What’s the etiquette when it comes to wishing someone a Happy New Year? Certainly the second week of January is still early enough in the game to greet those you are speaking with for the first time with best wishes for the remaining 348 days or so. The third week of Jan is acceptable but may be stretching it just a little - as evidently someone you have not spoken with until then is not that close a friend or associate (apologies in advance to those I will be calling next week) - and the cut-off point must be February. After all, who wants to be reminded that we have already passed an entire month of a new year where we thought things would be dramatically fresh and different but everything has so far plodded along in much the same vein and that gym membership subscribed-to in a moment of admirable resolution has been banished quicker than a protein-shake-can-be-mixed. So, Happy New Year to you all out there! Please enjoy those gleaming gym-machines and colourful-brand-new-dry-fit-shorts for the next couple of weeks.
New Year, Same Markets…
Where do we start when facing down the barrel of an optimistic 52 (well, 51 now) weeks of trading? With a more than decent performance already under our belts after five days to feel good about (+2.7% on the S&P500, +2% FTSE, +2.5% in Hong Kong) and China already surprising the investor community with strongly impressive trading figures (exports increasing 55% compared to this time last year), bullish talk continuing throughout the fund management community as cheap money relentlessly floods into asset classes in the search for yield, sentiment is strong out there, fervent enough to assume a strong first few months. Getting past the first quarter may seem simple enough, and even making it to the half-way point with our heads-held-up-high is less than uncertain. What happens when all the money has been spent and the powers-that-be must begin thinking of possible exit strategies towards the latter part of the year is the problem.
Early discussions and comment across the media and client-base would point to an affirmation of high-expectations for more-of-the-same in the first half of two-O-one-O, or is it twenty-ten, or two-thousand-and-ten(?), whatever you might like to call it. A few worries do persist though – financial journalists last weekend re-invigorated discussions of over-doing the bounce, and the potential for the rapid deflation of bubbles (especially in emerging markets) created and still being created through the unprecedented levels of government spending – but no one seems too concerned or willing to focus on those inevitable dangers right now. Happiness is a strong enough human emotion to ensure the enjoyment of a profitable-ride for some time to come. Tears can be dealt with at a later date. Geo-political forces may have their own say in the next six months, primarily concerns over Iran’s nuclear programme and the international community’s increasingly hawkish stance towards the constant procrastination with efforts to diffuse the apparent pursuit of a weapon that may de-stabilise the already fragile Middle-Eastern political status-quo.
NYC – the tipping is the point
Having travelled in the last few weeks around two of the world’s major cities (London and New York - now back in one with the tallest if maybe not quite the most important building renamed (Burj Khalifa) in honour of its ultimate benefactor), there were a few more interesting incidences of what 2010 may have in store. Strikingly, arriving on the East coast of what is still the world’s most powerful nation (churning out $14trn in GDP, still x3 China’s annual output) a level of fear seemed to be gripping the (exceptionally cold with a frankly insulting wind-chill factor slapping you across the face!) island of Manhattan. A single individual had failed in detonating a home-made explosive device on a US national airline, succeeding in only burning himself but at the same time bringing to its knees an entire global travel system.
Incredible as it seems, this one individual had ensured delays of up to five hours at international airports for flights coming into the US, and even once through US immigration there was little talk of anything else on the major news networks. For such a powerful nation, with one of the most feared armies in human history, one could not help but feel a little bemused at the level of fear one fumbled incident (as serious as it may have been, it was amateurish at best) could create amongst an entire population. Or was that really the case? Once you switched off the blushed-to-scary-perfection-presenters on oh-so-neutral-and-high-brow channels such as Fox News (must be one of the worst culprits in the spreading of undue fear and ignorance) and exited onto the streets of what many term the “capital-of the-universe”, the crowded streets of NYC betrayed the sense of siege some would have wanted you to believe was prevailing across the country.
As if collectively called to visit world-famous icons such as the ever-shining representation of liberty with “that” Statue and the Empire State (take the Express Pass, trust me), tourists oblivious to seemingly both terrorist attempts and greedy-bankers destroying jobs and wealth - you could easily exchange descriptions there if you like - thronged the spacious avenues from Mid-Town to the Financial District (which was eerily quiet). What were the New Yorkers thinking themselves though? Well, first you had to find one. It seemed the entire island had been handed over to the tourists apart from a couple of the more local areas.
It was in those areas, where the affluent spread their wings as widely as Central Park dominates the view-from-atop, that levels of confidence in the ability to recreate success from temporary failure shone-through. Historians point to one of the US’s greatest strengths being its lax-treatment of those having suffered bankruptcy – both corporate and personal – and attribute much of the underlying emotive credence that success is achievable to the absence of total failure, or at least the absence of the existence a heavily negative stigma attached to failure (failure is in fact oft-viewed as a necessary experience on the path to success). More than one encounter with NYC residents confirmed that reaching close to rock-bottom and surviving really only does make you stronger. There was no surprise then when even meeting waiters that had only several months earlier been running Silicon-valley based internet firms or real-estate companies in Seattle and now working on their latest business plans to ”revolutionise the food delivery business” in metropolitan areas.
Second chances are worth $14trn/yr it seems.
