Payback

As much as Dubai craves media attention and any excuse to have its name mentioned in the same breath as New York, London or Paris, surely it will come as a relief that the nightmare coverage over the last few days is starting to wane – as with anything that is fully devoured by the media the fuss is starting to fizzle out, replaced by the next big story – a tussle between Tiger Woods’s actions with a golf club off a golf course strangely enough (do we really care what he gets up to in his private life? Strange we love seeing genuinely successful people flounder) and Obama’s decision to push deeper into Afghanistan’s never-before conquered lands coming close to the attention his choice of watch has received. The climate summit in Copenhagen has already been polluted by the so-called “Grandfather” of global warming boycotting the gathering, angered by the apparent couter-productive attempt to limit carbon emissions through the cap and pay system – seems every industry (see below) is looking for a way to avoid government imposed limitations – and in a controversial decision video-technology has been ruled out for the forthcoming World-Cup to assist in referee decision disputes – but of course, what else would the fans have to discuss (not so calmly) over a few drinks after the game has long-finished? Oh, the fact the international media have run out of traction on the Dubai story doesn’t mean the problems have gone away – there’ll surely be more to discuss as difficult decisions are announced after the holidays.

Farming markets…
Plenty of action in the international markets, with the big non-farm payroll figure tomorrow in the US (-125k is expected) alongside a good rally in asset classes as the risk trade pushes US$ down past recent lows (cable at 1.67, Euro/USD 1.51) and a continued appreciation in stock prices across most of Asia following last week’s blip which now appears to have presented a good buying opportunity – from China (+30bps today) to Pakistan we’ve had returns to levels even slightly higher than that sell-off, with HK today rallying (+1.6%) on the weak dollar to erase that 7% fall. Interestingly in Japan, the significant laggard in the region (+12% YTD on the Nikkei, compared to +67% for Taiwan, 44% in Korea and 28% in Australia) a high-profile tussle tacking place for Japan Airlines between American Airlines (along with TPG) and Delta, as the US carriers keen to create a foothold in Asia make a noise in notoriously non-hostile Japan corporate world.

The Middle East did experience foreseen selling in the UAE, but even today and yesterday other parts of the GCC began the recovery process, with Doha in particular rising almost 7% after falling 8% on the first day of trading following the big news. Europe also recovered swiftly from the Dubai fall-out, now awaiting direction from the US ahead of those employment numbers, with a good amount of trading following the currency movements – trading about 90bps higher across the majors for now. US futures pointing at a good opening (+45pts on DJIA). One thing’s for sure, even if the Dubai response was overdone, fund managers have gone through their major holdings once more and ensured the quality is there – big buying in blue-chips since last Thursday.

And what of our favourite asset-class of the year – Gold is at it again. Anyone still doubting the fragility of human emotion dictating markets? $1,220/oz and counting. December is historically a strong month for markets, but not usually for Gold. The push towards $1,300/oz (seemingly inevitable now) taking place at a time where predictions for 2010 are making the rounds, alongside currency moves as detailed above, Oil’s insistence on remaining between $75-80/brl and even as the Baltic Dry Index flutters with a drop in global trading confidence.

Payback…
The bankers are at it again: If even Bank of America can repay almost $45bn in Tarp funds just a year after the near-destruction of its balance-sheet, then things truly have moved forwards a long-way – and fast. Too fast maybe. Whilst admirable that the US, in addressing the major issues head-on openly and frankly, has supposedly rehabilitated its major banks, the cynical side views the repayment as a ploy to avoid any cap on bonuses (as others had done a few months back). The fact BofA will undergo the single largest capital raising exercise in US bank history ($18.8bn) a sign of the strong desire to avoid the shackles of government intervention. The problem? That the huge amounts of liquidity pumped into the system and through banks like BofA itself, originally intended to support small and medium enterprises and facilitate the very heart-beat of capitalist lending, has merely succeeded in getting bankers out of the mess they first created. When vast sums of cash are at stake, moral hazard is never too far behind.

Barclays is looking to increase salaries across its investment banking staff by 150%, paying themselves more money to avoid possible clampdowns on their bonuses as seen with a vicious backlash on Goldman Sach’s recent announcements. Then again, at least none of these big banks pronounced themselves to be “doing God’s work” a la Goldman, who have since had to show what must surely have been a painful amount of humility and actually went as far as to publish an apology (probably a first for Goldman) and embark on a massive media-coaxing exercise. Did we mention their attempt to pay their way out backfiring as well? RBS in the UK has had no choice but to acquiesce to the Government’s “request” to ban bonuses, and unless the general economy really starts improving for the middle-class worker in the new year, patience for such large pay-packets will quickly give way to re-invigorated resistance.

Keep Dreaming…
As expressed by Tiger’s recent mauling at the hands of the intrusive press, any star, no matter how naturally talented and humble, can face a blip in their 15mins of fame. One worries for the latest US favourite, the British singing sensation Susan Boyle who just made US recording history by having her debut album become the fastest selling by a female artist in its first weekend on release. She rose to fame by “dreaming a dream”, but how long before the press decide to cause her sleepless nights?

One thing’s for sure, Dubai may want to time some of its future announcements around her mistakes so as to blunt the impact of its own negative backlash. As much anticipated (and much needed) falls in prices across the city take form, availability at the quite well-respected golf courses should improve. Tiger could always make his way over here to hit a few with either his wife or girlfriend, or maybe even both, as hotel room rates fall.