The causes of the financial crash, which created such privation in the western world, have been given a very general, popularly accepted notion - the avarice of bankers and incompetence of regulators.
Whether this stereotype avails because it is infallibly true, or a simplification of reality remains to be seen, the numerous central threads of the crisis documented thus far by willing authors and publishers to hopefully be woven together to form a truly reflective picture at some future point. Yet, today that is how popular perception views the situation.
Undoubtedly, the financial bubble was created and sustained by an intertwined co-dependency on financial leverage, a dualistic – inevitably parasitic – relationship between the financier, the asset class and the market. In this case mortgage companies' desire for growth, the availability of residential and commercial housing stock, and the public's expectation to exercise the right to own in a seeming golden age.
This made for perhaps the most heady financial mix ever seen given the number of banks operating, the size of the western world's housing stock and the appetite by the common (wo)man to enjoy not just a home of his/her own, but the fruits of an ever upward price spiral.
But as the asset class grew in value so the stakes grew higher, and so more nefarious activities emerged. Beyond the questionable use of 'self-cert' mortgages – which itself highlighted the extremities of 'strained credit' at the time – additional self-serving desires played a role.
The equally ever-stretched credibility of the CDO (and CDO2) package [reportedly] invented by Soloman Brothers in the mid 1990s) had engulfed Wall Street, its own already squeezed credit-rating credibility additionally brought into disrepute by the use of 'phantom signers' within finance houses to create a perpetual motion of supply and demand. Indeed it may also be the case that the 'phantom signer' may also have been 'invoked' beyond even this at the demand end: possibly used to help finance companies assist developer-type clients, who in turn tend to hold those larger commercial / semi-private loans which were of greater importance to a lender's balance sheet.
[The very appearance of the 'phantom signer' has created perhaps the largest legal tangle in the US, creating a situation wherein defaulted borrowers are able to stay in situ within their premisis since the long paper-chain of mortgage documentation and ultimate ownership rights has been lost. This largely affecting the bottom end of the housing chain, that could feasibly create a grid-lock in portions of the housing market for years to come. Which could itself act as a negative force regards the necessary de-leveraging of this asset class vis a vis the commercial de-leveraging of the both nations' cost-bases. This creating a pricing vacuum between buyers and sellers].
Many have said that this latest event was a story as old as the hills, and regale tales of the the South-Sea Bubble, the Tulip Bubble, the 1862 London stock crash, and of course the 1907 and 1929 Wall St crashes. But this latest episode was not restricted to pure stock speculation, as were its forebears. It went further into the very heart of what should be responsible capitalism, which itself is born from the very notion of inalienable private property rights.
Thus beyond PIMCO's mention of a 'new norm' (with which investment-auto-motives agrees), the very cornerstone of western capitalism could still potentially find itself at a philosophical cross-roads. This due to what may be a crumbling belief-system amongst the masses and national populace, from Athens, Georgia in the 'battling' USA to Athens in a very 'disheartened' Greece. Whilst the capital markets appear to be functioning, albeit with event driven volatility, the real question pertains to exactly what the new norm ultimately looks like; even if possibly disguised by the recent bounce back.
It is at this time, here in the west, that the 'healing rhetoric' is being offered, where a less believing public are being 'nudged' by ever more tentative political bodies of whichever persuasion and the idea of 'society at large' is being resounded. Yet the masses will take much convincing, if at all. We do not live in a bygone age where the individual is connected to society through a series of irrefutable relationships: family members are spread, community links and spirit largely inconspicuous in metropolitan areas, the church with far less influence etc etc.
In short, as the 1960s post-modernists would have it, the turn of the century saw the end of the 'Grand Narrative' that had been the social glue, whether through State, or Church or National Ideology.
Thus, in the real-world, the notion of 'society and the individual' is largely a fatuous one. The 'insularisation' of people over the last century or so has been a two-sided coin, offering people greater privacies, freedoms and self-governance, whilst also de-constructing the old ways that seemingly sustained mind and soul, even if it be naively so via largely institutional organisation.
So the 'new social norm' is not so recently emergent as the 'new economic norm', yet the two sit side by side at present. And this creates a very new socio-economic terrain for the west. Some will undoubtedly say we sit at the beginning of that much heard 'new world order', where the individual becomes a servant of commerce – possibly seeing facebook as the emergent broker; especially given its founder's aspirations to use it as global industry's interface.
