New York - Random Observations

Recession - What  recession ?

Just came back from a two week trip to the United States. New York City is obviously not part of America. We keep reading about the recession and the unemployment but we did not see any sign of that in the Big Apple.

Everywhere we went there were crowds. The stores were all chock a block full with  people not just looking but buying. Restaurants were packed  with people waiting to get into the more trendy places. Retailers such as Uniqlo of Japan are opening up large flag ship stores. Madison Avenue is seeing a revival of trendy stores. The Apple Store near Central Park was packed and this was during a week day.

The streets crowds on Fifth Avenue reminded me of the sidewalks of Hong Kong during lunch hours. The museums  were full. Granted a large number appeared to be tourists - even though it was not the season.

I am told that the property prices did not go through a big correction during the financial crises. Some of the seedier parts of New York such as the Bowery are now going upmarket with some new apartments selling in the tens of millions. Based on my limited knowledge I had always viewed the Upper East or West Side as the place to stay and would have expected them to be the more expensive places, but for smaller places, prices appeared to be much higher in the areas between mid-town and downtown  as it is popular among the younger generation.

If this is New York during recession I wonder what it would be like during boom times ?

Just Like Us

This time when we reached JFK we saw a mad scramble for the immigration counters. The lines were huge . As is always the case we ended up in the slowest moving queue. It took us almost an hour to pass through the counter. This was something we are used to when we return to Delhi, but by contrast this time we sailed through the immigration in less than 10 minutes. What a change.

Of the taxis and limousines we took during our visit almost ninety five per cent of the drivers were from Punjabi's ( Indian or Pakistanis )  or from the sub-continent.  Much against my nature , I surprised my family by actually making an attempt to chat with a Punjabi driver  who has been there since the mid-eighties . He said his elder brother was a lawyer by training and a retired bureaucrat and had now migrated from India  to Canada. Upon being told that my daughter was a lawyer, he wanted some advice as to how his brother could come the New York and start a immigration practice.

The Americans like the Indians ( certainly the North Indians) love to eat and snack throughout the day. While in the past we had our traditional sweets and snacks, we now add  in  pizza's , burgers and and other eatables. Our  obesity levels will soon be matching those in the United States.

The aggressiveness of the New Yorker is well known.We have definitely overtaken them. When we have a traffic altercation it is not unusual for one of the parties to whip out a pistol, shoot the other party and flee the scene.

Just a week or so before our arrival in New York the East Coast of the United States had a unexpected snow storm. Some parts of New York  and adjoining states had black outs lasting over a week. Increasingly houses in the suburbs are now installing generators to avoid black outs which apparently are becoming common. Sounds familiar ? 

New York vs London

This is the first time I have spent this much time in New York. I have been to London more often  and always regarded is as my favorite city . In a lot of ways they are very similar. Both of them are their country's and global financial centers. Over the last century and a half  both the cities have benefited from  wealthy patrons who have donated to build up their cultural institutions particularly their art galleries, their museums, their cultural performance centers. Both of them offer a rich variety of global cultural events - art, plays, dance and music performances . They are both the favorite cities for the global rich, and aspiring young global professional whether they are  Indians, Chinese,  Russians,  Middle Eastern,  Africans or South Americans. London however  is more expensive than New York in every way.

In my personal opinion, where they differ is that in that in London the various ethnic communities appear to comfortable in their own skin  and retain their own national identity. Walking  down Oxford street you see Africans in their bright colorful national dresses, the Arabs in their robes, an occasional Sikh bhai ji  in his flowing beard and kurta pajama. They are all equally at home and no body gives them a second look . I did not see too much of that in New York. Here  everyone gets Americanized. They all want to appear to fit in, to wear the same stylish clothes and for those who have been there long enough adopt a veneer of New York aggressiveness in their mannerism.

If it was not for the long flight I could consider switching my loyalties to New York especially since my daughter is there. 

Quote Of The Month

The Economist dated October 1st-7th,2011 in an article on "The Pakistani army's complex relationship with jihadists"

Clutching a glass of distinctly  un-Islamic whisky, a retired senior Pakistani official explains at a drinks party in Islamabad , the capital, that his country has no choice but to support the jihadist opposition  in Afghanistan. The Indians are throwing money at their own favorites in Afghanistan, he says, and the Russians and Iranians are doing the same. So Pakistan must play the game too. "Except we have no money at all. All we have are the crazies. So the crazies it is ".

Poof ... And There Goes Poverty

The Planning Commission of India should be nominated for the next Nobel Prize, or perhaps even be canonized for its ability to create miracles.

In a affidavit The Planning Commission has stated that if a persons daily income was  Rupees Thirty two ( Sixty seven cents in US currency ) in the urban area and Rupees Twenty five  ( Fifty two cents )  in the rural area , would no longer be considered poor.

