Did you hear the one about the economist who accurately predicted nine out of the last five recessions?
The Olympics are nearly upon us again, and after all the controversy over the global relay of the Olympic flame – surely one of the most ridiculous pieces of shambolism ever inflicted on us – it will soon be time for the serious business of track and field, which is what the Games are supposed to be all about.
There will be more controversy, you can be sure, over what sports really constitute Olympic events. This time the most egregious new “sport” is probably BMX cycling, which should be regarded as a harmless teenage past-time, like pop music or hanging out with mates, rather than a true embodiment of the Olympian spirit.
But if BMX can get in, why not include activities from the business world? I would love to see the final of the “post credit-crisis buck-passing marathon” with Alan Greenspan taking on a Rest of the World team – and winning.
Or what about the “rogue trader sprint” with a team from the world’s financial regulators chasing after Jerome Kerviel of Societe Generale and losing.
The financial sport I would really like to see included is the “protectionism relay.” This would involve bankers and financiers from various western countries competing to see who could introduce the most bigoted, short-sighted and xenophobic piece of legislation designed to halt the global free-flow of capital.
Each country would pass on its new protectionist law, as quickly as possible and with the minimum of serious consideration, to the next competitor, who would then try to add a new, cruelly chauvinistic and utterly stupid amendment. Easy isn’t it?
The only problem with such an event is that it looks as though the Americans would win gold, silver and bronze every time.
With the US Treasury seeking to strengthen the powers of the Congressional Committee on Foreign Investment in the United States(Cfius), even as Wall Street banks are going round the Middle East andAsia with their begging bowls out for capital, it seems like a sport only the Americans could ever win, because nobody else plays it. A bit like baseball, really.
But just recently a serious contender has emerged to play the Americans at their own game, and push for gold medal position inBeijing 08.
Last week the German government of Angela Merkel made it known that it would set up its own version of Cfius with a view to scrutinizing and perhaps even vetoing foreign state-backed investment if it is deemed to be a threat to “national security or public order.” How’s that for a winning run from the Germans as they go past the USA team on the final bend?
The Americans could come back with even tougher measures, like threatening foreign investors with forced divestment if they don’t like the colour of their money; or they could reduce the level of automatic scrutiny of a foreign investor to as little as 5 per cent of a US company’s shares – the Germans are proposing a pathetic 25 per cent at the moment.
But don’t write off the German challenge. With the country’s notoriously xenophobic labour ministry involved in the final framing of the legislation, they are in a strong position to take the top position on the Olympic rostrum.
Other European Union countries – which the Germans self-righteously exclude from their own anti-foreign investment laws – might also give the Americans a decent race. The French have never been reluctant to play the game of “security interests” or “national champions” when it has suited them.
The Australians too have had a recent attempt at the existing world records with their own piece of isolationist legislation, and the New Zealanders showed they are not far off the pace with their blocking tactics over Auckland Airport.
The British, having already sold most of the national assets over the past 20 years, will not be in the reckoning for a medal, but that’s nothing new for them at the Olympics.
The only problem I can foresee is that it might be difficult to have an Olympic event in which only Americans, Europeans and antipodeans participate. But if you let them carry on with their protectionist policies, it won’t be long before the rest of the world retaliates – and the Business Olympics are called off completely.
Will the UAE and other Gulf countries be forced to unwind the big investments they have recently made in the US economy? Will there be a fire-sale of assets held by Gulf investors in sectors as far apart as Wall Street and Las Vegas?
If you want to go anywhere in the UAE, you have to travel by road. Yes, for the uber rich there is the option of a helicopter, luxury yacht or private jet and in the future we will have the metro. But, for now, whether it’s by car, bus, motorcycle or bicycle, you pretty much have to travel on tarmac. It’s unavoidable.
This is when it could all get very serious. Until now, the financial crisis that hit the United States last summer has been confined to that sector; the write-downs, plummeting share prices and executive departures have all come from the banking, investment, share trading and other financial groups. The action taken by the Federal Reserve in cutting interests rates was a financial fix to what was regarded as an essentially financial problem.
But the financial sector has always been a lead indicator of the broader economic scene. Market crashes come before the contagion spreads to the general economy. And don’t forget that this was a crisis sparked by the financial “experts”, in their endless search for new products to push down the throats of consumers.
But now there are signs that the wider corporate world is going to experience the aftershocks of the credit and sub-prime crises in a big way.
Last week the US industrial giant GE – long regarded as a bell-whether for the global economy – stunned the markets with a sharp and unexpected drop in first quarter profits, blaming the US recession for a drop in demand for its key products in healthcare and electronics – and of course, the weakness of its financial business.