Yet it is also one in which the masses of the west finally open their eyes to the very real physical connectivity to the world at large, one in which the populace and social competition of India or China becomes truly real, instead of some personally ascribed far off notion no matter how well conveyed by the pages of the FT, WSJ, Economist or more partisan tabloids.
[NB The fact that the Indian published 'The Economic Times' has as the world's 3rd largest circulation of an english read financial newspaper says much, albeit the title is an anathema to many in the west].
Thus whilst politicos convey the need to accord to social ideologies, people themselves consciously or sub-consciously will recognise the need to look harder than ever at the 'ideology of individualism'. For their own very real utilitarian and ultimately financial benefit given the reduced support of not only the state, but also the innate structure of corporations that see the human opportunity of the east, offering capabilities far beyond the low level call-centre.
Individualism – especially that of the high-minded - has of course always been with us, at the heart of all great empires, to maximise the willing productivity of its people and nationhood. It has generated new ventures of all kinds, ranging from the high-risk adventure efforts of Shackleton, Scott and latterly Feinnes, to the academic pioneers who saw commercialisation of their discoveries from Marie Curie to Tim Berners-Lee, to the less visible but purely commercial efforts of many entrepreneurs throughout the ages. Individuals who sought to do things their way and create new value for themselves, employees, latter-day stock-holders, and society at large.
For myself / investment-auto-motives, perhaps the greatest relative examples of this 'individualistic drive' being various names in the auto, investment and governmental realms.
In the auto-world the likes of Karl Freidrich Benz (as distinct from the Daimler-Maybach work) for fore-sightedness, of course Henry Ford for appreciation of the far bigger commercial picture, and the downright pluckiness (even if wholly mis-judged) of Preston Tucker who help blazed the path for vehicle development.
Whilst perhaps individualism is harder to identify within the financial field, the old banking names of say Peabody and Morgan(s) stand out for their personal conviction in creating a better world both commercially and socially.
From a governmental/regulatory perspective, individualism is almost an anathema given the innate consensus process, yet mention must go to those who might remain nameless but who 'cleared the way' for innovative an commercial progress. Perhaps the most pertinent here being the UK's 3 'Locomotive Acts' (inc the red Flag Act) between 1861 and 1878, which although initially physically encumbered the physical speed of those first cars, provided for their gradual public acceptance via the very 'checks and balances' imposed on those 'new fangled contraptions'. A later 1896 Act saw these restrictions removed and the 1898 Act formalised vehicle specifications by which a burgeoning British & foreign industry could abide. Whilst the 1903 Act saw vehicles registered to owners and so provided for public responsibility and equally responsibility toward the public. This then shows the progressive stance that late Victorian politicians took on such a breakthrough industry, itself set to propel affiliated full supply-chain industries, from raw materials to retail.
Yet as a singular archetype, the modest yet wholly focused aeronautical brave-heart and hero Charles Lindbergh, perhaps serves best as a near human-deity in our machine-enabled, commercialised age; advancing the belief in the mechanical capability to create a speedy global network of trans-ocean trade.
Thus whilst society is undoubtedly of great importance for the individual, so the progressive yet pragmatic individual has perhaps a greater proportionate (ie a dis-proportionate) influence on society. This so because individuals more instinctively recognise other individuals.
This was undoubtedly the case for Henry Ford, who himself, like so many of his countrymen, grew from a 'simple' farming family. His experiences resonated with the words, essays and general philosophy of Ralph Waldo Emerson (1803-1872). In particularly the essay 'Self-Reliance' of 1841.
This renowned piece starts with a prologue from elsewhere that reads: "Man is his own star; and the soul that can render an honest and a perfect man..” And very early within the text the nub of the essay is scribed with the words: “To believe your own thought, to believe that what is true for you in your private heart is true for all men, — that is genius”. Although not the most high-brow of Emerson's work, this positive diatribe had a massive effect on the new industrialists in the mid-late 1800s and served Henry Ford as an ideological template in his determination to follow his path forward.
In the UK the American's contemporary was Samuel Smiles, a Scottish-born Reformer who saw the ills of his countrymen, their circumstances and what could be done to improve their lives, both intellectually and so physically; acting as an admittedly somewhat middle-class bell-ringer for social improvement for those at the bottom of the social tree.
