. Nah, they wouldn’t really do something like that, would they? Let the bloggers begin…

Not so chocolaty-sweet business…
Times must be tough as British Airways decides to eliminate snacks on its short-haul flights and (please fasten your seat-belts) no longer serve canapés and chocolates to business-class passengers on long-haul flights. Knowing the British press, and other delightful modicums of journalism, this is going to get turbulent.
A business class ticket to Los Angeles on BA costs almost $11,000 – are you seriously telling me that there is no way some of that cost can be put towards a simple box of Cadbury’s to help finish-off a meal served in the luxurious biz-class cabin to those poor hungry passengers having to deal with the horror of sleeper beds and only a 15-inch flat-screen displaying one of their “over-100-channels-of-great-entertainment”? If not a selection of Godiva, maybe just a couple of Snickers bars thrown in – don’t take it all away.

This is quite a surprising move at a time where other (full-service) airlines are stepping up their game to provide value-for-money for customers – especially the Gulf and Asia based airlines. Whilst Singapore Airlines, Qatar and (increasingly) Emirates are treating their business class customers with extra luxury and continuously improving their service (including a sumptuous selection of high-quality artisan chocolates), BA has made what will surely be concluded to be a horrific PR mistake in “dumbing-down” its offering even further, and blurring the line between low-cost and full-service airlines.

OK granted, the costs involved for BA’s operations flying in-and-out of the main global airports is a great differentiator, but travellers are more willing to go “that extra mile” if it means they can make significant savings. BA’s move is reminiscent of a typical knee-jerk reaction to a crisis – rather than searching for innovative and meaningful ways to improve business by offering incentives and lowering costs, BA’s genious decision may prove one the defining moments in its demise.
It is symptomatic of misguided cost-cutting measures across other industries, without considering the medium-to-long-term effects on business. Could you imagine a dry cleaner looking to cut-costs for example, by telling you that the extra dry-spin at-the-end-of-your-wash is no longer included? That’s a lot of wet-pants.

Rather than cutting services to the customer, BA may have been better-off probing for a deceptively smelly-and-smart-way to ensure voluntarily leave by surplus staff. The gifting of a certain perfume brand may well achieve this desired outcome once sprayed. They always say you first need to give, to get what you want.

Wednesday 29 July 2009

Fattoush Loving Diaspora - Tuesday 28th July

So China doesn’t want to rattle the US, but Obama believes their relationship will “shape the 21st century” – shaping is not necessarily a good thing, when’s the last time you had warm feeling towards a relative telling you to “shape-up” – okay, that may be reading between the lines a little too much, granted, but in the current environment and still early-stages of the new relationship being forged between these two major powers - on very different paths-of-fortune - every single utterance is to be scrutinised in order to search for a betrayal of true emotion. A composed master of speech like Obama does make this slightly more difficult, but someone will slip up somewhere, just a matter of time. As discussed last week, dialogue is focused on the all-important currency question, what to do with the vast reserves and some more worrying developments with China business practices in the face of some recent and concerning “negotiations” and eventual conclusions - which seemed to heavily favour the Chinese portion of a joint-venture, every time.

The other important discussions taking place today are in Israel and concern the sensitive issue of settlement expansion in those areas considered Palestinian territory by the international community. The bargaining chip that the Israelis have created for themselves stands in the way of the start of a proper road to peace – US special envoy George Mitchell is gearing himself up for what will no doubt be a tense discussion, but nothing good has ever come from ignoring the major issues. Watch this space and we’ll analyse the consequences/fall-out of whatever happens. During all of this diplomatic shuffling, and in the absence of further visible volatility in Iran’s political spectrum, the price of Oil has maintained its holding position around the $70/brl level, awaiting further indicators of growth and consumption before either breaking through to the delight of oil-producing nations, or retreating to the cheers of US motorists.

Salad counters….and counting salads (aka Fattoush-Index)
Following a recent trip to Lebanon’s capital, Beirut, and in similar vein to both the Big Mac Index and Soft-Shell-Crab-Index, I wanted to briefly explore the prices charged (equalised in USD$s) for the simplest of Lebanese dishes, served all around the Middle East - a salad dish known as Fattoush – made of no-fuss, (normally) fresh ingredients. The usual occurred of course, the cheapest (and best tasting, I can assure you) was to be found in Beirut itself, costing an average (calculated across a range of low-to-high-class establishments) of only $3.00. Other parts of the Levant, including Jordan, Syria and Egypt (I did not manage to get through to an eatery in Tel Aviv sadly, but I’m assured there’s great love for the dish there too), averaged $3.20-$3.30. Iraq comes in at $3.60.
Then we move to the Gulf. The average across the GCC after some quick calculations, and despite a tendency for most Lebanese restaurants to be found in hotels, was a surprisingly affordable $3.80 - to put into context, that’s “affordable” when compared to London where we’re talking about $8 at even the ever-popular-nothing-more-than-a-Lebanese-McDonald’s-late-night destination that Maroush is) – but then I took a look at Dubai in an isolated environment, and the cheapest (and not particularly pleasant tasting) portion of Fattoush I could find was $3.50. Not bad. However, the average across 5 well-known and highly visited Lebanese restaurants (both located in a hotel and stand-alone) was $6! That’s a 100% premium to the average cost in Lebanon. Dubai’s average cost is still at a 30% premium to the home-of-Lebanese-cuisine.