On Tuesday, the sickness appeared to spread inevitably to Europe, where the Dutch electronics giant Philips also shocked shareholders by announcing a drop in first quarter figures.
When America sneezes, Europe catches a cold, they say, but it looks now as though the Europeans will have to reach for the influenza medication in a big way.
Other big industrial groups, like Siemens and Linde of Germany, are warning that the full effects of the financial crisis will not come through to the wider industrial until six to nine months from now. That is a frightening prospect. In the next couple of weeks in America, we will get a much clearer picture of the damage to the broad corporate world, when most of the big business corporations that go to make up USA Inc will report their first quarter results.
I think we will all be in for a surprise. The big corporate analysis departments of Wall Street have all cut their profits estimates for the financial sector, but so far the wider industrial groupings have not been significantly affected.
Chief executives and finance directors tend to behave in a herd-like fashion in this respect. When one big industrial announces it has missed a profit forecast, all the rest argue that they too must come out with gloomy figures. To run against the trend is to risk surprising the shareholders with bad news some time in the near future – which is perhaps the most damaging single factor for a company’s share price. So I think we can expect some pretty bad news from the US giants in coming weeks, and for this negativity to continue for the rest of the year.
In a recent study, Citigroup – and it should know – estimated there was a nine to 12 month time-lag between the affects of the credit crunch and its wider affects of industrial activity.
In previous recessions, corporates took the opportunity to write down profits by up to 30 per cent – with all the consequent repercussions for dividends, employment and general economic activity.
Now the US, and the European economies, are much more dependent on consumer spending. I have a feeling this recession will be deeper and longer than anybody has so far predicted.
What does that mean for the economies of the Gulf? So far, the general wisdom is that because of rising oil prices and huge capital surpluses, the region is almost quarantined from the global malaise. These factors will endure, though oil is still the big imponderable.
Most experts are now forecasting a general fall in world commodity prices, but there is no such consensus on oil.
With America the biggest trading partner of most GCC economies, there is bound to be a serious knock-on effect from the US industrial downturn.
It is still far too early to call the end of this crisis, or to forecast accurately that the Gulf region will be spared the gloom now descending on the USA and Europe.
There’s a risk the euro could split into at least two denominations
Britain – the whole of the country – is suffering from bi-polar disorder. For those who dislike medical terminology, I mean to say that we Brits – just about everyone I meet – are a nation of basket cases.
For a start, there’s the joy and despair of the England football team in the omnipresent World Cup. The English are, pretty much down to the last man, boy and ladette, invested in the success of the national team. If the boys win, we’re happy. If not, it’s difficult to get out of bed in the morning. The Scots and, to a lesser extent, the Welsh have similar vehemence about the outcome of this great global event. If England lose, so much the better for many of them. Tesco, until recently, was selling ABE flags and pendants in its Scottish stores. ABE stands for “Anyone But England”.
So by the time you’re reading this England may or may not have played its game against Germany in the round of the last sixteen teams. But win or lose, the nation will be sharply divided between ecstatic highs and desperate lows.
You could say pretty much the same for the markets over here. We’re looking with a mixture of gloom and feverish hope at the recent UK Budget. It’s clearly one of the most sensible things to emerge from a British administration in years, but the mess the expenditure cuts are deployed to deal with is so nasty and so disorderly it would be foolish to expect too much.
One unequivocal bright spot is the re-emergence of the exceptional financier Amanda Staveley. Ms Stavely, still in her thirties, is the leading light at PCP Capital Partners, and has put together some remarkable deals, mainly for Gulf-state clients. The acquisition of Manchester City, and most importantly the restructuring of the share register of Barclays Bank at the height of the post-Lehman Brothers banking scare, are outstanding landmark events. Ms Staveley has been instrumental in the Qatari acquisition of Harrods, and has now emerged from the shadows to call the bottom of the UK commercial property cycle.
Obama’s ‘xenophobic’ posturing
Meanwhile, there are further signs that, talented orator though he may be, President Obama just isn’t up to the job. After his – in my opinion xenophobic – posturing over the BP oil crisis in the Gulf of Mexico, come two more disasters.
At present, President Obama is revealing himself as the last Keynsian still surviving on the world stage. As the leaders of the G8 and G20 major economies meet in Toronto, they are being subjected to some sever finger-wagging from the US authorities. The US is concerned, apparently, that if Europe rids itself of its tendency to spend money it doesn’t have, then the US economy will suffer. Oh, the irony. That such a message should emanate from the world’s leading exponent of isolationism and protectionism is savagely, sardonically amusing. Europe, led by Germany (which is sick of picking up the tab for the likes of Greece and Portugal) will resist this argument, I predict. The US administration and its leader have diminishing authority and impact on the world stage.
