Yuan Rising... As predicted

So as I predicted, China can not resist the combined weight of the U.S and the E.U on its Yuan valuation policy. And now Chinese financial officials are preparing us for a stronger Yuan.

http://www.marketwatch.com/story/china-central-banker-urges-rise-in-yuan-2010-11-22?dist=beforebell

People’s Bank of China policy board member Li Daokui said that the "rising prices of international commodities," was the reason for adjusting the Yuan exchange rate!!!!.... hmm, Never mind that commodities were rising since 2002. I suppose what else can he really say??!

the U.S is on a mission to re-adjust the trade imbalance between itself and its big trading partners... and they will do this financially and by tariffs if necessary ...

"“As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances,” Ben Bernanke

Ugly Currencies

“If you listen to the Chinese, they have one interpretation of what is going on. If you listen to the Americans, they have another” Pravin Gordhan, South Africa's Finance Minister (FT. LINK)





This is what happens when the debtor (U.S) and the creditor (China) disagree on the financial policies (devaluation of the Dollar) of debtor.

I think we are set for a long period of weak dollar and strong Yuan. Eventually, China can not resist the weight of the U.S and the E.U combined on this issue. But it will not happen at once as the they wish. but perhaps gradual revaluation of the Yuan.

and what does that mean for the G.C.C? More expensive Chinese products as the GCC countries keep their peg to the dollar.

Interesting that No one GCC Minister has brought this subject up ....yet at least!!

Effect of LASP on the Dollar (and therefore GCC currencies)

The LASP is the "Large Scale Asset Purchases" which is basically when the government prints money to buy out the outstanding debt it has.

so whats the effect of that on the dollar? The answer is in the table above - in the left hand column

Friendly Reminder: All of the GCC currencies are pegged 100% to it and Kuwait is pegged about 60% to it

Dollar Signs And Expensive Tomoatos

The dollar today reached 6 months low versus the Euro in a further sign that the dollar is getting debased basically by the fed. the Dollar fell 8.3% versus the Euro, Gold is at $1,319 per Ounce today, and the Yen is back at the 83 Yen per Dollar level - by the way; the Japanese government refuses to learn that it is absolutely useless to intervene in a highly floated currency market such as the one for the Yen.

Additionally, inflation in the GCC is picking up real fast. Inflation was reported at 4% in Kuwait and above 5% in Saudi! while Qatar and the UAE were still down but that is do to the still declining housing costs in the two countries. ّIn Kuwait and KSA there wasn't much of housing costs decline; therefore the impact of food costs was more visible. In Kuwait, tomatoes have reportedly increased over 4 times in about 3 weeks. while that's not all due to the weaker Dollar as there are supply factors affecting that as well. But tomatoes are just one example - look at table below:








From Alqabas Newspaper (Link)

Go Go GOLD!

Today Gold has almost hit the $1,300 mark against the Dollar! The Dollar is also weakening against the Yen. Combine those two facts and the the whole equities run up in the past few weeks in the U.S and the GCC. This tells me that there is something happening at the dollar's front that is further weakening the dollar.

remember, the UAE, Qatar, and Saudi Arabia, and Oman are 100% pegged to the US Dollar and Kuwait is about 60% pegged. So if the dollar weakens then their currencies weaken as well. And weak currencies in such import dependent countries - the GCC - will eventually result in inflation. Which will also hit the U.S if its currency continue to slide further.

Gold futures rise to trade near $1,300/oz - MarketWatch

Saudis With Out Homes!!!

The two guys in the caricature are saying:

Guy Reading: The size of the Kingdom (Saudi Arabia) is 2.25 Million Square Meter
Guy Cross-Legged: And majority of its citizens are renting and don't own land (homes)!!


Now am finding this really hard to believe; but there are very good estimates that the % of Saudi citizens owning their home is between 50%~30% with the most likely estimate being 30% or less

the 50% estimate came from official figures - now I really have my doubts on those because for one I have low trust in government figures to start with. And mind you, these are economic figures from a government not known for its transparency

while the most likely figures are coming from market participants - look here! whom in such countries I would definitely trust more

What got me to write about Saudi Housing was that since 2008 up until now, people have been talking about the big Real Estate boom in Saudi Arabia. Yet we have yet to experience that on the scale that we saw in Dubai or in Qatar.

