Wednesday 30 April 2014

Better than Big

So it has actually happened, China is within months of becoming the world’s largest economy, overtaking the US. It has happened quicker than anyone had foretold and (a little boringly) due to a technical re-evaluation of measurement parameters. It has happened right in font of the eyes of the world. Watching and waiting for the inevitable but having believed they had till 2019 until the necessary acceptance that the old-world-order - comfortably in place since 1872, when the US overtook Britain as the world’s largest economy - would signify an indubitably monumental new chapter in this ever-changing geopolitical landscape. Time to stop watching Diners-Drive-Ins and Dives on the Food Network and begin exploring Sweet-N-Sour-Shacks, Noodle-Nests and Peking Duck-Dives?

Not so fast there Confucius say…as always, the timing of this announcement by the World Bank is pertinent. With some realistic cynicism, it should be mentioned the World Bank are not too happy about the US withholding their funding at the moment, so hey let’s make the US look less powerful..ouch. Obama has just returned from a crucial trip to Asia where he met with every nation capable of creating a barricade against China. The much touted Trans Pacific Partnership is still to be ratified but that is essentially an agreement to stifle China’s growing influence across its seas and help maintain the US’s maritime power in South-East Asia. Nothing new here…the US has maintained global dominance with its two favourite major weapons since the second world war: 1. its currency backed by 2. rather intimidatingly large and powerful guns on its aircraft carriers…forcing a nation to accept your dollar-linked inflationary drive is a little easier when looming behind you is such menacing force..nice position to be in US maestros.

As exciting as it all sounds, such technical changes to GDP calculations can be misleading. India all of a sudden is the world’s third largest economy..a country where 80% of homes have no flushable toilets!..does that sound like a rich country to you?..and we should not forget that China is still a long way behind the mantle the US (and EU for that matter, with an unassailable combined economy of $17.2trn and some of the world’s highest living standards) has established as a leading innovator and overall rich-world lifestyle (no television in the guest toilet?..shame on you!) No..China has certainly come a long way, quicker than many anticipated..but fudging numbers and moving the goal-lines during play is not going to positively affect those living in abject poverty in rural western China nor cause them to celebrate their new found status. What good is being the world’s largest economy when you cannot feed your family? Poor is still poor. 

So what accounts for all this apparent narrowing of global living standards? Simple, people know more and WANT more. Want is a great desire and is what allows most of us to get-up-out-of-bed in the morning. We used to leave the cave to hunt, now we leave our apartments to sedately ride the (when not on strike) tube to tap-away at a keyboard and gossip via WhatsApp..all from the comfort of our desks. The belief that we must be generating, moving forwards, creating goods and services to be used for the exchange of other desirable goods and services. The very function of supply and demand is what keeps us going. With a little help from “command central”, it is the human need for more that has propelled China to its latest position. Hard work is equated with modest success. You have to go the whole way to get what you want, no matter the hardship.  As a great line in a recent business book suggests “If you are going to eat shit, don’t nibble”

Why do we put up with this need to bite whole and swallow? We want to be able to purchase “things” to enjoy our lives. Enjoyment comes from leisure. Is that not the point of us working in the first place?..to generate memorable moments of leisure? Interestingly, the dichotomy that now exists is the rich world has LESS leisure time. In years gone by, the rich were considered rich when they didn’t even know what weekends were (“a weakened you say old chap?)..everyday was the same to them..a day to fill with enjoyable competitive and sporting activity..truth be told, a good number of investment banks still seem to operate in such a manner...some bankers expend so much worryingly criminal-like intellect inventing ways to pass time, it actually comforts to know they are kept securely cooped up in buildings on the islands of Manhattan and Canary Wharf..phew! Even those criminally rich now “work” longer than ever before and generally have fewer leisure hours.

More wealth meant more leisure time. The poorer you were the more you worked, doing the work of the rich, especially serving the rich. With modern living accoutrements and a more skewed income disparity, seems those days have certainly passed us by. Recent figures (from the Economist) suggest the poor are likely relatively happier as they are able to enjoy the simple things in life, like heading home when their regimented shift ends to tuck their kids into bed at a reasonable hour and taking full weekends off. They certainly do not have as much income to take home and hence fewer material things, but they have solid and known leisure time. Those involved in low-wage menial labour (cash poor/time rich) as opposed to highly-paid accountants and lawyers (cash rich/time poor) may be the secret to happiness.  Is making just enough to afford the treat of a prime-cut-of-meat for a relaxed family barbecue on Sunday not a better position to be in than stuck in the office whilst the family jet-off to the South of France to enjoy the sunshine without you..who's the lonely wife playing tennis with..hmmm? We’ll leave that one to more qualified philosophers out there.