How does the Fattoush-index provide any interesting insight to the economic future of the Middle East? Well, a news report today announced that inflation rates in the UAE have actually turned negative for the first time since 1990 – now that’s a huge change to the pace of growth and so-called bumper-development through the last 20yrs, no doubt fuelled by Dubai’s success in attracting ex-pats since then. Excellent news, now finally prices that have been living-in-a-dream, that’s to say those authorities, business owners and especially restaurateurs whom have been living-in-a-dream concerning the prices they charge for the service they provide, no longer have an inferior-fattoush-chopped-tomato to stand-on.
Will Dubai adjust to the reality that has stared it in the face since the end-of-2008 and become a truly affordable and decent living environment? Many agree that the good work done in the last year with improving infrastructure and generally “cleaning” the place up has been rendered useless by the relentless overpricing that has continued. The absence of inflation rids one of the most enduring excuses that have propped-up prices.

The question still remains as to why the tourist friendly destination that Dubai is, is so much more expensive than a truly-natural destination like Beirut? Despite having a far greater number of year-round tourists, Dubai insists on squeezing every penny out of the visitors. Problem is, they also squeeze every penny out of those living here. The numbers just don’t add up. Sure, Dubai has a constant stream of relatively well-off Europeans (mainly Brits) searching for that elusive ray of sunshine, but Lebanon’s Diaspora is large enough and sustaining to a suitable level to normalise the numbers.
A recent trip to Lebanon got me thinking, just exactly how large a population does it take to sustain an economy totally dependent on tourism and services, and how much must an average “visitor” spend during their stay to ensure a profitable conclusion for the host nation? Despite the number of (cavernous) hotels Dubai has (over 450 now) offering the opportunity for foreigners to travel to and remain in for-a-week-or-so, it would seem that for 3 months of the year, the tiny country of Lebanon is capable of even outshining the so-called “world’s-best” tourist destination – the reason? Again, that ever-dependent Diaspora.

Cavernous v Boutique
At its peak, Dubai has had 6 million hotel guests stay in over 450 cavernous hotels. Lebanon’s population is normally 3.5m, but bloats to an incredibly vibrant and crowded 7.5m during the summer months of June, July and August. This includes at least 300,000 visitors from the Gulf at any one time during this period (whom the Lebanese greatly appreciate for spending their time and, errrm, money), all residing in the less than 300 hotels found throughout the country – and many of these hotels offer only 1/5 the number of rooms of an average Dubai monstrosity. Lebanon is dramatically underserved by decent, good-quality hotels – it focuses more on the higher-end boutique styles found in other Mediterranean countries. Dubai is in contrast experiencing an over-supply of ever larger, and if you believe the stories ever more inferior-quality Vegas-style accommodation.
So the main difference must be attributed to the permanent population numbers right? Well, Lebanon’s 3.5m versus Dubai’s (estimated) 1m certainly helps. Dubai simply does not have enough volume to generate the revenue required to keep the city growing at its desired pace. However, it really must be Lebanon’s Diaspora. A doubling of a country’s population on an extended summer holiday for almost three-months of the year does wonders for the service industry across all levels, and provides enough revenue for business owners to see through the rest-of-the-year. Hence they do not need to increase prices for the high-level of service they provide. The Diaspora can afford it, and the premium they may pay in the hotel for that portion of Fattoush is essentially subsidising the local eatery’s bargain portion of equally-high-quality around the corner.
So what should Dubai do? Simple - lower prices to attract more people. Oh yeah, and how about maybe improving the quality a little.

Expensive storage…
Oh boy, that sales-force again. Readers of the last set of observations relayed from Lebanon a few months back will recollect the efficacious sales-force at the inimitable duty-free-cigar-section of Beirut airport – a great amplifier no doubt in the consumption of cigars, influenced by certain “persuasive” factors. You’ll be glad to know that this occasion presented a more resolved state-of-mind, successfully avoiding the purchase of an unnecessary supply of glorious Cuban-sticks-of-mouth-ulcers – so instead I “allowed” myself to be persuaded into buying a humidor. That’s right, a “much needed” humidor. Funnily enough, uhhmmm, a much (much) larger and more expensive humidor than the one I had never-even-originally-intended-on-purchasing – but required to house all those extra supplies.