Likewise, he quoted from other useful sources, and from JS Mill gleans “The worth of a State, in the long run, is the worth of the individuals composing it”. This strikes the central chord of his attitude, much like Confucian thought thousands of years earlier, in that it is down to the individual to improve themselves, which then in turn improves their family's circumstances, then affecting the community, and so en mass affects the all the nationwide. But he was also a staunch reproacher, who cited bad habits – especially that of personal financial imprudence – as being the undoing of many men and women:
To quote: “Times of great prosperity, in which wages are highest and mills running full time are not times in which Mechanics' Institutes and Schools flourish, but times in which publicans and beer sellers prosper and grow rich...A workman earning 50s. to 60s. a week (above the average pay of bankers' clerks) was content to inhabit a miserable one-roomed dwelling in a bad neighbourhood, the one room serving as parlour, kitchen and sleeping-room for the whole family, which consisted of husband, wife, four sons, two cats and a dog. The witness was asked: Do you think this family was unable to get better lodgings, or were they careless? They were careless, was the reply.
Aswell as seeking the best from men, to build a better world, Smiles also undertook biographies of those he esteemed. Many of them were those who had been central to the British civil engineering boom which gave commercial prosperity and so economic growth to Britain's Industrial Revolution; the likes of Matthew Boulton, his affiliate James Watt in steam engine development, and George Stephenson's application of the device as the railway locomotive (beyond Trevethick's earlier work).
Samuel Smiles's philosophy of thriftiness has historically drawn scorn from Keynesian-leaning economists who view such behavior as limiting the availability of private capital for commercial use, as was largely the case by those in mid-Victorian Britain who had long memories of the past and saw the 1862 stock collapse.
Yet today, the west's modern banking system has evolved since the 2008 debacle, albeit slowly and begrudgingly, with higher capital reserve ratios set in place to provide greater public confidence. Regulations are being rewritten with previous debate about re-enactment of a Glass-Steagall type Act in the USA, the recent stability of capital markets undermining the doom-mongers.
So whilst the west continues its 'de-leveraging diet' formed from previous credit spurge, so the shock of the last 3 years has generated a new outlook amongst many to become far more responsible about their financial affairs, and to return to their grandparent's philosophy that was to 'save and prosper'.
It will be this allocation of publicly sourced private funds, along with FDI from the EM regions, that will help to re-buoy the west. It will take many years to recapture the 'good old days' but at least the financial world and consumers themselves will be on a sounder footing.
And as part of this process will come an understanding that much responsibility lies with the individual, not just the reneged responsibilities of the supposedly 'sleeping state' or the 'greedy banks'. We unfortunately don't live in a perfect world, the worst excesses of a base human nature often in the financial press and the cause for widespread social consequences.
Yet, more than ever now, it will be down to the individual to find their own way in creating their future; their own path.
As the adage goes: “The future starts here”,and it is a fact not lost on billions of people elsewhere on the planet. So there is perhaps no better attitude and way to enter 2011.
Friday 31 December 2010
Saturday 18 December 2010
Christmas Message – Responsible Capitalism - the only real way forward.
Here in the West, for many people the forthcoming 'Austerity Christmas' will bring about intrinsic personal reflection, with self-generated questions pertaining to a very definition of value, in all its senses.
Over much of the last decade, many people – thought of course not all – have enjoyed what at times seemed a super-charged lifestyle, the scope of what was considered normal being a 'lifestyle entitlement' pushed ever broader and deeper. Such an expectation fueled by easy credit, the upward escalator of the material world, itself driven by 24 hour media, and the desire for ever more exotic experiences, from travel to personal attentions services to provide ever more esoteric luxury dimensions to life.
Although since the 1950s the younger generation have enjoyed greater income and personal freedoms, the Gen Yers of the now homogenious middle class became the Bright Young People of the 2000s, but unlike that enclave of the monied class in the 1920s the more recent emergence of BYP's were nationwide, who could at weekends literally live the 'high life' no matter what their background. Champagne of whatever Cru and cocktails became de rigeur in metropolitan areas, even if that be not quite the Cristal popularised on 'Bling' music videos and a preferance for Mojito cocktails. The pretence of holidaying in the Maldives or Cuba, or at least psychologically 'living the dream' could be had even if the actual holiday trip had been a package deal to a less salubrious place.
