Back To The Future

Today's New York Times had an article about oil discoveries in South America . It will be interesting to see how it affects the Geo-political situation in the Middle East ?

Historically  Mexico and Venezuala have been "the two traditional energy power houses" with the latter  having more oil reserves than Saudi Arabia. According to the article, recent discoveries and step up in production in Brazil and Colombia has enabled them to surpass Kuwait in terms supplying oil  to the United States.

What this means is that over the next couple of decades America's dependency on oil from the Middle East from countries such as Saudi Arabis, Iraq, Kuwait, Algeria, and Libya will gradually start declining. This will accelerate when  with  the improvement in technology, it starts  the exploitation of the  huge shale oil reserves  in  the United States on a  large scale as its  neighbor Canada which is now the largest oil exporter to the  United States followed by Mexico. The cost of recovering shale oil is high, but over a period  with improved recovery methods it will come down. 

Its impact will likely be two fold. Prices will drop . Yes increased  demand from China and India will to some extent offset the decline in supply to the United States. With  the pool of  global oil reserves having gotten larger and with the costs of  shipping oil from Canada and South America  going to be cheaper than from the Middle East ,this will take the United States back to the situation prior to sixties as it started becoming more dependent on oil from the Middle East . This does not mean that the prices will go back to the same level. It will not, but certainly be peaking out or stay at this level for some time if not slightly lower. 

Also there have been articles about shale oil reserves in China and India along with oil reserves in South China Sea and in Africa. Of course exploitation of these will take decades, but looking at it simplistically from a layman's view of  " The Great Game " played among nations, what is the long term future of the Middle East , particularly the oil producing states with modest populations,  depleting oil reserves  and no other resources? I am sure the governments are already  positioning themselves but how many of them can re-invent themselves to be the Singapore or Switzerland of the Middle East ?I would place my bet on Beirut than any of the Kingdoms.

Secondly with the fix  for oil  from the Middle East becoming less needed,will the United States loose interest in ensuring the status quo in the Middle Eastern kingdoms? Will we see the "Jasmine", "Spring " populists revolution tsunami now rolling into the neighboring countries ? What about Israel ? Will its status revert to being a pariah in the Middle East as it was in the sixties ? Seeing the recent change of behavior among its old friends Egypt and Turkey  and with  Palestine  now  lobbying for recognition as a state in the United Nation, will Israel become more amenable towards a settlement ?
 
It will be fascinating to watch the political  clock hand going backward towards the fifties and sixties for the Middle East  rather than forward as it will be for Asia , South America and Africa.

Be Careful What You Wish For !!!

One of the justifications for the invasions of Iraq was the bringing of democracy to the Middle East.

A few years ago there were elections in Palestine and Hamas won, but was not allowed to govern.

Now in the last twelve months following the Jasmine revolution in Tunisia we have seen the strong men of Tunisia, Egypt, Yemen and now possibly Libya and perhaps even Syria being moved out.

It will be interesting to see what happens a few years from now. Already in Egypt we are beginning to see the effect on Israel's relationship with that country. Israel might again find itself isolated as it was in its early days of  nationhood.

There is  also concern that Islamist might move into power in Libya. In the mean time there is still some confusion in the other countries. If this does happen will the United States still be able to count on support of  its allies among the rulers ?Will they be around in about ten years time ?

The ripple effect is being felt not just in the Arabian Peninsula. Turkey which also had a good relationship with Israel and is a member of NATO,  is now pushing for a more prominent  role in the Middle East. This could be a sign of its moving away from the European Union club which has snubbed it for so long and which itself is now in shambles.

This is yet another sign of the re-alignment of the economic power away from the West to the East. Keep watching this space.  You might get more than what you wished for. !!!

Mirror Mirror On The Wall - Who Is The Role Model For Us All ?

The last few weeks have been interesting.We have been seeing stories in The New York Times, The Financial Times, The Wall Street Journal  which we would normally have associated with the emerging markets rather than the developed world.

Europe is in a state of disarray.The European Union which was supposed to bring prosperity and create a market bigger than the United States finds itself on the edge of a cliff . The question remains " will she or wont she" the she being Chancellor Merkel. Will she put Germany's resurgent economy at risk by continuing to pump money into the economies of nations whose spending habits mirrored that of countries in Latin America in the seventies and eighties ? Unfortunately if the Chancellor pulls her finger from the dyke, it will likely start a possible tsunami of defaults, not just among the PIGS ( Portugal, Ireland,Greece, Spain) but possibly  Italy as well. Also the financial institutions in the better managed  economies will not escape  and will take huge hits as well and it will likely be beginning of the end of the Euro. The IMF, the ECB, and the governments concerned all are scrambling to protect the banks rather than letting them swallow the bitter medicine as they  recommended the Asian governments do during the late nineties.