And it’s not just me. Poor old General McChrystal certainly felt that the politicians didn’t know what they were doing with regards to the wars in Iraq and Afghanistan. His infamous coverage by Rolling Stone magazine (infamous in that the reaction has been extraordinary) has resulted in his dismissal.
Mounting debt, falling euro
One of the reasons that the Europeans will not yield to the demands to keep printing and spending money is the ongoing crisis that is the euro. The British pound – not that sterling is a hugely significant measure of very much, I admit – has hit a high of more than 19 months. Traders attributed the down trend in the euro to mounting concerns about, erm, mounting debt.
Some say that the UK is set to raise interest rates, and this may have been a factor too. But overall, it’s not so much a question of the British pound rising as the euro plummeting. The US dollar has gained more than 18 per cent against the euro since the start of the year. The pound has traded at around the 1.50 level against the greenback during this period – so the move is all euro weakness.
Well, folks, I have to tell you I did say as much at the beginning of the year. Spot the crisis, and sell, sell, sell.
I have to say that I see things getting worse for the European currency before they get better. We have a full-blown catastrophe on our hands this autumn. The cracks are already appearing – the markets favour “northern” euro securities over “souther” securities denominated in the same currency. The risk is that the currency will split into, at least, two – or maybe even atomise into scores of different denominations.
We’ve seen this before, in situations of political turmoil. When the Soviet Bloc countries were rudderless following the collapse of Communism and the demise of the Soviet Union in the late 1980s and early 1990s, banks in countries such as Hungary and Poland issued promissory notes in dollars instead of bonds denominated in their own currencies. Some even backed the notes with assets rather than currency of any sort. Thus they re-invented commodity-backed notes – a new currency. If things go badly wrong, this will happen all over again in Europe.
At the very least, I expect to see a two-tier system of some sort develop with the European Union. The simple fact is that the political will of the bureaucrats to create a unified Europe was way ahead of the actual political facts – Europe is a mosaic of different cultures and countries, not a homogenised blend. If Paris and Berlin could tell Athens what to do, then fine, the austerity packages would work. But they can’t, so it won’t. The cracks in the euro will widen and deepen.
If you’re a true petrol-head (or gearhead if you’re American) and haven’t been living under a rock for the last decade, then you probably are all too familiar with the UAE’s biggest digital export.
Everyone knows that oil is the UAE’s biggest gross export, as it boasts some of the largest reserves in the world. However, only those in the car industry recognize the true size and power of the emirates most hyped digital or online exporting of automotive pictures, videos and reviews.
Most of the top viewed automotive videos on popular sharing site YouTube are from one of the UAE territories, however most come from uber luxury metropolises like Abu Dhabi and Dubai. These photos and videos of multi-million dollar cars, trucks and SUV’s capture the world’s attention and put the UAE in the spotlight when it comes to online automotive media.
A Massive Industry Presents Massive Opportunity
The automotive industry is a multi-billion dollar industry and that’s not just including vehicle sales. The popular television show Top Gear, the BBC’s most successful production (in terms of revenue) has an estimated value of tens of millions of dollars alone.
Insanely valuable auto related assets don’t have to be print or televised to be considered multimillion-dollar assets. Social media accounts regularly sell for hundreds of thousands of dollars, and YouTube videos that go viral can pull in regular 5 figure earnings for their publishers.
The combination of exotic luxury vehicles shared on Instagram, Facebook, YouTube, and Snapchat alone from the UAE could easily be appraised as a multi billion-dollar industry. That’s no small industry!
Extreme Everything Drives the UAE’s Magnetism
So the UAE’s automotive digital media assets probably total billions in value, but what makes the UAE so special, compared to other major international cities? Extreme everything. While New York may be full of millionaires and billionaires, they often choose to travel around in chauffeured luxury sedans. This is part preference and part necessity given how densely packed the NYC area is.
The top UAE cities on the other hand are a completely different story. Because they were built recently and are very young, they were planned out in more logical grid like patterns. They are also mostly located in the middle of deserts. This means that wealthy UAE residents can enjoy high end exotic automobiles to their fullest extent, regularly topping them out on long safe straight-aways that many American’s and Europeans simply don’t have access to.
The vast wealth and wide open geographic location of the emirates territories make them very uniquely suited to not only grow a thriving car culture but also regularly exercise that cultures preferences for extreme speeds and extreme driving, drawing in millions of viewers as it does so.
The Automobile in the UAE’s Future
Oil reserves are finite and one day the UAE will not be able to support itself with crude exports alone. The governments are working on diversifying their industries to help transition into a post-oil era. One place they might look is their car culture. Oil has helped foster this hardcore subculture but it’s not required to sustain it.
Car lovers around the world will always want to seek out videos and pictures of the latest and greatest, the lightest and fastest, loudest and shiniest vehicles and the UAE has always delivered and would benefit to do so into the future as well.