In the 2000s, the idea of luxury sold, and the archetype 'veblan good' reigned in the sea of lifestyle aspiration and the spiral staircase of ever higher expectation.
Materialism and consumerism has of course been part and parcel of an aspirant life since the beginnings of the industrial revolution, and 250 years later to that British invented schema, has become intrinsic to the life-blood of the world over; China's rise of course demonstrating its latest advocate for a better life.
But for the US and Europe 2008 brought the reality-check, the consequential economic strangulation has trickled-down into people's lives via the wrenching and writhing of slowly restructuring western economic models, as the very core of growth mechanisms are questioned and the cost-base of the West necessarily driven down via both commercial and public sector rationalisation.
Thus the leaders of western economies recognise the need for re-align to once again become globally competitive, yet that too has generated a USA vs European attitudinal split that sees the former taking greater steps to artificially inflate its way out of trouble, whilst the later stays as prudent as possible. Europe also trying to retain a sense of solidarity between floating and sinking member countries.
In short a pseudo-protectionist reactionary mentality has arisen, seen both in the USA and amongst the economically lost PIGS which add dead-weight to the Euro-model both in function and world-wide perception of the bloc-currency.
Thus the very value of what were 2 globally esteemed currencies are increasingly being considered and re-considered, on a near daily basis, set of course against the more muted but still ostensibly up-beat tone of the BRIC+ regions, themselves partially extracting themselves from the 'old-world' with ever increasing bi-lateral and multi-lateral trading agreements.
So it is at this time within the 'old-world' that the very question of how to define 'value' has arisen. Moreover, when identified in all of its guises, how it is created/obtained?
It is a question that reaches across from the individual's inward view... to government's outward view... to the players of the commercial world's facing up to the challenge as how to marry aspects former and latter via appropriated ratios dependent on both their fit in society and their place in their respective sector value-chain. Commercial conglomerates and industrial holding companies must view all of this from above as must the financiers within the investment community.
There has been much transition in the west even over the short period of the last three years, and it is set to continue as multi-nationals play both sides of the coin: maintaining the growth push in the EM regions and gauging the appropriate timing and level of western re-investment.
The expected rise in general input prices (as warned by the CEO of Robert Bosch) will probably be (when historically viewed) seen to trend as relatively slow, yet that trend line will be populated by bursts of speculation and correction as geo-political and nation-state economic events periodically send short-term investors to 'upward-bound' safe havens.
Conversely for the west, consumer angst still weighs driven by those basic employment concerns, private industry rightly insisting upon frozen wage/salary rates and flexible contracts and the previous expectation of state employees pertaining to job security and annual income increases now seen to be unsustainable.
Thus the context for all activities are being re-orientated, from B2B to B2C, from those related to wholly private consumption (from wealth management to automobile demand to fashion goods) to those directly concerning the national good (including infrastructure, health, energy, etc etc).
As a result of these shifting sands variously sized investors of various influence must both generate the trends of tomorrow and be able to track those trends.
Hence the 'financial interplay' between the capital bases of private finance, industrial finance and governmental finance has never been so simultaneously open and closed.
This era then is the period during which the 'old-world' West must essentially re-build itself to become once again globally meaningful so as to stand a chance of not being left stranded, increasingly remote and insular relative to ever-rising Asian, S.American, African and Middle Eastern 'new-world' global economy.
This issue then puts pressure on the commercial and industrial infrastructure of the West, and that means making sure the inter-play between governmental finance, industrial finance and private finance is all-together well targeted, harmonious and efficient.
With the 2008 collapse and intervention of governments, many commentators stated that the old capitalist model had failed and that a new ideology was sought. Yet ironically, today in the US, UK and Europe, as a result of these 'bail-outs' and rapid bounce-back by the survivors of the banking world it is the very nation-states themselves that are now weaker than ever, with cash-cushioned multi-nationals and the banking sector itself playing a greater part in 'holding together the western fort'.
It may appear strange to include within the Christmas message of a pro-capitalist investment advisory bureau the name of Vladimir Lenin, who as a Communist was against religion aswell as obviously capitalism, but his standing in that there are 3 types of alternatively avail ably sourced capital was and still is essentially true. As previously stated, these are: Government Capital, Industrial Capital and Finance Capital.