And a recent article on Arab News which points out the lack of low-cost housing and this is were the Oxford Business Group suggest to have the highest demand.

I suggest that the Saudi government to get serious about addressing such low level of citizens' home ownership as these are dangerously high for such a wealthy country

Hopefully someone there will listen, hopefully

A Sovereign Wealth Fund that Finally Gets it !

Advanced Technology Investment Company - 100% owned by the Abu Dhabi government - is making a huge push into becoming a leader in the Contract Chip Manufacturing (aka Foundry.) It started with co-founding Global Foundries (USA). It then went and bought (taking it private!) Charted Semiconductor Manufacturing (Singapore), and finally buying out the rest of Global Foundries from its the other shareholder (Advanced Micro Devices, of which Abu Dhabi owns between 10~15%)

So far so good, but the twist is that they are going to build a Semiconductor manufacturing facility out by Abu Dhabi Airport! the first of its kind in the Arabian Gulf!! target production is on 2014~2015

Abu Dhabi looked at what they have right now, financial resources and energy resources and while the Semiconductor business has very well established players out in Taiwan and China, Abu Dhabi believes it can still compete and achieve where many "Oil Producers" have failed, that is in True Diversification - which will be achieved when more semiconductor facilities open up in the Emirates.

I think Abu Dhabi is on the right track, and even though this may seem like a very expensive path they are taking; it makes a whole lot of sense if one is to look at the long term benefits for the people of the Emirates when they have a non-oil global industry established in their country.

Good Luck Abu Dhabi,

Beirut Up, Dubai Down

Dubai last year was ranked #12 and this year it ranks #31!!!!

The real estate bust that hit Dubai is making it no longer among the top most expensive cities in the world for expats to live in.

According to EuroCost International

"in Dubai, spectacular decreases have been registered for expat rents in 2009"

One really starts to wonder about the yields in Dubai right now? they must be really spectacularly miserable!!

In the Arab world the most expensive city to live in is now Beirut. There has been lots of gulf money, mostly Qatari, flowing into that city, which has made prices increase dramatically. At #10 (last year it was #28), one starts to wonder if this is a genuine demand driven, bank Audi of Lebanon argues for this point or a result of speculation?

http://www.eurocost.com/en/rent_world_2010.html

Saleh Al Falah Appointed as Kuwait's Market Regulator

Zawya reported today that Mr. Al-Falah is to be the head of the Market Regulatory Authority. This is a good move, but after a long and desperate search (22 have rejected) for the position they went w/ the head of the Kuwait Stock Exchange. During his period at the KSE he faced opposition by several large investors as he insisted on increasing the quality and the level of reporting - something they were unused to during the tenure of his predecessor.

This is good news - as at least we can get moving with the Market Authority - and hopefully the transparency and small-investor protection will increase. Though many skeptics remain, and rightly so since he needs to be tougher in dealing w/ Kuwait's troubled companies.

The Market Authority Team are:

Saleh Alfalah (Head), Mahdi Aljazaf (Vice), Naif Alhajraf (Member), Yousef Alali (Member), Saleh Alyousef (Member)

http://www.zawya.com/Story.cfm/sidANA20100908T060418ZOAL59/Kuwait%20Appoints%20First%20Stock%20Market%20Regulator

The New Indian Acquisition Age

Indians and the GCC have a long history of interwoven business dealings, as it was and extension of the near geography and the somewhat closeness of the cultures. Nevertheless it has been only recently that we hear about Indian businesses expanding their businesses into the GCC region. Mr. Jagtiani is the owner of the Landmark group is buying out a UK business that was presented to the GCC in 2009 - I know of two locations in Dubai - but there maybe more than that.

while this can be described as a local business buying a UK business - but nevertheless the owner is a wealthy Indian w/ expansion plans in the GCC for this new acquired business

Expect More of the Same :)

Billionaire Jagtiani to buy Carluccio's for $138.9m - Retail - ArabianBusiness.com

Foreigners net buyers on DFM target=

Foreigners net buyers on DFM target=

that fact that more than 50% of buyers were non Emarati, and that the RE sector was the most traded are encouraging signs. Nevertheless, there still remains a huge number of unoccupied apartments/houses/commercial RE in Dubai. I would tread carefully if I were to enter this market.