Through the continued development of digital asset, social media growth and online publications like blogs, the UAE can cement itself as a world leader in the premium car market as a top purveyor of the high end and the exhilarating.
The United Arab Emirates, is a country of emirates, which many people don’t take the time to fully understand. An Emirate is simply a territory that is ruled by an Islamic monarch or “king”. So, the United Arab Emirates is simply a group of kingships or dynasties. These are comprised of Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain.
Now that we have the “what” out of the way, we can dive more deeply into what these emirates do, who lives there and how they are planning to grow on into the future.
The UAE is No Longer Simply an Oil Exporter
While it’s true that the UAE is the world’s 7th largest oil exporter, it is by no means depending on this statistic to carry them into the 22nd century. All great leaders today understand that to remain vibrant as a global economy in the future one must invest in education and technology.
Sheikh Rashid bin Saeed Al Maktoum, the current king of Dubai, understands this concept fully and that’s why he has poured much of his countries oil revenues into the investment of other diversified projects designed to help the economy weather a post-oil world.
Dubai has spent millions in developing real estate, trade, shipping, commerce and even tourism. The idea is simple; by not putting your eggs all in one basket you help protect the longevity and stability of your prosperous nation.
A Future Rich in Cultural Exports
The emirates territories fully realize that with the advancement of battery, solar, wind, thermal and other sustainable energies their countries will lose what is currently one of their biggest exports. What then will these territories have to share with the rest of the world?
In one simple word: culture.
The UAE did not begin when oil became a popular global commodity. These territories have been ruled for thousands of years by kings and their sons of often nomadic tribes. It’s a true sign of a culture’s resilience to not only grow, but to thrive in such inhospitable natural conditions,. Yet somehow, the UAE emirates have and that fascinates the world.
In the future, with their brand new, world-class infrastructure and airports the UAE will attract hundreds of thousands of tourists eager to see what existed before all the magnificent gleaming skyscrapers. People will be eager to learn about the actual human factor that contributed to the rise of one of the major global powers of the modern age.
Investments Today Mean Profitable Years Ahead
Outside of attracting tourists the UAE has positioned itself strategically between “east” and “west” as a major trade hub. With the continued rise of China and her satellite nations in the east and the old power of Europe and America in the west, the UAE is poised to profit greatly from the flow of goods and services that will mostly likely make their way through their territories, whether by land, ocean or air.
Unlike many assumptions, the UAE’s future is clearly not tied to just oil. Instead the territories leaders and people have settled for a much more bright future that builds of the greatest strength the territory has always had; it’s rich culture, friendly people and strategic importance as a connection between peoples and cultures from around the world.
An unusual dispute is developing in Abu Dhabi between the authorities and the internet based taxi booking company Uber. There appears to be significant debate about the details of the dispute, which has resulted in both Uber and its chief rival Careem, suspending services.
Both companies operate a pre-booking system using the internet, and rumor has it that as many as fifty Careem and Uber drivers have been arrested. It is common practice for drivers to work for both companies, and they drive on a limousine, or general transport license, which seems to be one of the issues at the root of the dispute.
Uber which is a US based company, has exploded in popularity worldwide, and this new method of operation has totally transformed the taxi business. The older more established firms are struggling to cope with the new fast moving and aggressive Uber model. In the United Arab Emirates those taxi companies just so happen to be owned by the government or wealthy local families with influence.
A spokesman for Careem which is a Dubai-based company, that uses a similar booking system to Uber, said that many of its drivers had been stopped and detained by local authorities over “licensing issues.” As a consequence, many of the other drivers are now afraid to drive for Careem and so they have suspended their services pending clarification of the regulations.
Apparently, although this has yet to be confirmed officially, the arrests were due to Uber and Careem drivers contravening regulations by undercutting the prices that local limousine companies were offering. The Uber model has drawn criticism from Taxi drivers all over the world, as they feel that Uber drivers do not have to conform to the same high standards, rules and regulations that established companies have to abide by. According to the established companies, this then gives Uber an unfair advantage in business and pricing terms.
While services have been suspended in Abu Dhabi, they are still operating as usual in Dubai which is the main tourist area for the region. Uber have been operating in Abu Dhabi since 2013, and last year, the Middle East and North Africa were some of its fastest growing markets worldwide. Uber have invested a lot of money in the Middle East, ironically perhaps assisted by a $3.5 billion investment from Saudi Arabia’s public investment fund. These type of disputes seem to have plagued Uber regardless of the country, and while it is unlikely they will sell their business in the UAE, that is exactly what they ended up doing recently in China. Whatever the final result, it would appear that there is a need for both sides to get this matter resolved quickly.