The pictures from the media are suitably anaesthetised such that we cannot fully appreciate the malodorous stink as well as the appalling sights and sounds of those struggling to maintain an existence. This is made all the more poignant when contrasted with signs of astonishing affluence virtually next door and with very little connect between them.
I only mention this as I have been very fortunate to have recently been sailing in the stunningly beautiful Grenadine islands, where the ostentatious wealth of some visitors is in sad contrast to some of the inhabitants. The Caribbean cruise liners which haunt these islands probably dispose of more waste food each day than some islands have in total for their populations and there seems little impact of the much vaunted “trickle down” effect of such tourists in their self contained sanitised world. There are also the million pound yachts that sail the area but they at least have more contact and expenditure with the smaller islands and communities. Probably the greatest difference is with the island of Mustique, where its glitzy world of celebrities, so often featured in the likes of “Hello” magazine, can be contrasted with that of the island of Mayreau, where a population of less than 400 ekes out a meagre existence. To be fair, progress has been made on this poor island, with electricity having been introduced in the past five years and a new road (in fact the only road) having been built but, nonetheless, a painful life on a paradise island. After the failure of the recent WTO talks to make any meaningful progress, this has certainly served as a correct reminder of the duty we have in our financial world to press for further and fairer economic development and trade.
Turning back to a more familiar subject, the price of oil, it is an interesting point to consider that with the higher cost of crude – where have all the “petro-dollars” gone to? During the period from the end of 2001 and the first half of 2005, OPEC cartel members (Organisation of Petroleum Exporting Countries) apparently generated $1,021 billion in revenue from oil exports. Of this money it would appear that some 88% has been spent on imports and this is a big change when compared to the last major oil price rises between 1973 and 1981 when only some 52% was spent and the rest saved and invested abroad - principally in US Treasuries. It appears that these countries are spending more on infrastructural development this time around, which is not just better news for their citizens but also good news for the world economy where recycling of these Dollars has been so crucial. The expansion and development in Dubai is the prime example of the way the cash is being used now.
You may have read some suggestion that Gazprom, the Russian gas leviathan, might be eyeing up a potential purchase in the energy supply industry in the UK. Mutter from the gutter in Moscow certainly seemed to be narrowing it down to Centrica, the old British Gas business. This indeed would be an interesting move - and in fact quite a logical one for the Russians. Russia has embarked on a significant charm offensive to the West, even with the establishment of a modern English language television station to ensure that their side of the story is properly communicated. The possibility therefore that a major producer could become also a major retailer is not unusual but to have another nation having some significant control over both supply and delivery should be a concern. After the recent events in Ukraine, it is an issue that should not be ignored. We shall have to see if this deal becomes any more than just idle chatter.
This week will hold some fascinating figures for us from Japan. After the tremors of last week in the Tokyo indices resulting from the investigation into Livedoor (Japan's leading internet company), this week sees a significant number of corporate results coming through and the expectation is that these should confirm the continued recovery of that previously depressed economy. This may well be one of the key issues for this year, as, if we are to see a slowdown in the US economy, then any resurgence in the world’s second largest domestic economy will become an even more important support for investors. The Japanese consumer has been very parsimonious over the past years, with much saving under the beds, but if the trend is to continue then a significant rise in Japanese consumer expenditure will become important to us all as a key driver of continuing global growth.
And finally…………I am grateful to the publication “The Bumper Book of Government Waste” by Matthew Elliott and Lee Rotherham for their wonderful highlighting of some remarkable usage of Government funds (a.k.a our money). Two of the more remarkable payments included £200 to the owner of a parrot apparently scared by a jet (presumably a Hawk) and £2,500 allocated for an RAF aircraftswoman to retrain as a pole dancer - after all who wants to climb the greasy pole when you can dance around it?
Have a good week,
Justin A. Urquhart Stewart
Director
Seven Investment Management, a division of Killik & Co
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