Tuesday 28 July 2009

** CHIPS and PEACE ** - Monday 27th July

All the excitement in the markets and global stage, what with China’s Shanghai index now actually doubling for the year (buoyed by the year’s largest IPO expected in a few days, index actually returning +103.51%!), UK shrugging off worse than expected economic contraction numbers, the rise in infected sufferers of swiftly-spreading-swine-flu (the initial “over-reaction” was indeed justified), as well as the latest pleasing developments in the Middle East and its elusive search for peace, all appear to have created a little too much excitement for Sarkozy to bare. France’s President fainted with disappointment at not being credited for either the economic recovery or signs of progress in the Levant, despite his energetic attempts to place himself at the centre podium of the world-stage. Okay, it was actually during one of his rigorous runs – a young wife will do that to an ageing man.
I’m not sure if it has anything to do with his collapse, but a report today exposed Starbucks for having a so-called “frozen coffee” that contains close to 571 calories – that’s like having a Big Mac and fries for lunch – now of course, in France it’s known as “Le Big Mac” – and when you consider the fact that there are no Starbucks outlets in France, the finger must be pointed at the great US fast-food chain – how “freedom fries” ironic.

Mid-East Peace… The Middle East is in a state of excited anticipation as the special US envoy jets around following Obama’s watershed speech in Cairo back in June – several visits with the once-shunned - but always considered a great potential Western facilitator - Bashar Assad, a little apparent pressure on the Israelis to cease their settlement expansion against UN wishes, and we are now facing a very viable solution to the near-60yr problem faced by those living in the Levant – peace.

Of course, Syria signing peace with Israel, and more so Lebanon signing peace with its southern neighbour is a rather more difficult notion to put into practice than putting pen-to-paper, as only the Oslo accords too painfully taught us. Nevertheless, the very fact that Obama’s administration is close to starting the conversation in all seriousness is testament to the energy and advantage-taking of the wind-of-change flowing through the region since the globally-loved US President came to office.
Now, the solution to what is essentially an age-old programme will not be easy and no-one is of course expecting it all to take place within a week, but the positive overtures being made by all parties, and the return of a US-Ambassador to Syria, only further isolates Iran in the region and amplifies the differences between those willing to put long-standing animosities aside in the name of a lasting solution for the greater good of the people and a brighter future for all. Israel’s role here is naturally the most crucial aspect. We’ll discuss this in more detail as the week, and developments in the Mid-East discussions, progresses.

…pleasantly peaceful markets...
Good timing on the meeting with the US’s banker, as China’s huge reserves may come into question again when the credit-card crisis that is now gaining momentum in the press (first few articles appearing in the FT and Economist over the weekend) hits for real later in the year. Following last week’s look at the US + China relationship, today sees the start of the long-awaited “strategic discussion” between the two, as they seek to maintain the momentum created through the energetic policies already responsible for the impressive (but for how long) return to form of global markets. Even the S&P500 is now returning 8.4% YTD, with the tech-heavy Nasdaq +24.6%.
Gold has started to flirt once more with the $70/brl level, although some here believe it is a reversal of trades put on a month-back when the rogue trade distorted the market – whatever the reason may be, it has certainly helped the Mid-East markets post their best performance in a month.

One of the more macro indicators some fund managers like to monitor (apart from our favourite BDIY – which has been falling for the last 5 days), is the Chip-Manufacturing Index. South-East Asia is of course the primary market here, and if they are producing more chips, that means Apple and Intel are asking them to produce more chips, which means they are feeling more confident about tech-sales, which means consumers are spending disposable income on high-priced tech-goods, which should mean that people are actually making money again and feeling confident enough to buy expensive tech goods, right? Well actually…no, wrong.

You see, it all comes back to the human emotion factor again. There have been studies conducted to determine just exactly how long the average individual can veer away from their usual course of lifestyle – the average duration is 18mths. This would lead to the suggestion that just as many look to the “lip-stick index” (apparently women purchase more lip-stick during recessions to make themselves feel better with a relatively inexpensive purchase) the chip-manufacturing index may only be reflecting an “enough-is-enough” reaction from some and explain why the likes of Apple and other classy “must-have” high-tech goods producers are experiencing bumper sales.

For some it seems, nothing makes them feel better than brandishing the latest I-Phone 3GS and flashing it about in the local downtown Starbucks, as they sip on a 571-calorie iced-coffee watching the plain-clothed-ex-banker sitting in the corner e-mailing his CV out on the free in-store WI-FI.

Thursday 23 July 2009

US + China = Friendly Success?

Hello All, I’ll be travelling till next week - we’ll revisit the economic situation then.

Already this week, major developments from the world’s two most important economies during this global recession – both the US’s and China’s financial leaders making bold new announcements.