Why are some cultures more successful than others in generating competitive economies? The weather seems to have a lot to do with it. In notoriously warm locations such as the Mediterranean coast, Latin American port cities and stiflingly humid Middle Eastern areas, a certain sense of languid,  laid-back “effort” prevails. From the indeterminate “maƱana” of Spain to the good-luck-if-it-ever-happens “inshallah” of the GCC, you never really know when you are going to get something done. This is all well and good whilst on vacation…you can put up with a slightly lazy waiter whilst lounging on the beaches of Cancun say..but trying to do business in such an environment can result in rather more needless grey hairs. Sitting in a lush hotel lobby or office waiting lounge is not necessarily most people’s idea of grueling labour. Sitting for several hours, more than a few times a day for four days in a row becomes a little more than tedious, especially when you are half-way across the world on a running-clock of business expenses. “I’ll meet you in the lobby in five minutes habibi” – the last words of your meeting contact on the phone…one hour ago.

The colder climates have resulted in arguably more hard-working and over-achieving cultures, not to mention more “timely”. Before the advent of such creature comforts as central heating, just staying alive in such cold climates required extra exertion and a requirement to keep moving. Over evolutionary time, mixing these hard-wired work ethics with invitingly innovative environments, coupled with a distinct lack of stigma of failure, has proven itself a significant driver of success in the world’s most advanced economies. Those creating a business in such domains feel significantly less pressure of the shame of potential failure, nor psychological barriers...brought upon by the belief that all cultures are welcome and no one will judge you..it is as if one was shackled back home only to suddenly release their inhibitions and “find” themselves. Examples abound of Indian and Chinese software engineers “taking-a-risk” in Silicon Valley rather than falling into traditional-line back home, or aspiring Asian entrepreneurs flocking to London away from the judgemental eyes of their parents -proof in point.

So with the latest sensationalist headlines, will you find me dusting off my Mandarin language dictionary and once more believing the future of innovation is now in the Far East? Not quite. Not as long as great cities like London, New York, San Francisco and other tolerant societies provide the most alluring and dynamic platforms for those with a will to succeed. For now, we’re still happily making notes on the Food Network App, allowing one to plot a delicious route through some of the most heart-attack inducing barbecue shacks the world has created. Eating yourself to a yummy, sticky, tangy BBQ death…now that’s rich!




Wednesday 16 April 2014

Soft-Shell Crab Index - with a side of Steak

Roller-coasters are feared and loved by children and teenagers alike - the ducking, the diving, the stomach-churning-moments that remind you to watch-what-you-eat and bring that thump-thump of your heart right up to your throat…oh yes..any equally teenage like spotty, sweaty trader, investor or even Flash-Boy (as Michael Lewis would deride) in the last two weeks has likely enjoyed much the same relationship with their ride of choice..the global markets. 

Since our last mention of lofty market highs on the 26th March and incredibly ridiculous valuations paid for tech acquisitions, we have been going through the anticipated sharp correction (S&P500 at one point shedding 3.5%…Emerging Markets continuing to make way for safer havens…Japan swinging wildly through an 8% peak-to-trough) most notably with a wiping out of almost $300bn from the tech-heavy Nasdaq in particular. Much of this has been long-feared profit-taking off such stellar performers as Netflix…but it seems to pay to insightfully watch those canaries in the mine-shaft..only a couple of days before this pull-back, notably over-medicated media pundits (yes you CNBC and CNN) were extolling the opportunity to continue buying into the rally - when you see everyone looking in the same direction, look the other way! Even the “ tenth-man rule”…used by some of the world’s most elite strategic think-tanks, works on this contrarian premise - if all nine people in a room agree on a certain topic, the tenth man must disagree and assume his interpretation - no matter how improbable - is true. All too often, the proof is in the tenth man.  