Cab-tales…
Any city where the cab-drivers regale (often unprompted) their passengers with tales of their past entrepreneurial activity and future ambitions, simultaneously informing of their rather profitable investments made on the markets in 2009 and then still demanding a tip at the end of the journey before the passenger’s hand has even made for his wallet, is a winner in my books. The sheer undiluted sense of optimism and unrelenting belief that things will get better is contagious and positively infects every facet of daily-life. You are not allowed to look depressed in a city like New York. You are not allowed to sound sad, and you most certainly cannot get away with talk of defeat or doom-and-gloom. When the human spirit is so fragile and has been assailed from every angle with talk of the end of our consumer civilisation as we know it, it is strangely heartening to witness capitalism still thriving in the heart of its creator’s domain.
I’ll tell you what’s amazing in New York (and other parts of the US in fact). The expectation of being paid for your services is built-in to the very fabric of people’s daily activities. You cannot so much as guarantee a bell-captain in a hotel (not bell-boy, oh not, not in NYC, there they are all bell-“captains”), nor ensure you sit at a reserved restaurant table anywhere in the vicinity of the time you reserved it for, without having to pay for it. A Benjamin here and a Franklin there makes the world of difference. In fact, it doesn’t just make a difference, it makes things happen. Need to jump a queue to grab a much-sought after table (a three hour wait) in a movie-made-famous café? No worries – just slap the palm with a note worthy of recognition and hey-greenback-presto you are in there.
Now, some societies would frown upon the need to have to pay above-and-beyond what most would assume is a naturally provided service, and in most cases they would be right. There is also a rather fine line between working for money and only working when there is extra money involved. In other cities the incessant need to go that “little extra” could become a sour experience, but somewhere as vibrant and (dare I say it – in love with the power that money brings in an enduring affair of greed) it passes as daily activity – a routine that separates the “haves” from the “have nots”. Its widespread acceptance results it in being accepted.
To have or not to have…
The key difference in a NYC type society and somewhere like Asia though? The belief amongst the “have nots” that they are only temporarily not the “haves” – that through a number of years of honest-hard-work (or within a matter of months for others through not-so-honest hard work) the status that wealth brings with it, and the (literally) opening of restaurant doors it proffers is an attainable goal. This is of course the very basis of the ‘American Dream”. Whilst it is always spoken about, often written about and nowadays sung, rapped and hip-hopped about (go Alicia Keys “Concrete jungle where dreams are made of,
There’s nothing you can’t do, New York, New York”) there is nothing as invigorating as experiencing it hard-and-fast, first-hand.
On the way out of a trendy restaurant in a once industrial part of Downtown, a have-not individual requested donations from the “have” diners exiting, blessing each and every one as they handed over modest dollar bills. One generous diner must have handed him something a little more substantial at one point, as he got up off the ground when realising the note’s value and chased the cab the diner had entered to ensure he thanked him excitedly, jumping up and down whilst declaring “the dream is alive!”
A city where certain nightclubs and lounges only provide guests with the chance to enter if they have personally been provided with the proprietor’s private mobile number to which a text message must be sent, requesting the key-code sequence for that particular evening which must then be tapped-into the innocuous looking front door with a red-light above, only then granting entry to the (admittedly impressive) bar/lounge where drinks cost as much as a small home in Korea, and the clientele ache to be noticed whilst doing their best to hide. Only a city where those without the code feel they might one day be sitting in that lounge looking out can get away with such a notion.
No matter who you spoke with, whether they were relative new-comers or long-standing dwellers of their proud-city, a self-belief that they were in the right place prevailed. Sure, there is talk and awareness of the rise of China and other great emerging countries, but no one seems too immediately bothered when they notice that many from those countries still decide to move to theirs to pursue their dreams. That must be one of the main attractions of somewhere with the dynamism of NYC – that it is attractive to others, and every one always wants to feel they are where others want to be.
What’s ahead…
The indicators for 2010 are clear. The desire for governments to continue to stimulate economies is strong and the majority feel it is still necessary to avoid a relapse into the fearful quarry of a deeper recession and avoid the dreaded depression factor. Central banks may be accused of failing to focus on asset-price inflation once again in their goal of controlling consumer-price inflation. The more optimistic out there argue that markets are experiencing a “sweet-spot” as developed nations continue to recover and pull themselves out of recession, but remain fragile enough to ensure governments remain reluctant to nip the return-to-form in the bud by raising rates. This is indubitably providing more incentive for markets to rise and investors to diversify into riskier assets. It appears there is a green light to enjoy the inflating of a few bubbles here and there for some time to come before difficult questions must be asked and decisions made about when enough-is-enough. As always, timing will be everything.
Run down the 2010 path…
How about those New Year resolutions we all made in the last few weeks? That gym scenario again looms tall. Difference between cities around the world and attitude of its inhabitants to their resolve to adhere to the belief certain changes will impact positively on their lives? Gyms in London, Hong Kong and Tokyo all market special offers in January to attract new members. What do New York gyms do? Actually increase prices in January to catch the extra demand and lock their members in for 12 months minimum.
As per the tag-line of the gyms’ most visible brands - keep running in 2010.
Best Rgds,
Hani
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