Money & Democracy

"...it is wholly impossible for a central banker subject to political control, or even exposed to serious political pressure, to regulate the quantity of money in a way conducive to a smoothly functioning market order...a good money, like a good law, must operate without regard to the effect that decisions of the issuer will have on known groups of individuals...A benevolent dictator might conceivably disregard these effects; no democratic government dependent on a number of special interest groups can possibly do so"

Friedrich August Hayek

Basically Central Bank's independence is a mirage... and even more so when special interest groups "large business and/or politicians' businesses" have a say in the political decision making.

Personally I think that Big Saudi business will be the pulling & pushing force in the coming One GCC Single Central Bank regime - (http://blogs.ft.com/money-supply/2010/03/30/concepti

on-if-not-birth-of-gulf-central-bank/#comments)

Especially that it will be based in Riyhad, and headed by a Saudi central banker (Dr. Al Jassar Above) with a terrible track record in handling the Ghossabi/AlSaa`d loans to the banks in the region - where priority was given to Saudi banks rather than following the seniority of the loans

Another Surplus = Another Disappointment?

Yesterday Kuwait's government announced it's 11th year - YES 11 Years - of budget surplus. This year it was 22.4 Billion USD. This expected now in Kuwait, however two very important questions arise:

1) What will happen to the surplus? am dyeing to see some development to the old infrastructure of Kuwait . I mean spending this 22B $, in much needed projects (hospitals, streets, airport) would really do wonders

2) Just when are we going to have any visionary leadership that will lift Kuwait from this "oil income ..... formed almost 94 percent of public revenues" lock

many other important questions remain: who specifically will benefit? can an incompetent government handle the responsibilities of big plans?, and what would be an alternative export aside from good ole Oil?

http://zawya.com/Story.cfm/sidANA20100829T090202ZMQJ09/Kuwait%20Posts%20%2422.4%20Billion%20Budget%20Surplus

Zombie Stank (GCC Banks?)! ........

Applies to many GCC banks as well

Bad loans of Kuwait

Bad loans and write offs are the the result of years on un-diversified allocations to a single sector in un-diversified economy. basically oil income becomes the fuel for a regional real estate boom with the investment companies taking the blame. The banks' management and board should burden a lot of the blame as well. Especially in Kuwait, where banks' EPS used to grow @ 30% and no one was asking how did that happen!!

http://zawya.com/Story.cfm/sidZAWYA20100828035551

I am reactivating this blog :) hope we enjoy

الدولار بين مقصلة العجز و مقص الدين

يبلغ مجموع العجز الحكومي المتوقع في التأمين الاجتماعي (Social Security) و الرعايه الصحيه (Medicare) بين ال 40ّّّّّّّّّّّ - 50 ـتريليون دولار على مدى السنوات المقبله. سبب هذا العجز هو التقاعد المتوقع لجيل الطفره السكانيه (مواليد الفتره 1944-1964) للولايات المتحده وكذلك الارتفاع في معدل الاعمار منذ نهاية الحرب العالميه الثانيه. الحلول لهذا العجزهي فد تكون بالاتي:

1) أستقطاب المهاجرين
2) تخصيص برامج التأمين الاجتماعي و الرعايه الصحيه
3) زيادة سن التقاعد

نتيجه لحجم العجز المتوقع فأنني أتوقع أن يتم الاخذ بكل هذه الحلول بداية بالاسهل وهو زيادة سن التقاعد, ثم محاولة استدراج مهاجرين اكثرو خصوصا من خلال الضغط الشركاتي على الحكومه الى أن نصل الى التخصيص و ربما يكون على شكل جزئي!