Brave Bernanke…
In the US, Bernanke is playing a dangerous game. Back in June 2008 he mused to congress “Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a substantial downturn appears to have waned”. A month after that, he sat alongside then Treasury Secretary Paulson (co-architect of all that is happening before us still) saying they were witnessing “greenshoots” of the economy blossoming all around them– hmmm. Fast forward a year on, where we are arguably still deeply in the midst of one of the most painful and global of all recessions, and we now have more declarations to congress that the slowdown is, well, “slowing down”.

That’s great, but the reality is that we’re still in the middle of a contracting economy, where the danger of unemployment continuing to hinder any recovery is very viable and the recovery process itself is potentially system damaging (i.e. more political machination will have to be endured to deal with the so called “exit strategy”). The last few months have seen a dramatic revival as investors stepped back from the edge. Were they really shuffling back towards the warm glow of economic confidence, or being pulled from the edge by the sheer brute force of unparalleled government spending and some of the loosest financial monetary policy in history?

It is no surprise that investment banks like GS and JPM have been able to post such strong financial results in the last couple of weeks – apart from only having a few competitors left, the Fed and Treasury initiatives have not only cleared the playing field for record profits but essentially tilted the entire pitch in their favour and provided a five goal head-start. The most dangerous part of Bernanke’s long-standing plan (again, he has been playing straight out of his rulebook first published in 2002) is how to avoid the scarier of two possible situations:
One conclusion being the US entering a Japan-style “lost-decade” (albeit with the famous extra dynamism and political re-invention) as extra capacity and a failure to accept the pain of natural unemployment rates overrides common sense, leading to permanently-low interest rates and falling prices. The second, a sign of optimism on its own, the risk of inflation as the US economy does indeed recover and the abundance of money flowing through the system starts to prematurely increase prices and creates that dreaded word – inflation – just as the economy needs all the momentum to continue its faltering resuscitation.

Bernanke and the US are undoubtedly doing what they believe is necessary to influence market sentiment, from media-manipulation to pandering to the always reliable short-term memories and gullibility of the lowest-common denominator within the investor community – those that always seem to buy at-the-top. By admitting the greatest worry remains unemployment, a veritable get-out-clause now exists, but even the exit strategy itself is causing concern.

Reserves about China…
Copying has always been frowned upon. Whether at school, in artistic creations, movies and writing, he that is caught or deemed to have copied is often outcast as someone devoid of intelligence and clarity as well as the dreaded curse of unoriginality. In this cookie-cutter, Facebook/Twitter-world, where it is cool to be the same rather than different (is it just me or does everyone seem to be holidaying in the same location when witnessed through their photo-shopped postings?) the copying stigma probably really only holds true in innovative production processes now rather than anything else.

The fact that the Chinese are often accused of only copying and then attempting to improve upon a product design, process and/or belief even, is not a sign that should be taken as an expression of weakness or lack of future potential – after all, most of the technologies that have allowed the US to first rise as and then remain the world’s sole superpower through the conclusion of the second world-war, were gleamed from “copying” and then improving upon a variety of technologies originally conceived of by their fallen enemies through their war machines. Were it not for the foresight of some of the leaders at the time, a lot of what was being planned for “evil purposes” may have gone to waste rather than eventually securing the future of the modern western world.

So what will the world now make of the news that China, looked upon in the last quarter of a century as the world’s largest photocopier, wants to deploy its vast foreign reserves (estimates at $2.13trn) for the purpose of “investing and acquiring” international assets, in order to “support and accelerate” overseas expansion by domestic Chinese companies? Some will worry that China wants to make the most out of a bad situation for the rest-of-the-world, taking advantage of depressed asset prices and for all intensive purposes purchasing as much as possible for as little. Others will only watch with some weariness though, pointing to the mistakes China made in the past with high-profile acquisitions (i.e. Blackstone – let’s be honest, not quite the best result there). The reality may be closer to China exerting greater influence on those areas flush with natural, and essential, resources. Nothing seems to influence more potently than a couple of trillion dollars.

An outsider would say that the US and China, two “friends” in this globalised world, are on very different and distinct economic/political paths. Both acknowledge the difficulties they are facing given these extremely arduous and testing economic times, struggling to re-invent (or copy) themselves to adapt to new challenges. Both are looking to succeed. Both need to succeed to ensure their bright futures.

One tiny problem here, human emotion – human emotion is a paradoxically simple and irrational function of everyday behaviour and ambition– it wants to succeed and watch others fail – there is an awful, but ultimately true saying, that “success is sweetest when accompanied by the failure of a friend”. Not nice hearing something so cuttingly true is it? The parallel announcements and ongoing attempts to thrive through these challenging times by China and the US may first represent a comforting, almost co-ordinated attempt, to prop-up the global economy, but really convey the uncomfortable truth of human emotion.

Those of you not on holiday please do reply with your thoughts so that we may discuss further…

Monday 13 July 2009

Trashing Dubai or Trashy Dubai?