 So markets aside, as there is really nothing new to all this noise and excitement of corrections, fluctuations, volatility and surges in the Fear Index (+23%…well-played those smarty-pants that bought into the Vol), some have suffered in the last couple of weeks but certain pockets of the new homogenous global-“elite” live impervious to the daily machinations of the gyrating and worry-inducing geopolitical landscape.

We call these lucky few the new generation of “Untechables”. Anything and everything that is fresh and innovative (hmm.. about personal perspective here, must be said) is no longer subject to the physically enforced limitation of time and delivery. Technology has blown that old-world order into the smart-phone-scape. Where once there was something invigoratingly different about a visit to Hong Kong, as opposed to a hop-over to New York or a quick weekend in Dubrovnik, the advanced world of branding and logistics has now ensured that the morning toffee-infused-latte one enjoys before getting on a plane will once again be consumed in exactly the same manner and concoction…and identically designed environment…when walking around trying to enjoy the “different” sights-and-sounds of the visited city. How boring.

In fact, nowadays it is more difficult to find something unique about a city or particular tourist destination, near-impossible to go somewhere that has not already been flouted and exposed for all to witness on the numerous iterations of social-media - everyone’s to-do-list now looks the same..doesn’t it!? May as well just have one big shared list that everyone will tick-off (recognise the unerring sounds of a dystopian 1984-like world anyone?). Honestly however, I am quite torn by the effects of Instagram and helpful food-bloggers abounding across every block of New York or borough of London..after all..the gluttonous aspect of my character loves the fact that a Cronut (mmmm..) can be selfied on Monday in a New York food-truck - heralding the creation of a brand new sweet delight (like a perfect drop of dessert heaven) only to be miraculously transported and deliciously replicated by keen trend-watchers - whom are equally savvy to the fast-paced-lightning-like viral dispersal of such food-fashions - to be gorged on by Friday on the streets of London and Paris - the “London is 5 years behind New York “ tag-line has been so viscerally squeezed that nothing is less than a couple of days click or bake-away. Do we like this?..answers in the comments below please.

Some of you will recall my analysis of the relative cost-of-living created at the height of the financial crisis in 2009, through the Soft-Shell-Crab Index a (cruder and simpler of course) equivalent to the Economist’s “ Big Mac Index” - where PPP (Purchasing Power Parity) is calculated in US$-terms to determine whether a particular currency is under/overvalued based on the price of a Big Mac at every McDonald’s in every capital city in the world where one is sold. Such indices are perfect examples of this “same-world” order. It should not be so easy to compare the price of dinner in a high-end restaurant in one part of London’s Mayfair to mid-level Hong Kong - cultural variation and local idiosyncrasy (please go visit Tokyo to get a taste of that) is good for the soul.

The Soft-Shell-Crab Index is inspired by the ever-growing presence of Asian “con-faux-fusion” eateries, all vying to attract crowds of, seemingly inexhaustible, affluent diners capable and willing to fork-out the necessary spend for a decadent night out. Out of utmost respect, Tokyo is left aside once again..eating there is simply without peer.

 Some simple analysis* points to a baffling trend - not only have prices increased across the entire spectrum since 2009 (up by an average of 20% across San Francisco, New York, Abu Dhabi, Hong Kong, Shanghai and Singapore) but the discrepancy between the highest (Abu Dhabi) and lowest (San Francisco) has also increased by over 30%. It seems that ordering a plate of delicious food to impress your clients/date in tech-savvy San Fran, is more appealing to the wallet than trying to outcompete the “I want everything on the menu habibi..three times over” attitude of Emiratis in Abu Dhabi - ever seen a table in the Middle East actually FINISH their food?

The greater implication for such observations of this PPP is a manifest and continuing widening of the income-disparity gap - centres of financial-wealth that are attracting money from across the legally acceptable spectrum (yep..that means some money-laundering) continue to increase prices and inflate away the size of a portion in return for its cost, extracting the most from the normally less-than-price-sensitive diners. Lesson to be learnt here: go immediately and open a soft-shell-crab food truck and instagram your way to near-instantaneous replication in every major global city centre. Even a well-known and successful restaurant chain in London that only serves two items on its menu (lobsters and burgers..what geniuses!) has gotten into the soft-shell crab game…plans are to open a new side-chain that will only serve juicy steaks and king-crab…Go long and hard the crab industry!