The United Kingdom in the meantime is enthralling  the world with its drama, which could perhaps be called the The Last Days of the Murdoch Empire. The cast of characters include a strong willful patriarch who starting with a  newspaper in a small town in Australia, went on to become the most powerful media baron and kingmaker in a number of countries. The supporting characters include his son and heir apparent, second wife decades younger than himself, a flaming red head, the head of the ruling political party , the law keepers (rumored to be have been wined and dined)  who while resigning insisted that they were not the only ones, after all the politicians used to meet journalists more frequently than they did. Adding a bit of mystery was the unexplainable death of the whistle blower. The only thing missing is a hint of sex, but then the show is not over yet.Keep watching the space.

In case you were not titillated, you had the former head of the IMF's peccadilloes with the hotel maid- whether by  consent or force remains to be seen. In the meantime, he is once again being regarded as a possible candidate to be the next President of France. On the other side of the border  you have the Prime Minister of Italy  in his seventies  trying to  inherit  Hugh Hefner's Bunny crown with his bunga- bunga parties.

Across the pond, you had the sub-prime crisis about which many books have been written. This was  followed by biggest Ponzi scheme in history and the insider trading scandal. Where were the regulators and the auditors?

With that over, you now have the world's biggest economy  together with the rest of the world being held to ransom by the two political parties to see who will blink first. We would all like to think that at the last minute there will be a compromise, but in the meantime it continues to be a cliff hanger. This is supposed to represent the best of democracy and a two party system ?

These are the countries, the  politicians and bureaucrats who come to emerging markets  and tell us how we should free the markets in terms of currency flows and trade, we should  allow democracy and  be more transparent and do something about corruption. Yes we have our share of problems, scandals, corruption, unexplained deaths, dynastic politics and so on, but perhaps we are better off muddling our way through. After all  the Asian countries ( including India in the early nineties) while going through the financial crises bit the bullet and moved on and since then have made a remarkable comeback. Perhaps it is time the roles are reversed and the developed world look closer at the developing countries and learn from them.

Quote of the Year

 Wall Street Journal July 14th, 2011

Indian Home Minister P. Chidambaram said the three bomb blasts in Mumbai were the result of stealthy work by terrorists and don't signal a breakdown of intelligence-gathering by Indian security officials and police authorities.

"Whoever planned this attack worked in a very, very clandestine manner," he told reporters in a Thursday morning televised press conference. "It's not a failure of intelligence."

How Much Is Enough ?

This is a  question  which comes up frequently as we talk to friends  and as we see the level of greed among politicians and bureaucrats and business men.Also of late Bill Gates and Warren Buffet who have given away a substantial portion of their wealth have been going round the globe asking people to follow their example.

Over the last century there have been numerous examples of wealthy families Rockefellers, Fords, Andrew Carnegie, Tatas,  Birlas who have all endowed charities with substantial sums for the good of the community.

However my favorite is Charles Feeney one of the two founders of Duty Free Shoppers. Both the partners are total opposites. I remember from my days in Hong Kong reading about his co-founder,  Robert Miller's lavish parties at his house on the peak with guests flown in from around the world. He had big fat  weddings for his  daughters all married into European royalty or other similarly wealthy families.

Charles " Chuck" Feeney, at one time among the top 50 richest men has been giving away all his wealth through his Atlantic Philanthropies. The total amount is believe to be around $9-$10 billion  Unlike Bill Gates he has done so quietly. He does not fly around in private jets. He travels by subway and lives extremely modestly. I am sure there are numerous other examples such as this - the royal family of Travancore  who gave their wealth to the temple.

However on a lower level over the years I have had this conversation with my friends and colleagues during my life as a banker and now as a wannabe entrepreneur. Is  one million  enough  or is it five  million,or more ? At that time we referred to it as FY money - enough to be able to walk out of a job where you were not happy . For us  the yard stick was to be able to ensure that our children had a good education, no debt  and  to be able to maintain the life style we were used to plus have a nest egg for emergencies.

That was then. However when we meet now we dance around without mentioning  a specific number. The reality is that once you have covered  the basics mentioned above then everything beyond that  is to leave behind an inheritance for your children unless you totally change your life style.

Recently I was chatting with two of my oldest friends from  Hong Kong and that got me thinking .Both  are around my age plus or minus a few years  They have been very successful .

One was an entrepreneur who started a business and sold it off a few years ago. His wife  has ventured off  successfully on her own business. Together with a friend he started another business in a totally unrelated field. That is doing very  well. While talking I suggested another add on alternative to what he was doing. His reaction was " Yes I know and my clients would love me to do that. I could easily double my revenue, but frankly I have enough on my plate to keep me busy. I do not want the hassle"

The other friend a bachelor, is a successful professional who dabbles on the side by investing in  ventures which attracts his interest rather than from a  pure financial investment point of view.. He is a partner in a  business  which has a high profile in Hong Kong  catering to the rising aspirations and prosperity of Hong Kong's middle and upper class. They have over the last few years moved into China. I suggested that they look at India, as it was on the same growth pattern and would be a good market. The response was  similar . " I am in this to  keep busy and to enjoy what I am doing . I really do not want to be bothered ".