So with a stroke of a pen the Planning Commission has reduced poverty for a few hundred million people, something which normally takes decades of economic development. If that's not a  miracle then what is ? Mother Teresa did not even come close.

Incredible India never ceases to amaze !!!!
 

Is Anybody In Charge - Anywhere ?

As I read the newspapers daily, I am increasingly concerned about what is going on in the world. It is frightening to  to see the politicians and the bureaucrats fighting and dithering over decisions which should be made to get the world back on track.But no one appears to be able to do that.

Starting with my own country India we have a well meaning Prime Minister who is the figure head with the real power being vested in the Head of the Congress Party. Perhaps of her recent illness,we  are beginning to see the squabbles , first with the coalition partners  and now increasingly within the party itself itself. It is no longer limited to junior ministers or  party functionaries, but senior figures such as Pranab Mukherjee, PC Chidambran, and  Kapil Sabil. You then have have the party mavericks such as Digivijay Singh and Mani Shankar Aiyar who emerge occasionally  to make outrageous soundbites. You get the impression that people are beginning to position themselves for the next term and each trying to do their best to trip up the other.

Unfortunately things are not much better on the Opposition Bench.Under normal circumstances the term the Grand Old Man would apply to a senior figure such as LK Advani but unfortunately his behavior, his outbursts and his continued lust to be the next Prime Minister prevents you from giving him the sobriquet. You then have the other senior leaders such as Narinder Modi  ( NaMo) , Sushma Swaraj , Arun Jaitely  and others who are now being talked about as potential candidates , assuming of course that the Bharatiya Janata Party emerges with enough votes to be able to form a government . Perhaps the dark horse will be Nitish Kumar from Bihar who might emerge as the acceptable face for the BJP to rule even though he might be only a coalition partner.

In the meantime the country's growth rate has now slowed down to below 8%. The decision making has been paralyzed. Projects are getting delayed . 

Pakistan on the other hand continues its games and finally even its closest ally the United States  is beginning to say " enough is enough" . In the meantime the leaders both civilian and military  continue with the threats to stop the support to the Nato allies in dealing with the Taliban and other terrorist outfits. The trump card which Pakistan holds is  the nuclear arsenal.Instead of focusing on the economy the civilian military leaders are running to their all weather friends and allies.

In  the Middle East,  Israel is gradually getting  isolated. The only prediction I will make is that if the Jasmine revolution continues as mentioned in my last blog " Back To The Future " , Beirut and not Dubai will  in a few years regain its spot as the financial and fun capital of the Middle East as it was until the seventies.

Meanwhile across in Europe they continue to wring their hands about what to to about Greece ?  The Greek sovereign bonds appear to be as radio active as the  sub-prime bonds. Here again the banks bought the bonds for their higher yield without doing the  due the diligence and relied on the rating agencies. What reinforced their faith to invest in these bonds was the fact that it was issued by a country in the Euro zone and that they would get bailed and they shoveled them into the wagons.. It was different from Iceland which had to bite the bullet and sort out its problems.

Then you had the perfect storm where it was not just Greece ( which now  has to be force fed the medicine), but also potentially Portugal, Ireland, Spain and perhaps maybe even Italy could be sucked into the default vortex . The impact on the banks in European is too horrifying  to imagine. Meanwhile the European Central Bank , The International Monetary Fund both headed by French citizens   go from meetings to meetings with the Finance Ministers, the Central Bankers and the Heads of State  without reaching any decisions. In the meantime the investors in the markets continue to be whip-sawed .

In Britain  the Economist magazine  says  the co-coalition government is looking leaky. The recent riots have left the social workers trying to figure out the cause of the riots. There is increasing  talk about  talking action against the social networks which fanned the flames. Again the double standards. When it is used in China, Middle East to fan the flames, loud voices of support  are raised about freedom of speech, but now that the shoe is on the other foot,  there is talk about  how it can be controlled.

In the United States, with the forth coming elections both the Republicans and the Democrats continue to position themselves and every decision gets down to the wire to see who will blink first. The Federal Reserve Governor  Ben Bernanke in the meantime continues to tweak the economy to see if the green shoots will grow or will they wilt and will America catch the Japanese disease ?

On a relative basis, Australia , Latin America and Africa overall ( if you ignore the Arab countries) are the  continents where it is pretty much business as usual. There are isolated countries where there are problems but nothing which could be considered contagious unlike what is happening in the areas mentioned above.

There is a Chinese proverb or curse depending on your interpretation   " May you live in interesting times" . Certainly for all us who are  Midnights Children, have had more than our share of  " interesting times". Perhaps it is just  a sign of my  getting old, but I for one  would like the excitement to slow down.

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.