Whilst some fret about the increasing costs of daily staples (witness recent explosions of violence in the Middle East and Sub-continental discontent when a loaf of bread becomes too expensive for an average daily salary) others are more worried about what it means when their favourite breakfast is a few cents more expensive – this week an entire article on one of the more respected news websites was devoted to investigating the increase in pork prices the US was suffering, resulting in more expensive bacon fry-ups at 24hr diners. Oh the suffering!

Some will say this is simply the way the world-works, others will try to bring about change, most will have no choice. Those that can chose, must do so between steak and crab..poor things.



·     *All pricing information attained from enquiries carried-out between 14th and 15th April 2014 by contacting (or checking online) each represented establishment where soft-shell-crab is known to be served in the listed cities. Variances in size and quality may of course exist but calculations are based on the limitations of the information provided.

Wednesday 9 April 2014

Fame – the greatest credit

What’s wrong with the way we look at the world? If someone were to offer you an option whilst browsing the web of clicking on a link to read more about the latest discovery of water on Saturn’s moon by some of the greatest scientific minds on earth, or the revelation that Miranda Kerr is indeed interested in “exploring other options” in her sexual life, well…I guess you’re already reading the latter and ogling those pictures! Fine, maybe not an entirely fair experiment as Ms. Kerr is an exceptionally attractive woman (to both sexes it would appear) but the point is that most of today’s media hungry society are incredibly interested and enthralled in the lives and machinations of others rather than comprehending and exploring some of the universe’s deepest secrets. Things have gone wrong.

Fame and the cult-of-the-celebrity have pervaded most aspects of daily life. We digest our news and breakfast cereal watching pleasing-to-the-eye and known news anchors, gravitate towards web pages and blogs of the best-known (if not most cerebral nor understanding) names in respective businesses and seek solace in the antics of “celebs” with nothing more to do in their wonderfully socially-additive-lives (errr.. please read that with a tinge of irony) than show up at the opening of the latest “Just Falafel” store dressed as if they were partaking in the Miss Chick-Pea bikini competition…Oh how it can get messy when that tahini drips all over.

Ok..there’s very little wrong with the voyeuristic and vicarious enjoyment derived from such celebs, little harm can come of it – apart from the odd fashion faux-pas fad here or there being replicated (way too many tattoos and Miley-twerking going-on people), often innocent and pleasing to the masses..watching Royal baby George bundled down the steps..but something more disruptive and detrimental can begin to emerge from this seeming blind-devotion and incorrect tunnel-vision attributed to the “credibility” of those exposed in the media.

Whilst it certainly pays to be bandied about with inundating PR and marketing (the ever articulate Oscar Wilde pointing out more clairvoyantly than he may have imagined, that “the only thing worse than being talked about is not being talked about”) there are instances where the illusion of omnipotence and authority, with often inaccurate information being passed off as supposedly intelligent personal sound-bites…becomes an issue when looking at the modern financial system.

Too many investors (like young teenagers staring a-gawk at their latest oft-fabricated Bieber-like crushes) fall for the charms and carefully constructed allure of the big-name investors. Any cursory glance at the current fund investment landscape and private equity world displays an incredible bias towards the big-name firms… Blackrock, Fidelity, Putnam, Carlyle, KKR, Blackstone..yeah..you know them all. The world’s three largest pension fund-managers control more than 40% of assets and the top five private equity firms annually share 70% of newly invested assets. The lasting causal link between these major players and their huge devoted followers is quite simple – in each instance there is a larger-than-life protagonist heading the firm.  

So even in the subjectively glamorous world of finance – only some would consider a x4.5 multiple-of-money over 4 years excitingly more attractive than another Kanye-Kardashian revelation, and a good thing too! - the “cult-of-the-celebrity” has firmly taken hold. With some simple investigation though, diversifying away from the big-names is often the best way to ensure outsized returns. Following-the-herd and blindly entrusting your hard-earned assets (ok, not so hard for some desert dwelling SWFs) does not always pay-off. This cursory examination of the best-known funds, Private Equity players and certain “famous” investment managers provides good evidence for diversification away from the allure of the celebrity - just look at PIMCO.

