Apologies for the lack of consistent market commentary in the last couple of weeks but travel itineraries have proved slightly hectic with many visiting delegations travelling-the-well-trodden-path through the Middle East - the weather around the Gulf is lovely this time of year, making for an attractive destination for a number of visiting professionals on supposedly “official business”.
As Europe plans to save Greece (and itself), Bernanke prepares markets for an end to the spending-spree at the same time as China’s figures express another surge in bank lending, Iran demonstrates against (or celebrates, depending on which news channel you are watching) to mark the Islamic (31st anniversary) revolution. The world watches in anticipation of another attempt by the disenfranchised Iranian youth to rock the ruling authority’s (increasingly isolated) boat as recent sabre-rattling has peaked (even animals have been catapulted into space!) amid worrying signs of persistent internal friction. The authorities have apparently learnt from perceived mistakes though, as tighter internet controls and preventive measures are imposed to curtail past widespread use of technology to convey opposition to the incumbent powers. Who has ended up getting the sharp-end of the stick again after a recent bad experience in China? – yep, that apparently-oh-so-evil expression of Western hegemony – Google! Might help avoid further problems for the internet-leader if Google moved its headquarters to somewhere a little less controversial – like North Korea maybe.
Car-trouble…
Bad news for another company persists and damages Japan’s once-glowing reputation as blood-thirsty Western (read: Fox news) media pounce again and again on every piece of PR damaging Toyota woes, delivering mighty blows to once-stuff-of-legendary-quality Toyota processes - tarnishing the world’s largest car-company. Toyota seemingly forgot to check the blind-spot when changing lanes, causing a collision of immensely significant negative repercussion. Tales of deaths caused by faulty/shoddy manufacturing striking deep into the proud mindset of corporate Japan. Disaster mitigation will dictate a difficult time ahead for the company in the short-term, as recalls and safety-aware buyers pick other manufacturers. Amazing how things can change. Even implying that a Toyota was not of immaculate construction just a year ago was akin to denouncing a Big Mac as “tasteless”. Then again, McDonald’s suffered its own moment of near-path-to-destruction a few years back amidst a health-driven dramatic fall in sales, so it seems the mightiest do indeed fall the hardest. Hopes are that Japan’s well-documented and less than swift to address-internal-issues culture does not get in the way of Toyota re-accelerating away from a potentially destructive stall.
Where’s the return?
As discussed in January, these markets are providing a slight case of indigestion for those expecting much simpler-softer times after the incredible events of 2009. Without exception, every major developed market is posting a disappointingly negative YTD return (avg -5%), with the normally smile-inducing emerging markets adding to the losing team performance (Chile the only star in all Latin America etching out +4.7%). Where have things gone wrong? They haven’t really. This was expected after the fatigue inducing non-stop rally of 2009. The dips are the best times to get back in. Risk appetite has waned, expressed by the rise of the US$ (Cable 1.56, Eur/USD 1.37) as Gold ($1,078/oz and Oil ($75/brl) have both stabilised as investors remain unsure how the rest of the year’s “recovery” will pan-out. Emotional responses to uncertainty across global market recovery and a general lack of consensus prevailing at present. Sticky and frankly difficult markets are most likely to continue until the next major positive catalyst that will again express itself in the form of a rebound in employment. Until then, these markets remain the domain of day traders and ulcer-immune investors.
Paying-for-it…
On a sadder note, read that the affable (if you like partying) US congressman Charlie Wilson passed away yesterday. His life was chronicled in a recent Hollywood movie, describing his prime role in financing the covert war in Afghanistan in the 1980s to repel Soviet forces through funding of the well(US)-armed Mujahideen (modern day Taliban). So much could be written about how the US often repeats its mistakes in backing a certain group of people when in their interests to do so, only to then ignore their basic demands and requirements when no longer ‘strategically” important to them. With the latest set of events in Iran and undoubtedly an underlying level of support against the incumbent powers from US and Western influences, mistakes being learnt from lessons past is high on the agenda again.
Best Rgds,
Hani
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