ففي سنة 2009 يتوقع مكتب الكونجرس للميزانيه عجزا يبلغ 1.186 تريليون دولار (8.3% من الناتج القومي) و الاهم من ذلك كله هو حجم الدين الحكومي الخارجي المتوقع و هو 7.193 تريليون دولار (50.5% من الناتج القومي) - هذا يمثل الدين المملوك لجهات غير حكوميه - و هذا الدين بالذات هو الاهم و هو بتاريخ 02/05/2009 بلغ 6.4$ تريليون مما يؤدي الى الاستنتاج أن مجموع الدين الحكومي الخارجي سيتخطى المبلغ المتوقع. وعلى فكره فأن مجموع الدين الحكومي العام بالتاريخ نفسه قد بلغ 10.7$ تريليون (الدين المملوك لجهات غير حكوميه + الدين المملوك لجهات حكوميه)!!

الديون تؤدي الى العمى!

من عمى الاستهلاك الى عمى التقتيير!

يؤدي التزايد بالاقراض الى حمى استهلاكيه و مضارابيه تأتي أتيانها على الشعوب فتكون كالمخدره تحت ضغوط الحياه الاستهلاكيه مما يؤدي الى المزيد من الاقراض و المزيد من الاستهلاك!! و ما نشهده الان من الفائده شبه الصفريه المتبعه من قبل المركزي الامريكي و من قبله المركزي الياباني الا دعوه لتحفيز تلك الشعوب على الاستمرار بالاستهلاك الذي قد أنخفض بشده!

و لكن كل هذا التراخي في السياسه النقديه و أضافة الى الضمانات الماليه و التأميم الكلي - تقريبا! (سياسه لم تكن هذا تخطر ببال أكثر المتابعيين قبل الازمه)- لمؤساسات مثل Fannie Mae و Freddi Mac و التي هي المؤسسات الرئيسيه للرهن العقاري في أمريكا, و التاميم الجزئي لكثير من البنوك (مجموع الاستثمار المباشرفي تلك البنوك 170.5 بليون $) و التي غرقت في حمى الاقراض و امتلاك الاصول المضاربيه لتأتي الازمه (التصحيح الشديد هو الوصف الصحيح هنا) كعاصفه في وجه ملاك و مدراء تلك الكيانات و تجعل الكل يصيح "أنقذينا يا حكومه"! تماما كما يفعله أصحابنا في الكويت!

"اذا فات الفوت....ما ينفع الصوت"
و لكن يأبى النظام أن يعود كما هو! و هذا هو شيئ طبيعي جدا!! ما كان قبل التصحيح (الازمه كما يحلو للبعض ان يسميها) هو الغير طبيعي و الان حان و قت العوده للوضع الطبيعي! و نحن الان في حالة التأقلم الغير مريح مع عالم أقل دينا!!! الدليل على ما أقول هو امتناع البنوك من الاقراض بالرغم من السياسه النقديه المتساهله, و بالرغم من كل الضخ الحكومي! فالازمه هي أزمة ثقه و ليست أزمة سيوله فالجميع معرض لانخفاض قيمة الاصول مقابل ديونهم الماليه و هذا يؤدي بالبنوك الى تشدد لانها هي ذاتها قائمه على معدلات اقتراض عاليه جدا.
ليس باستطاعتي ولا استطاعة أي أحد استقراء متى ستقرض البنوك ولكن الادوات الماليه أمام البنوك المركزيه شبه انتهت! ولم يبقى سوى طبع الدولارات و اعطائها مباشره للمواطنيين!!!

"مصائب قوم عند فوم فوائد"----------ليس دائما!
النفط الذي هو دم الاقتصاد العالمي هبط من قمة ال 147$ الى فوق ال 30$ بحبه! هذا الهبوط طبعا مرحب به لكثير من الشعوب المستهلكه لتلك السلعه الرئيسيه - و بالتبعيه نحن نرحب به أيضا لخفضه تكلفة الشحن و انتاج ما نستورده ....ونحن بلا فخر, من أكثر الشعوب استيرادا- كسلعه رئيسيه, النفط قد تعرض كغيره من الاصول الى الارتفاع فعل المضاربه المغذيه بجرعات هائله من الديون والتفائل الشبه طفولي! (http://economictimes.indiatimes.com/articleshow/3829350.cms)
فعندما أتى التصحيح, اتى موجعا و مؤثرا في سعر البرميل! أن أردت أن تعرف تأثير الديون في تغذية الغريزه المضاربيه فما عليك الا ان ترى سعر البرميل من القمه الى القاع و ترى ان ذلك حصل خلال فترة 4 اشهر فقط!