With all these boisterously colourful characters (am thinking Mr. Bonderman here..yeehaaa!) market theory dictates that there will be winners and loser. The interesting dichotomy we are witnessing in our franticly paced day, is a tellingly-Shadenfreude-like visceral enjoyment in the lofty falling to the bottom of the heap. Wow..like a pack of waiting vultures, the minute one of our “celebs” stumbles and falls, the feeding frenzy commences with frightening glee. Think about that for a moment and realize just how simple that makes us?..the mob frenzy akin to the burning of ancient cities and the downfall of once “revered” emperors and Caesars has never left us, simply it has shifted to the frighteningly more instantly destructive Twitter.  

Why exactly is it that winners are now hated by the losers?..is there too much protection for the weak at school or something? No one gets bullied anymore..does this removal of thick-skin provide some sense of evil if you win? What’s wrong with winning? The problem once again is the cult-of-the-celebrity. Instead of society heaping deserved praise and emphasis on the great contributors to society like scientists and cutting-edge astrologists, biologists and economists, focus is on the less-qualified that make-it-too-easily and then go about spending it with equal levels of ostentatious “intelligence” – when was the last time you picked up a copy of the Daily Mail and seen a bunch of nerds celebrating their latest Hadron Collider success at Loulou’s with a bevvy of beautiful models? Hmm..maybe those inspirational smarty-pants under Switzerland should do exactly that one in a while!

At least the nerdy protagonists of the Big Bang Theory are loveable and popular but let’s be honest shall we?...most of us started watching it for Penny - the hot blonde. Human emotive simplicity triumphs once more. We are impressed with the less impressive these days, concerned with the less concerning and losing touch with what has made us truly great in years gone by. Luckily we have enough visionary and altruistic individuals (the “Moon-Shot” entrepreneurs spring to mind) working on our behalf to ensure we will one day inspire ourselves to reach for more than another look at that deliciously single..oops..Ms Kerr.


Wednesday 2 April 2014

A “Flipper-ing" Good Memory

Oh boy..here we go again. The Dow and S&P riding high at record levels, Treasurys remaining at artificially depressed yields, top city centre property prices shooting up beyond all logical levels, oil enjoying a still-sticky $100/brl “new natural” level, our old friend Gold fluctuating between cherished store of value and “what use is a gold bar when we’re starving?”, talk of mega-mergers at stratospheric valuations occurring as frequently as Sahara sands falling on London’s cars..oligarchs and just-plain-fools-alike talking at the top-of-their-lungs in bustling city restaurants of their next incredibly profitable “trade”..phewww…one would think the global economy was in full recovery. The terrible endemic of systemic fallibility, that once flowed through the veins of the credit and mortgage markets, forever banished beneath the deep mountain of cash pumped into the system..sadly not. “Out of sight, out of mind” may play enough tricks on the human trading psyche to provide a period of apparent respite and prosperity, but that volcanic build-up beneath that mountain is beginning to rumble once again..and most of the villagers in its shadow are continuing their lives oblivious to the ominous signs.

Unlike Dolphins - proprietors of the animal kingdom’s best known memories (yep, even better than Elephants)..is there nothing those playfully loveable swimmers can’t do? - seems we’ve forgotten the many lessons of 2008. Those dark days are no more..many would have you believe. A strong wave of fresh (ignorant?) optimism has spread relentlessly across the financial industry: Tech acquisitions exemplified by Facebook lavishing $25bn in a couple of months on - in one instance - nascent virtual-ocular companies..even causing high-spending Middle-Eastern SWFs to gawk. Trading titans are pouncing on every opportunity to squeeze profits, venturing bravely in the epic search for yield..sometimes with some misplaced overconfidence (recent emerging market corrections a point-in-case). A return to the good times..we’ve all wanted it..in fact we’ve all needed it. The human emotive response to despair is incapable of sustained depression, we are not wired to be unhappy, that is what drives us - and civilisations as a whole - continually forwards..we crave development and progress, which is absolutely how it should be. However, there is only one way this current situation will end..likely in the next couple of months. Some of the sharper minds out there have already been buying up deep out of the money options on volatility..just look at the Vol/“Fear” index to see why it is overdue a frightening-rumble of its own. 

