This will likely be the last piece until 2010, as I temporarily decamp to the (much colder) London office for a couple of days next week and then break for the Christmas and New Year period. I wish you and your families a very joyous festive season, and thank you all for your support over 2009, as well as your continually kind and thought-provoking feedback. It certainly has been an eventful year! Have a wonderful time over the last few days of 2009 everyone. I am looking forward to seeing you all in 2010. Before that, some end-of-year reflections…and future thoughts.
There’s a great line in an episode of the classic comedy series Seinfeld (if you were never “into” that show you should try again now) where one of the main characters describes “agitation” as an “old irritated man trying to send back cold soup in a New York deli”. The sheer visual imagery conjured up is strong enough to imagine a bunch of agitated financial titans all sat in that old man’s seat at the deli, trying desperately to return TARP money to the US government – and within a time limit. Will this be the image with which the end of 2009 will be remembered? Will all the other incredibly visceral memories throughout the year be swept aside in a matter of popular protest induced by the threat of big bonuses, or will there be something left in the (very few) days of trading to hurtle us towards 2010? Well, no – certainly safe to assume nothing more disastrous than a few office party misdemeanours will be reported (always great fun to regale colleagues around the water-cooler the next morning) until we hit the reset button on all those lovely big green numbers on the trading screens. In early 2010, hopes will be for a continuation of the strong undercurrent of positive market sentiment that has brought us back from the brink.
Looking back…
Talk about agitated, apart from the sheer selfishness of a bunch of British Airways waitresses – oops, we say “flight crew” – threatening to destroy plans of an estimated million passengers looking to get home for Christmas in addition to demolishing their employers along with, the last twelve months have been quite a ride in global markets. Whether or not you were actually involved at the investment level, you certainly watched them with a very, very close eye. The highs and lows we have all seen and lived through either now feel as though they passed in the blink of an eye, or played out in slow-motion as you sat at your desk just wishing it would all end. Housewives, plumbers and teachers all of a sudden became (annoyingly) fluent in financial jargon having spent sleepless nights glued to CNBC and other frenzy-inducing media channels, suddenly confident enough to open discussions with investment bankers over dinner (back in the days when bankers were still invited to such social events) as to the pros and cons of the toxic-asset-relief-programme (they even knew the TARP’s full name!) and what proportion of blame should be attributed to those in the so-called “regulatory” industry vis-à-vis just how far clever financial engineers deceived the powerless man on the street. Mothers would constantly trouble their banker sons, already ego-deflated from losing their Masters-Of-The-Universe status, enquiring as to whether they had really raised a child as evil (sorry mum) as the media were making them out to be – a tough year all over.
It was annoying this time last year, and it is still annoying today when the media suddenly forgets many of the lessons feigned to have been learnt during the height of the crisis. When it really felt the world might go to bed one night and wake up the next with no system of monetary exchange in place, humility and caution reigned supreme – no doubt reflecting the public mood in the face of continual bank failures and unprecedented governmental interventionist measures. Things were so-out-of-skew that at one point we were all even heralding Gordon Brown, at the G20 Summit in April, as the world’s saviour – yeah, you thought you’d forgotten that hadn’t you? Many repetitions of “we will learn from these lessons” echoed down not just the halls of world-wide sovereign treasury departments, but corridors of governmental power, trading floors and even the average super-leveraged (UK and US) household. Promises to never repeat the same mistakes and inject a fortified understanding of moderation through living–within-one’s-means dominated personal thoughts as conspicuous consumption became an “evil-act”.
Think back to the first quarter of 2009, when the almost nightmare-like scenario we had lived through in late 2008 was still causing many to pop one-too-many-an-aspirin, trophy wives were freshly packing their bags and walking out on their bonus-bereaving “husbands”, governments were just starting to open the flood gates of liquidity to their fullest, stimulus packages were causing individuals to take for granted figures centred on hundreds of billions of dollars (what’s another 30yrs added on to our debt repayment schedule anyway?), markets were threatening a further tumultuous fall beyond the precipice and the incredible shift in sentiment and change in general economic atmosphere comes sharply into focus. We certainly have come a long way. Just remember to look in the rear-view mirror every once in a while.
The end was nigh…repent.
Lifestyle changes and self-conscious displays of moderation - this was all a natural and honestly necessary reaction. In times of crisis, sins will be repented. The worry now is, barely a year after the very same people promising to drop-it-down-a-gear-or-two by choosing the house wine rather than the most expensive on the menu, many have just-about reverted to their bull-market ways, losing touch with the humbleness they briefly expressed, in an incredibly short period of time. “One holiday a year is enough” they said in February 2009. As markets first stuttered to life in March, and then continued to rise against all odds providing a warm sense of confidence, a second holiday became an acceptable limit around summer time. A third holiday is now on the menu, seeing as markets survived a tough summer and even surprised to the upside in the final quarter. Now, markets rising are all well and good, and extremely welcome for all of us.