And their relative characteristics, expectations and strengths never in such sharp focus as today.
However, the first, Governmental - whilst obviously concerned with the development of the public good and is directed at projects and schemes that enhance national development - has never been so fragile. The second, Industrial- notionally itself a mixed economic model of publicly and privately sourced funds depending upon the region (previously say Europe in contrast with the UK) – today sees that innate ratio (of whichever previous ideology) tend toward greater self-sourcing or private sourcing. The third is of course purely privately
sourced capital, which historically was initially dualistic tending toward matured commercial sectors, and new (then new-world) 'ventures'; but through the latter half of the 20th century spread across a wide spectrum of sectors and the various growth stages of the various players in various particular fields as both industrial activity broadened and the types of players evolved and the types of instruments to assist also developed.
Thus, today even after the financial crash and the cries for fundamental structural economic change, the reality is that for the West it will be the strategic decisions of private finance and industrial finance that shape its future.
Thus whilst right to distinguish between capital's sources, and having his name recently echoed amongst the youthful yet aggravated intelligentsia of the university campus, Lenin's views have been proven by history as increasingly irrelevant, and could be argued today as being almost disruptive and destructive to the real-world challenge of re-energising the West.
[NB Communism and far-left Socialism proved to be an overtly idealistic and unsustainable economic model, one necessarily inherent high-mindedness and good-heartedness of (wo)men living within a falsely constructed social framework that disregarded the innate 'economic being' within most people, ranging from the purely utility-driven to improve 'his/her lot' to the inter-social competitiveness of a community for one-up-manship, thus Lenin's ideologies, whilst persuasive at a popularist level after the fall of German and Russian aristocracy in fact ran and runs contrary to the 'real-world'. A world in which it is almost a natural diktat that differing levels of inputs by different individuals of differing intelligence and capacity for work must be rewarded at different rates so as to be intrinsically fair, even if at purely the surface level of social impressions it appears unfair].
It is for this reason that the capitalist model - though admittedly with inherent faults that requires checks and balances - is becoming ever more dominant. The historical trend for increased general wealth perpetuating the growth story in less developed regions and so increasing the standard of life for those with little and exposed to the very real dangers of life whether natural or man-made; from the ability to buy medicines for curable disease to escaping poverty-stricken shanty towns and ensuring the next generation has access to education.
We live in a world where for many westerners the financial fortunes of west and east have rapidly switched, and to this end there is an understandable dilemma as to how capital should be attributed.
Although perhaps second to the provision of innate human caring, the responsible provision and allocation of capital remains perhaps the most important challenge for government, industry and financiers.
The auto-industry plays a significant role in wealth generation, but also has been seen to be an agent of wealth destruction time and time again. So the decisions as to which of those automotive sector companies – throughout the value chain - deserve and gain financial backing must be made responsibly by all 3 providers of liquidity. This backing of course depends upon reputation and the outcome of a deep due diligence process. But must surely be primarily based upon past performance, a convincing demonstration that through the previous good times of the 15 years leading up to 2008 - and indeed throughout the financial crisis – what should have been value generative companies lived up to expectation and proved their worth as positive contributors to society.
This is not to say all liquidity should be directed at industrial activity, since the ability to generate value and so wealth for re-appropriation was seen by the 2008-10 capital markets re-bound itself. And since money itself is also effectively a commercial commodity itself so it should be allocated toward the greatest return potential, which includes various capital markets. Indeed, beyond talk of government bail-outs, without that investor based speculative rebound the West would be far far worse state than today, and it is only right that where markets inadvertently drag-down good companies amongst the fear of the bad, so participants within the same market must be able to cherry-pick the sound/good from the bad (as seen with say Ford seen at $1 vs GM) after a fear-driven collapse..
[NB To avoid such pandemonium in future, whilst the 'up-tick' rule is perhaps too 'prescriptive', investment-auto-motives believes that the concept of an 'warning indicator' could prove useful stability tool. Something which warns the market once of a company stock dropping to say -5% below an time-period averaged MarketCap or Book Value. Thus provide the market time to properly assess the fundamentals of a company and so be driven by rationality rather than emotion. This is still of course still leaves a company open to large-play investors running 'hard-shorts' to perhaps intentionally run-down a company, but today's much smaller concentrated private equity world will probably be less likely to use such tactics, instead being seen to be part of the broad value building process].