Swinging markets…static reality
I know commentaries have been very intermittent in the last couple of weeks but there is so much silliness in the markets that to attempt to decipher what is happening during these summer months would be akin to trying to look for excitement and skill in a game of cricket – a futile enterprise. The most action has been taking place in the world of Premiership football, as the newly-minted Manchester City team are using their Abu Dhabi backed funds to put together the modern day equivalent of a gladiatorial dream-team, individually capable of taking on all-comers, but the secret recipe will be whether or not the attitudes and differing characters of each of the players will be able to come together to play-as-one and succeed as a team. If you believe the omnipresent doomsayer Nouriel Roubini, who recently rebutted stories that he was actually thawing and slightly less-pessimistic on the markets, well, there’s no hope for anyone.
A bit like the markets actually, where a whole host of newly optimistic traders and short-term investors have been pushing markets up across Asia, Europe and the US in recent days (avg. daily gains in Asia close to 2%/day in recent trading, S&P500 +8% in a week). There are those clinging on to those snippets of “less-than-bad” news, and there are those continuing to try to out-smart and out-pace the others trying to do exactly the same – sounds like a recipe for disaster if you ask me rather than a resolute and winning team approach.

The volatility in currency trading and commodities has continued throughout the month, Gold especially re-establishing itself above $950/oz (the trend upwards has actually matched the S&P’s gains), Oil getting over its hissy-fit on the heels of the rogue-trader debacle a couple of weeks back – now resting at around the $65/brl level again – and the oh-so-temperamental Cable shuffling up and down the track until deciding to head off and cross the 1.65 level for the first time this month – again, major movements in currency rates are often the first warning signs of a new shift in investor outlook – the smartest individuals always play the high-stakes game in a casino, and in the gambling world that the financial markets are, the high-rollers shift around the small but frequently profitable currency rates.
Last year, the excessive fall in the value of the GBP vs US$ was the first sign of a flight-to-safety that started way back in August, a good few weeks before the start of the nightmare with the Lehman collapse, and all the fun that ensued. We’re not far from the quietest and nervy of all trading months, and this August may well prove another important watershed.

Dubai Dirt or Dirty Description of Dubai?
Before signing off, an article in the notoriously rude and often aggressive British press yesterday caught the attention of many a reader it seems, focusing on the easiest target of all, the seedy side of Dubai. Those that have followed these commentaries for some time will certainly know Dubai is not spared a soft critique, but the sheer violence and aggression with which the journalist in the Sunday Times proceeded to pick at Dubai’s woes and very insultingly comment upon the misgivings between the UAE’s religious beliefs and the reality that lies underneath was both shocking and worryingly biased.
The writer would have been better served with less time spent on talk of the prostitutes and other well-known and long-ago criticised “professional” trades, and more effort on the opportunities that the more clean-living and law-abiding individual can take advantage of – it really seemed to me that the author was precisely the low-quality type of ex-pat westerner that the UAE can kindly do without, thank you very much – I mean, how can he complain when the first thing he does when arriving in Dubai is seek out the dirtiest, dingiest club possible (I wouldn’t know personally, but I’ve heard from others) – some dive in the Metropolitan.

Seriously, what was he expecting? Every city, and every hotel bar in every city in the world, has its fair share of professional women lurking about. London is no different. Has anyone ever spent an evening in the lobby of the W in New York on a Saturday night? Come on, sex-for-money should not be a defining element of a city, and should not provide the back-bone for an ill-judged and blatantly vindictive article that did nothing but play up to the low-quality ex-pat crowd – most likely many of them effectively kicked out of Dubai after realising they were too ineffective (that’s a nice way of saying stupid) to even make it here.

You can read the article here ( and see for yourself that it includes nothing nearly as witty or thought out as a “soft-shell crab index” nor any other insightful and well-written commentary with a keen-eye-for-the-cynical for that matter!

Friday 10 July 2009

Sands of SW1

G8 or “Gee, who-ate-all-the-money?”
Markets have been all over the place in the last few days – we’ve had a lot of international G8 gesturing over the same period, but whether the two are linked at all, in terms of investor perception, is really quite unclear. What is clear is that the significant fall in the price of Oil (almost 18% in the last 10 days) has been accompanied by volatile shifts in other asset classes, affecting markets throughout the commodity related sphere as well as creating a great trading environment for what must possibly be the best game out there at the moment – trading foreign exchange.
Cable has been swinging wildly around the 1.60-1.63 level, as if it were caught in between two bouncy walls unable to escape the endless pattern – not certain what might cause the push in either direction again, but there are increasing concerns over the future of the UK economy and many visitors to the country over the last few weeks have voiced similar negative observations of the well-intentioned but ultimately misplaced emphasis on spending and borrowing to get out of a crisis created by spending and borrowing. A watchful eye on UK’s Sterling seems to be a common theme amongst the restless investing community.