Yearly performances such as Brazil (+141%), Russia (+127%), Indonesia (+121%), a whole host of Asian economies returning rising +50% and even the largest developed economies in Europe and the US returning 20%-30% in many instances has been an incredibly important factor in restoring levels of confidence and providing a floor to an eventual full-blown economic global recovery. Just remember that in February this year, before the influx of cash from government coffers, the uncertainty of success was palatable. Indeed, one could argue the certainty of success should still be keenly recognised as a non-given.
Things…
The “new big thing” is still a year or so ahead of us. First, international governments must figure out how to play their ‘exit strategies’ in such a way as not to prematurely kill-off any of the Greenshoots of recovery. Recent positive indications in unemployment figures from the US last week and the UK in recent days have followed pick-ups in confidence levels across large industrialised nations like Germany even. Asia has always been a resilient performer since running past the depth of the crisis and never looking back, with China powering ahead (GDP growth +10% est 2010) through its shift from a totally export-dependent economy to a partially domestic consumption focused nation, not to mention its own form of huge stimulus spending. Emerging markets all over have outshone the rest of the pack, and consensus is clear that this will continue in 2010.
Consensus is also equally rounding around a belief that a nasty shock may emit from China’s own over-expansion in the banking industry at some point, but they are clearly wealthy enough (will probably cost them $1.5trn – petty cash) to handle their own affairs and the contagion effect will be limited. Gold, Oil and the US$ will be areas of great analysis as we continue along the route of currency prisoner’s dilemma games between the US and, well, the rest of the virtually Dollar-denominated world. The socio-political agenda is full, and the economic calendar is unrelenting. Sleep was lost in 2009, and sleep will be lost in 2010. Obama’s basketball sessions will become shorter but more intense and he may have to cut-down and only make two great speeches a week.
UAE – Unrelenting Absolute Entertainment
How can we forget the endless amounts of entertainment and material Dubai provided us in 2009 huh? At the height of the financial crisis in the city, strange things happened on the once-clogged-to-the-brink-of-suffocation-highways as inhabitants realised that their egos were writing cheques their bodies certainly couldn’t cash – literally (and yes, that is from Top Gun. We’re getting old). The entire drama of its construction boom and bust, constant mixed messages of whether or not they were “one with Abu Dhabi”, the game of bluff that played out to its near disastrous-end in the last month and the final act of chivalry by the UAE’s capital-city all tied together in a muddle of emphatic hubris, political manoeuvring and ultimately soothing unity to close a most entertaining chapter in the country’s history.
Have significant concessions really been made in return for that 11th-hour show of unity? Will Dubai’s hard-fought and developed level of autonomy be stifled and brought closer to the Gulf-fold? We can hardly wait to turn the page and see what is further along the story.
Bring it on 2010…
With public debts and deficits soaring in many countries, some economists and policymakers are starting to worry about a future "public debt crisis". As with many a commentary, it may prove futile to forecast it, but as it is almost Christmas, and in true fortune-telling fashion as so many of our esteemed colleagues decide to entertain us in at this time of year, a few predictions for 2010 on matters concerning us from all areas of interest might prove useful, if not entertaining: By the way, has anyone every taken the trouble to go back and check on the precision of 2009’s predictions? No? Great, in that case, my “expert” predictions for 2010 are:
1. President Obama will not win the Nobel Peace Prize again – I’ll put a lot of money on that one.
2. Tiger Woods will pick up a golf club and win another two tournaments (minimum) around the world – his wife will win her divorce case and take half those winnings with her.
3. Millions of MBA grads will make promises to learn Mandarin and Cantonese to fully-leverage their new found skills in the huge Chinese market, only to discover on arrival in Shanghai that the Chinese are actually using them to learn English. The Chinese market: a billion people, a billion people, a billion people – yeah, learn from Gillette’s story when they realised a billion people DON’T shave.
4. An animated movie will win the Best Film award at the Oscars – in 3D.
5. Abu Dhabi will increasingly become a city of destination for “exclusive” and “executive” vacations – Dubai will increasingly become a destination for “I think I’m an exclusive executive” as prices begin to first fall and then plummet.
6. Hugo Chavez will win whatever election he decides to call in Venezuela again. And again. And again.
7. Berlusconi will be alleged to have fathered two illegitimate children – one boy and one girl. The boy will be a potential candidate for prime minister of Russia one day, given his mother’s origins.
8. The US will begin making good cars again that US customers will actually want to buy. The Japanese will announce the invention of the world’s first viable “personal flying vehicle” – darn it Detroit! Always an entire decade behind Japanese technology.
9. The Gulf Co-operation Council will finally move to a “chip and pin” credit card system, alleviating frustration amongst customers at every point of sale. Getting the bill can’t always take longer than the duration of the entire meal.
10. We will not learn from our mistakes in 2009, and will repeat many in 2010, and 2011, and 2012…
See you all in 2010!!
Best Rgds,
Hani
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