At the beginning of this new era to do anything less would be disingenuous to both the populace of the West aswell as the fundamentally sound ideological platform that is responsible capitalism.
This then is the central Christmas Message from investment-auto-motives to one and all.
Whilst it may not convey the usual tome of seasonal rhetoric, it hopefully stands as part of a sustained and longer-term reason to cheer, long beyond this Christmas, the next and many of those thereafter.
In the meantime, for a couple of weeks or so, it is...
'Time to See Beyond the Bottom Line'.
My Best Wishes
Turan
Over much of the last decade, many people – thought of course not all – have enjoyed what at times seemed a super-charged lifestyle, the scope of what was considered normal being a 'lifestyle entitlement' pushed ever broader and deeper. Such an expectation fueled by easy credit, the upward escalator of the material world, itself driven by 24 hour media, and the desire for ever more exotic experiences, from travel to personal attentions services to provide ever more esoteric luxury dimensions to life.
Although since the 1950s the younger generation have enjoyed greater income and personal freedoms, the Gen Yers of the now homogenious middle class became the Bright Young People of the 2000s, but unlike that enclave of the monied class in the 1920s the more recent emergence of BYP's were nationwide, who could at weekends literally live the 'high life' no matter what their background. Champagne of whatever Cru and cocktails became de rigeur in metropolitan areas, even if that be not quite the Cristal popularised on 'Bling' music videos and a preferance for Mojito cocktails. The pretence of holidaying in the Maldives or Cuba, or at least psychologically 'living the dream' could be had even if the actual holiday trip had been a package deal to a less salubrious place.
In the 2000s, the idea of luxury sold, and the archetype 'veblan good' reigned in the sea of lifestyle aspiration and the spiral staircase of ever higher expectation.
Materialism and consumerism has of course been part and parcel of an aspirant life since the beginnings of the industrial revolution, and 250 years later to that British invented schema, has become intrinsic to the life-blood of the world over; China's rise of course demonstrating its latest advocate for a better life.
But for the US and Europe 2008 brought the reality-check, the consequential economic strangulation has trickled-down into people's lives via the wrenching and writhing of slowly restructuring western economic models, as the very core of growth mechanisms are questioned and the cost-base of the West necessarily driven down via both commercial and public sector rationalisation.
Thus the leaders of western economies recognise the need for re-align to once again become globally competitive, yet that too has generated a USA vs European attitudinal split that sees the former taking greater steps to artificially inflate its way out of trouble, whilst the later stays as prudent as possible. Europe also trying to retain a sense of solidarity between floating and sinking member countries.
In short a pseudo-protectionist reactionary mentality has arisen, seen both in the USA and amongst the economically lost PIGS which add dead-weight to the Euro-model both in function and world-wide perception of the bloc-currency.
Thus the very value of what were 2 globally esteemed currencies are increasingly being considered and re-considered, on a near daily basis, set of course against the more muted but still ostensibly up-beat tone of the BRIC+ regions, themselves partially extracting themselves from the 'old-world' with ever increasing bi-lateral and multi-lateral trading agreements.
So it is at this time within the 'old-world' that the very question of how to define 'value' has arisen. Moreover, when identified in all of its guises, how it is created/obtained?
It is a question that reaches across from the individual's inward view... to government's outward view... to the players of the commercial world's facing up to the challenge as how to marry aspects former and latter via appropriated ratios dependent on both their fit in society and their place in their respective sector value-chain. Commercial conglomerates and industrial holding companies must view all of this from above as must the financiers within the investment community.
There has been much transition in the west even over the short period of the last three years, and it is set to continue as multi-nationals play both sides of the coin: maintaining the growth push in the EM regions and gauging the appropriate timing and level of western re-investment.
The expected rise in general input prices (as warned by the CEO of Robert Bosch) will probably be (when historically viewed) seen to trend as relatively slow, yet that trend line will be populated by bursts of speculation and correction as geo-political and nation-state economic events periodically send short-term investors to 'upward-bound' safe havens.
Conversely for the west, consumer angst still weighs driven by those basic employment concerns, private industry rightly insisting upon frozen wage/salary rates and flexible contracts and the previous expectation of state employees pertaining to job security and annual income increases now seen to be unsustainable.