Perhaps the best story I have read and which very nicely summarizes the difference of opinions about how much is enough,  is an often quoted anecdote about Joseph Heller - the author of  Catch 22.

During a commencement address at  Houston's Rice University in 1988,  Kurt  Vonnegut ( Slaughter House Five)  recounted a conversation he had with his good friend Joseph Heller.

Joseph Heller and he were at a party given by a billionaire on Shelter Island. Kurt said, "Joe, how does it make you feel to know that our host only yesterday may have made more money than your novel 'Catch-22' has earned in its entire history?" Joe said, "I've got something he can never have."What on earth could that be, Joe?" His response was "The knowledge that I've got enough."

Do we all know when we have enough ? Unfortunately in most cases we do not.

RIP - Joseph Heller - the man who knew he had enough.
 

Observations on Wimbledon

I know I am going to get into trouble here, but having watched tennis matches over the years,it is interesting to see how the physique of the top women players has changed .

In the past going back to the days of Evan Gollagong, Billie Jean King, Martina Navratilova, Steffi Graff the women players were all  slim, played without grunting and won their matches.  Over the last five to seven years the younger women players tend to be stouter and much more vociferous . The men players have not changed. They tend to be slim and while there might be an occasional grunter, it is quite a contrast to the women players. Having said that in spite of their physical appearance the women players tend to move just as fast and probably volley harder then their predecessors from the seventies and eighties.

While Ascot might have its share of strange hats, Wimbledon has its women and occasionally men walking the courts making their own fashion statements. Beating everybody hands down are the William sisters. Their dresses and their "dont give a damn"attitude makes them very different from the other players. Not that they are just about attitude. They have a fantastic track record and now choose the matches they want to play.

On the mens side  the Federer - Nadal duo continue to dominate , but of late Djokovic has been  trying to gate crash the party. The loudest fashion statement is Nadal's sleeveless shirts and his long shorts. Both  have their own slight distracting  mannerisms. Federer gently pushing his hair back toward his head band and Nadal constantly tugging at his wedgies. On the doubles side the players with their high fives, their chest bumping, and bottom patting are a sight.

Having said that the tennis players, particularly the men are a contrast to the other athletes - if I may use the term - in soccer and cricket  and are much lower keyed.The exception to this were the the temper tantrum throwers such as Ivan Lendl, John McEnroe and Andy Rodrick among  others . While their purses and endorsements might be just as big, they tend to be much lower profile and do not strut around or make  the headlines  with their shenanigans.

It is  amazing how over the decades the three gentlemanly games, tennis, gold and cricket have diverged. Tennis and golf  still  continue to be  elitist games whereas cricket has been democratized and now is a common man's game.  Will this also change or stay the same. My guess is it will remain as will golf , both not being team games and only person you are trying to outshine is your opponent.

Flavour Of The Year

Last week I was at the airport on my way to Kolkota and picked up two magazines because the headlines attracted my attention.

It was the first time I have ever bought an issue of Sports Illustrated ( not even the annual swimsuit issue)  May 20th issue. This was  the Indian edition. Its cover read as follows:

DIRT IN CRICKET
Undercover with the betting mafia for over half a year and face to with the biggest threat to the integrity of the game. SI India finds the sports is caught in a web of money, politics and organized crime.

The second magazine was Telekha long known for its bold investigative journalism. Its cover had the following headlines :

Maharasthra Sold

The Politician-Builder Nexus
Sharad Pawar
Vilasrao Deshmukh
Ashok Chavan
Supriya Sule
Ajit Pawar

Thousands of acres of land. Thousands of crores of profit. This is the shocking story of how political leaders turned a state into a private treasury.

What are the odds of the people mentioned suing the magazines for libel ?

In addition to the above,  you cannot pick up the newspaper or switch on the news without the image of the bare-chested, private jet flying yoga guru Baba Ramdev  being flashed at you. He has jumped on to the anti - corruption bandwagon first initiated by a group of activists led by Ana Hazare. Baba Ramdev is threatening to go on a fast to death if the government does not declare war on " black money" among others items included in his list of demands.

There have been numerous marches, and support groups, including web based groups , all actively rooting for them.

We all hope that this will be the turning point which comes in the country's stage of economic development and will result in the decrease of corruption.  However the more cynical among us, are questioning whether Baba Ramdev is the Trojan Horse being used  to dilute the efforts of Ana Hazare ?

Will it result in any significant action being taken or whether as Paul Beckett the Indian Bureau Chief of the Asian Wall Street   predicts that this is a choreographed play and is taking bets against the Baba starving to death.

Keep watching the headlines.