Italy’s hosting of the G8 summit could not have come at a better time for those observers of international politics that enjoy a little cynicism – Berlusconi’s now infamous parties must have all been cancelled to the disappointing excited anticipation of his other 7 guests I’m sure – apparently the greatest cries of anguish though were from Berlusconi’s Italian “girlfriends” who had been looking forward to “getting-to-know” the man-of-the-moment, Obama. Barack may have a slightly more prominent issue to deal with concerning the women around him though, as his daughter was pictured wearing a t-shirt baring the well-known anti-nuclear CND logo – hot on the heels of his successful nuclear-reducing meetings in Russia. It really must be the summer press-period if a President’s daughter’s t-shirt demands more media attention at the gathering of the world’s richest nations (read: powerful) where slightly less seemingly important issues (oh, just little things - like the global economic crisis, global-warming and impending threats to world peace) will be discussed.

Sands of SW1…
Walking around London in the last few days one could not help but start wondering whether there was a potential correlation between the fall in Mid East markets and the commencement of the annual pilgrimage otherwise known as the Arabian-London-deluge. Is anyone left on the desks across the Gulf region’s financial institutions to answer incoming concerns over the fall of Oil back to almost $60/brl?

Summertime in London – when the sun is out, the birds are singing and the streets are thronged with what used to be miserable-looking-commuters suddenly airing an aura more in-keeping with those found around the cafes and clubs of the delightful Mediterranean. A strange occurrence can normally be observed - total strangers actually acting in a kind manner with other total strangers (i.e. holding doors open), white-van-men revving a little less and allowing pedestrians to cross zebra crossings without fearing for their lives, and even normally grumpy black-cab drivers chirp away merrily about how lovely everything is -that’s when you really know the city’s heatwave is getting to people.

But where are the masses of Middle Eastern visitors as mentioned above? They were conspicuously missing from the roads and pavements in and around Knightsbridge (aka Arabiatown) when the sun was shining brightest last week on a glorious two-weeks of Wimbledon-London. As the sun has retreated, to wherever-it-is it hides in London, the city’s favourite big-spending visitors have finally made their presence felt – in what is their inimitable and distinctive style. One can only surmise that the entire premise of escaping the heat of the desert summers does not normally entail the wearing of (all-year-long-worn) shorts and t-shirts, slapping sun-block on over-beached children and having to scout out the nearest location that has a working air-conditioning machine. No, visitors from the Gulf want to wear their (patiently researched and then purchased) jeans, light jackets (in a bewildering array of rainbow-inspired designs) and jumpers, not forgetting the chance to finally open that umbrella they bought while being laughed at by their friends in Mall of the Emirates.

The disappointment amongst the touring crowd was heart-breaking for some, as they refused to even venture to the specially-constructed out-door terraces of Harrods’s cafes – preferring to sit at home with their families, wanting and hoping that the clouds would return to cover London’s greying skies and the wonderful act of precipitation would ensue. For almost three straight-weeks they waited. When it finally occurred, no sound of joy could be heard over the booming thunder as the heavens unleashed what had been held back for so many days. So fast and so great was the rainfall in fact, that the very tube stations that had been in danger of being shut-down due to excessive temperatures from the heat-wave just days before, were in fact evacuated as platforms flooded. Our intrepid Mid-East visitors don’t really take the tube though.

In these economic-crisis-times, patent spending is no longer an acceptable form of posturing – but this notion seems to be placed on temporary suspension when a tour of a certain quarter of London is undertaken. The area of Knightsbridge, known to insiders as SW1, provides a bull-market-reminiscent-snap of the good-life – splendid supercars idle up and down the busy roads as their owners move from café-to-café spreading their sweet-scented-oud across the remaining masses of Londoners - surprisingly far more accepting of the gentle invaders (uhhm, and their economic stimulus spending) than previous years.

Problem is, with no one to answer the phones back on the desks in the Middle East, the very element that allows these visitors to enjoy the best of what London has to offer, continues to fall in value. Only one super-car per family next year kids.

Wednesday 8 July 2009

Adoring Crowds...Rioting Masses

Adoring crowds, rioting masses…
Huge crowds, adoring admirers and an endless supply of good-will for the skill and seemingly effortless ability as displayed by one of the world’s most famous men – I wish I was talking about Obama and the reception he received on his typically charismatic and bridge-repairing visit to Russia this week, but it was in fact the reception of a thoroughly arrogant and thriving-on-disproportionate-and-misplaced-importance-football-player, Cristiano Ronaldo. An estimated crowd of 80,000 (that’s not a typo) jubilant and expecting fans filled the Bernabeu stadium to near-capacity, welcoming their new (mightily expensive) star. Oh how he pranced around (a good deal of restraint was required in choosing that particular description), soaking in the glory without even a glint of humility. What’s that saying about nice guys finishing last? – poor Andy Roddick had that very same heart-breaking truth handed to him over the weekend.