The probability of another 2008-style crash is low, the world’s central banks will pull out all the stops to ensure that..but the blind belief of “things can only go up” bodes ill for a likely sharp “unforeseen” correction that will at the same time sober..but also push us into the next phase of this dangerous current geo-sociopolitical environment of widening inequality we have created and found ourselves in.

These tensions have been steadily rising all across the social divide for half a decade now, witness the most recent manifestations via the Crimean crisis, where once again the root-cause was the everyday Ukrainian’s inability to comprehend what exactly made him so poor to allow the top 5% of the population control more than half the country’s wealth? It is the never-ending casualty of human weakness - we are inherently programmed in such a way that we will repeat mistakes of the past. We are unable to learn and move on in numbers large enough to enjoy the fruits of our past sacrifices. Unless real change takes place, we are no better than the ancient civilisations that have come and gone since the first-know recorded histories of c. 5000 B.C, their relics lie testament to the ultimately failing-lofty ambition of modern living poisoned with such extreme social inequality.

You ask..has really that little changed in so many millennia? It would appear so. The US was founded on an almost allergic reaction to the aristocratic corruption of the European way - how has that fared for our trans-Atlantic friends now? Well, even in the land of the brave where “anyone can make it”..there is the 1% controlling 1/3 of the country’s wealth and even worse an endemic corruptive vein flowing through the “democratic process”, where wealthy donors are able to bend the ear of the President-to-be at seeming will. Ivy league places are subject to legacy preference and nepotism at alarming rates and the entire country’s process has apparently reverted to the very core of what it had been stripped out from - will future scholars look back at the U.S and mention with a sigh the same quip used when referring to the USSR nowadays “nice idea in theory but ultimately failed in practice”?

Staying with the theme of US institutional corruption, since when does Sheldon Adelson get to decide who the next President is?? This is unbelievable. The people of America have become so anaesthetised by the likes of House of Cards that when they see a billionaire welcoming candidates to his palace in Vegas, callously and openly attempting to manipulate the outcome of US Presidential decision making for real, they sit back and let it roll! The incredulity! The modern day phenomenon of practically idolising billionaires no matter how they’ve made their money (Mr Adelson from one of the easiest sins to take advantage of - gambling) the day we have entered into what should be serious debate as to what constitutes institutional corruption. When people are so easily manipulated by advertising (as per our previous discussions in these pieces) the more control and protection those unable to resist the allure of TV lights should be afforded - something should change here. Democracy? More like Media-ocracy.

Even a recent trip to the UAE, that bastion of class and culture (read that with slight irony please) evoked queasy memories of 2009, harking back to the days when its rulers proclaimed they were “immune to the global economic fever” literally hours before their credit default spreads widened with more flexibility than a Russian ballerina. You know we are in dangerous territory when anecdotal evidence abounds of landlords refusing to renegotiate rents at any lower than double the current rate. Good for them you would say, apart from the fact that there seems to be no memory stretching further back than 2013. Have they really forgotten? Apparently so..those same landlords are mimicked across most hoteliers and retailers (hiking up prices even faster than the skirts of those Dubai clubbing ladies at midnight), refusing to negotiate unless you start at double..start at double?! Ask them why, the response you’ll get is EXPO EXPO EXPO. Jeez. For a country that has a stringent ban on drugs, you have to wonder what the hell is in that shisha they’re smoking!

Humans have evolved and sit atop the animal kingdom food tree for a reason - we have managed to cultivate a control of our tools. One of the most important tools has been whatever humble stone..inked-feather...pen and now iPAD-note-taker has allowed for the recording of experiences and life in general - i.e. memories..memories that are preserved and become part of our history. History - where our mistakes have been noted in all their inglorious, undisguised form for all to read and learn from. Want to know how to avoid repeating the mistakes of the past? - easy, just read history. Even John Kerry - in his talks with Sergey Lavrov - has fortunately been quoted as placing deep emphasis on not repeating the mistakes of the 1938 Munich agreement. 

Memories in this modern tech-age are unfortunately resigned to being told what to remember..it is all too fleeting now. This causes dangerous consequences when warning signals are not recognised through an understanding of the past - those that have memories like Flipper will likely swim away before the economic tide comes out, the others caught-unaware and left hanging to dry.