Thus the context for all activities are being re-orientated, from B2B to B2C, from those related to wholly private consumption (from wealth management to automobile demand to fashion goods) to those directly concerning the national good (including infrastructure, health, energy, etc etc).
As a result of these shifting sands variously sized investors of various influence must both generate the trends of tomorrow and be able to track those trends.
Hence the 'financial interplay' between the capital bases of private finance, industrial finance and governmental finance has never been so simultaneously open and closed.
This era then is the period during which the 'old-world' West must essentially re-build itself to become once again globally meaningful so as to stand a chance of not being left stranded, increasingly remote and insular relative to ever-rising Asian, S.American, African and Middle Eastern 'new-world' global economy.
This issue then puts pressure on the commercial and industrial infrastructure of the West, and that means making sure the inter-play between governmental finance, industrial finance and private finance is all-together well targeted, harmonious and efficient.
With the 2008 collapse and intervention of governments, many commentators stated that the old capitalist model had failed and that a new ideology was sought. Yet ironically, today in the US, UK and Europe, as a result of these 'bail-outs' and rapid bounce-back by the survivors of the banking world it is the very nation-states themselves that are now weaker than ever, with cash-cushioned multi-nationals and the banking sector itself playing a greater part in 'holding together the western fort'.
It may appear strange to include within the Christmas message of a pro-capitalist investment advisory bureau the name of Vladimir Lenin, who as a Communist was against religion aswell as obviously capitalism, but his standing in that there are 3 types of alternatively avail ably sourced capital was and still is essentially true. As previously stated, these are: Government Capital, Industrial Capital and Finance Capital.
And their relative characteristics, expectations and strengths never in such sharp focus as today.
However, the first, Governmental - whilst obviously concerned with the development of the public good and is directed at projects and schemes that enhance national development - has never been so fragile. The second, Industrial- notionally itself a mixed economic model of publicly and privately sourced funds depending upon the region (previously say Europe in contrast with the UK) – today sees that innate ratio (of whichever previous ideology) tend toward greater self-sourcing or private sourcing. The third is of course purely privately
sourced capital, which historically was initially dualistic tending toward matured commercial sectors, and new (then new-world) 'ventures'; but through the latter half of the 20th century spread across a wide spectrum of sectors and the various growth stages of the various players in various particular fields as both industrial activity broadened and the types of players evolved and the types of instruments to assist also developed.
Thus, today even after the financial crash and the cries for fundamental structural economic change, the reality is that for the West it will be the strategic decisions of private finance and industrial finance that shape its future.
Thus whilst right to distinguish between capital's sources, and having his name recently echoed amongst the youthful yet aggravated intelligentsia of the university campus, Lenin's views have been proven by history as increasingly irrelevant, and could be argued today as being almost disruptive and destructive to the real-world challenge of re-energising the West.
[NB Communism and far-left Socialism proved to be an overtly idealistic and unsustainable economic model, one necessarily inherent high-mindedness and good-heartedness of (wo)men living within a falsely constructed social framework that disregarded the innate 'economic being' within most people, ranging from the purely utility-driven to improve 'his/her lot' to the inter-social competitiveness of a community for one-up-manship, thus Lenin's ideologies, whilst persuasive at a popularist level after the fall of German and Russian aristocracy in fact ran and runs contrary to the 'real-world'. A world in which it is almost a natural diktat that differing levels of inputs by different individuals of differing intelligence and capacity for work must be rewarded at different rates so as to be intrinsically fair, even if at purely the surface level of social impressions it appears unfair].
It is for this reason that the capitalist model - though admittedly with inherent faults that requires checks and balances - is becoming ever more dominant. The historical trend for increased general wealth perpetuating the growth story in less developed regions and so increasing the standard of life for those with little and exposed to the very real dangers of life whether natural or man-made; from the ability to buy medicines for curable disease to escaping poverty-stricken shanty towns and ensuring the next generation has access to education.
We live in a world where for many westerners the financial fortunes of west and east have rapidly switched, and to this end there is an understandable dilemma as to how capital should be attributed.
Although perhaps second to the provision of innate human caring, the responsible provision and allocation of capital remains perhaps the most important challenge for government, industry and financiers.