Whereas Obama may well be credited with bringing global peace a step closer (if not prosperity in this credit-crunch ravage global economy), Ronaldo’s golden boots may prove that he has the balls for scoring a few wins of his own at his new Spanish home. Obama’s own effortless ability and deft touch may not result in a multi-million pound contract, nor posters depicting poses with him sporting the latest tight swimwear on the back of another multi-million pound sponsorship pay-out, but his efforts are still quite worthy of note methinks.

Obama, in addition to his many other well-deserved titles, has now been hailed as the harbinger of the end-of-the-“new”-cold-war, as he does what he does best and smoothes over all the rough patches that his predecessor’s administration had so kindly created for him, resulting in a resounding win with the declaration of a significant decrease in the unnecessarily high number of nuclear weapons both nations still possess since the maddening rush for the “ultimate deterrent” during the 50s-70s. Success on the back of the meetings with Medvedev will not prove as interesting as the highly-anticipated run-in with heavyweight (and still undoubtedly in-charge) Primeminister Putin.

Seems to be the week for crowds, what with almost half-a-million (estimated) fans descending on LA to be a part of the Michael Jackson funeral (sad stories of tickets being sold over the internet at ridiculously inflated prices not diminishing the emotional aspect of the event – this really is it). A little more worrying, the riots taking place in China’s Uighur city – reports there putting the number of deaths at 156 people, apparently inflicted by long-standing and deep ethnic divides (is it ever because of anything else?) – most concerning is that if the official number, and official numbers in China are strangely often not that accurate, is suggesting such a high number of casualties, the true situation on the ground must be even more dire.

Markets are still quite jumpy during this holiday-period (Asia quite mixed, Europe trading higher so far, US futures slightly higher) as volatility continues to provide opportunities for only those patient enough to sit in front of their terminals all day, outguessing others to enter and exit markets at the right time. The large swings in cable and oil price in the last few days still attracting a lot of attention from those investors looking for any interesting piece of news to pin their views on. For a good read to assist in forming these views, our global strategy team released their quarterly report today, upgrading financials, energy and telecoms sectors and maintaining an overweight stance in emerging markets – let me know if you would like to discuss in more detail.

In another worrying admission of defeat of some aspect of the one-much-vaulted and relied upon system of financial trading, there are some reports that speculation on oil, gas and commodity markets may be curtailed – by the limiting of holdings by energy futures traders and other speculative funds (partly on the back of the latest manipulation in the oil market uncovered last week). Wow, this is another serious blow for the so-called efficient market system where previously authorities heralded speculative traders as providers of liquidity and others forms of efficient distribution of market “noise” – another spectacular moment of hypocrisy and incredulity in the face of short-term public memory - should be quite a fall-out on the back of this development.

Saturday 4 July 2009

Slick Spikes…Boiling Buses…

Slick Spikes…Boiling Buses…
Apparently a rogue trader was responsible for the spike in oil prices this week – to a year high at $73.38/brl – the short-lived impact, one hour to be precise (certainly positive for the Middle Eastern oil nations sensing an attempt to move closer to the $80/brl level) sent volumes soaring and someone somewhere is smiling – but I actually thought the spike in the oil price was down to the revelation that London buses (in some mad manoeuvre by transportation authorities in London) are operating heaters even when temperatures outdoors are reaching a sweltering, and absolutely non-London-like, 31 degrees Celsius!
As if it wasn’t bad enough being stuck in a crowded bus in the muggy heat, travellers are forced to huddle together in one corner, seeking respite from the heaters, waiting and wanting to feel that brief wisp of air breezing through the tiny crack of an open window. The excuse? London buses were not “designed” to have the “option to switch the heater off” – hmmm, anyone believing that would conclude clever lobbying by the evil oil industry, influencing bus designs to ensure maximum oil consumption. Or, simply those that design buses are unfortunately not the smartest engineers out there – those guys all work on worthy and necessary projects that benefit the public – like creating the Bugatti Veyron super-car - sales of which are apparently rising across London, not surprising really considering the sheer amount of disposable wealth circulating in the city of London and the rumour that the Veyron’s air-conditioning system is the best out there – what better way to deal with the London heat huh?

With the lack of air-conditioning and general hustle-and-bustle of the city not catering in the slightest bit to any form of heat, 31 degrees feels more like 40. Not sure what was more shocking, the absolute shambles (but still great fun and wonderful atmosphere) London becomes, or finding myself actually yearning for the cool haven of a Dubai-style shopping mall (I did say it was shocking!) – what is it again they say about grass (fake grass in Dubai’s case of course) and the other side?

Market Fireworks…
With US markets closed for Independence Day ahead of celebrations tomorrow (happy 4th July!), volatility across markets in Asia and Europe have steadily risen since the close last night on thinner liquidity. After what looked like a sell-off ahead of the long-weekend so money-managers could watch the fireworks without worrying about their portfolios and open positions, Asia’s markets actually managed to hang onto some early gains in the majors, with Hong Kong and China once again leading the way (avg. +1.2%), and some pockets of positive performance (India +1.7%). It has become clear emerging market economies are now accounting for the bulk of equity trading - MSCI comprise 24% of world market capitalisation. Interest is at an-all-time-high amongst investors chasing yield and looking for any good-looking story about developing nation growth etc. – problem is, when information like this gets published it normally marks the correct time to make a move in the other direction.

Qataris, I hear, are selling their cars in spades at the second-hand market, a normal occurrence ahead of the summer-car-swap-before-invading-London-spree. This year though, the market is revving up as supply swells with a combination of those unfortunately finding themselves without jobs and the usual I’m-really-bored-of-the-clutch-on-this-Ferrari story forcing prices lower than normal.
A slight surprise following all the talk (here especially) of how strong and immune the Qatari economy has been in the face of the global economic melt-down. Or it may simply be an extension of last summer’s experience, where many young Qataris found their cars confiscated on their return from the summer holidays, hence this year forcing the raising of cash at home to simply finance a new-car purchase over in London/Cannes/Marbella – a good time invest in those car dealerships.

Wednesday 1 July 2009

Thrilling Tennis…

Thrilling Tennis…
Strange goings on since arriving in London. Very strange. First, millions of fans around the world are sent into a spiral of distress (and consumption) as they initially mourn the sad demise and passing off one of music’s greatest practitioners, and then celebrate his life and achievements by purchasing every conceivable piece of artistry he had put out during his near 45yr career – but Michael Jackson’s depressingly shocking death is not what has put the spin into most people’s strange behaviour.
What has been more shocking is the dual emergence of a proper London summer heat-wave, and a serious threat to the Wimbledon title by a British subject – seems ironic that just as the UK is increasingly spoken about as an economy in terminal decline, through overleveraging itself to the hilt in a mad attempt at emulating the “American Way”, the country finds itself with the first serious contender (come on Henman, you never really thought you were good enough did you?) to make a dash for the nation’s most coveted sporting title in half a century.

London Lies…?
Problem is, despite the wonderful weather that the UK is experiencing, the sun shining on a daily basis in a glorious reflection of temperatures more suited to the Cote D’Azure than Clapham Common, and the exalted emotions displayed by the brave London-city dwellers ambulating in a sleep-deprived state - air conditioning is not exactly “de rigueur” in London – the dangers faced by the UK economy are still deeply evident and deeply dangerous.

A more detailed piece tomorrow will examine some of the misnomers doing the rounds – many of you out there know full well that we have been pulled back from the brink by those well-intentioned, hyperactive policies put into place to flood the world financial system with enough cash to prevent a total catastrophic collapse of not capitalism but the leveraging machine that most of the developed world has come to depend on. The very problems that existed back in September 2008 are still there. The huge debt to GDP rations being run by some governments (UK at a ridiculous 14%!) are now simply too large to simply ignore as temporary issues necessary in a crisis – talk of downgrades by S&P and other credit-rating agencies (they don’t only downgrade entities in Dubai you know) will only really gather pace when we have the return of money-managers after the summer holidays. Tans will fade, the slithers of optimism will likely subside, and the ugly truth of the underling state of the global economic malaise will manifest.

Until then, markets will likely remain volatile – trading in the last few days attests to this. Commodities are enjoying something of a renaissance but is this really more a play on currencies (US$ that is) rather than a more concerted belief in renewed consumption from developed and emerging economies – or is that currencies are moving on the back of international debt concerns and hence exerting pressure on new hedging strategies on commodities? Whatever the reasons, the markets are showing very little direction at the moment.

Very “Bad” liquidity…
There’s so much bad news out there today unfortunately - with plane crashes, train de-railings and other disasters leading to horrendous loss of life. On the markets, to be honest I’ve not had the time to go through the intricacies of the market indicators as of yet, so focus will instead be on Michael Jackson again. In particular, the attempt by the ticketing agents to “replace” tickets with souvenir tickets, apparently designed through inspirations of the King of Pop himself. Are they serious? In today’s society, where the average investor is sceptical about his rate of return and attempts to make up for losses are met with widespread scorn, such a worrying effort at avoiding repayment of the world’s most precious commodity – cash, in any form – is an indication of liquidity problems finding its way through to the one industry long-considered immune from economic downturns - Entertainment.
The King of Pop, despite most likely dying a bankrupt individual, was one of the world’s greatest entertainers. His ability to “thrill” and inspire through his music and dancing was never overshadowed by whatever personal matters tabloids and the media in general wanted to focus on. The undiluted facet of his natural abilities cannot be cynically (shamon!) replaced by a ticket that represents the worst of the media business - profiting at the expense of MJ’s most beloved – the fans.