The auto-industry plays a significant role in wealth generation, but also has been seen to be an agent of wealth destruction time and time again. So the decisions as to which of those automotive sector companies – throughout the value chain - deserve and gain financial backing must be made responsibly by all 3 providers of liquidity. This backing of course depends upon reputation and the outcome of a deep due diligence process. But must surely be primarily based upon past performance, a convincing demonstration that through the previous good times of the 15 years leading up to 2008 - and indeed throughout the financial crisis – what should have been value generative companies lived up to expectation and proved their worth as positive contributors to society.
This is not to say all liquidity should be directed at industrial activity, since the ability to generate value and so wealth for re-appropriation was seen by the 2008-10 capital markets re-bound itself. And since money itself is also effectively a commercial commodity itself so it should be allocated toward the greatest return potential, which includes various capital markets. Indeed, beyond talk of government bail-outs, without that investor based speculative rebound the West would be far far worse state than today, and it is only right that where markets inadvertently drag-down good companies amongst the fear of the bad, so participants within the same market must be able to cherry-pick the sound/good from the bad (as seen with say Ford seen at $1 vs GM) after a fear-driven collapse..
[NB To avoid such pandemonium in future, whilst the 'up-tick' rule is perhaps too 'prescriptive', investment-auto-motives believes that the concept of an 'warning indicator' could prove useful stability tool. Something which warns the market once of a company stock dropping to say -5% below an time-period averaged MarketCap or Book Value. Thus provide the market time to properly assess the fundamentals of a company and so be driven by rationality rather than emotion. This is still of course still leaves a company open to large-play investors running 'hard-shorts' to perhaps intentionally run-down a company, but today's much smaller concentrated private equity world will probably be less likely to use such tactics, instead being seen to be part of the broad value building process].
At the beginning of this new era to do anything less would be disingenuous to both the populace of the West aswell as the fundamentally sound ideological platform that is responsible capitalism.
This then is the central Christmas Message from investment-auto-motives to one and all.
Whilst it may not convey the usual tome of seasonal rhetoric, it hopefully stands as part of a sustained and longer-term reason to cheer, long beyond this Christmas, the next and many of those thereafter.
In the meantime, for a couple of weeks or so, it is...
'Time to See Beyond the Bottom Line'.
My Best Wishes
Turan
Tuesday 7 December 2010
Company Focus – Aston Martin Lagonda – Stretching its Wings with Cygnet.
The emergence of the premium city car came about with the Daimler's brave introduction of the innovative A-class in 1997. It was quickly nick-named 'The Earl of Sandwich' amongst the UK auto-industry given its high price position and innovative twin-layered floor.
Developed from the smaller 1993 'Vision A' concept, which size-wise sat equidistant between production A-class and >Smart ForTwo, so spawning 2 original concepts for the German corporation. A company which at the time had enough liquidity and credibility to take over Chrysler so as to seek platform synergies, accordant cost savings and operational stretch across a broader consumer market. History shows how this corporate ambition flailed, but the A class, along with its less numerous but technically visionary Audi A2, set the scene for establishing the genre as a credible sector.
Premium small cars had been undertaken before, as seen in the 1960s with the effectively coach-trimmed Mini offerings from Hooper Coachworks for Peter Sellers, Wood & Pickett for George Harrison of The Beatles), and the Downton variant, all of course based on the original primary premium small car, the performance orientated Mini Cooper & Cooper S. FIAT of course had Abarth & Giannini variants of the 500 (Cinquecento)and Renault the 8 Gordini.
The French in particular applied up-market fashion-label marketing ties for limited run editions - as seen with the Peugeot 205 Lacoste and others, this effectively copied in the late 1990s by Rover Group for the limited edition Paul Smith 'designer' Mini.
And obviously, those original, inspiring auto-centric monikers have been of course been revived, since the re-introduction of Mini by BMW, the 'Cooper character' utilised as the 'centre of gravity' when devising the reborn range. Abarth and Gordini more recently used to give provenance to the Italian and French makers' higher priced variants. So far the FIAT 500 Abarth Ferrari edition, and one-off Rolls-Royce trimmed Mini reflect the ultimate yet.
Thus it could be said that where possible in the 2000s, most small car makers have adopted the idea of “Putting on the (Mini) Ritz'...and in doing so, as the song says 'Trying very hard to look like (Gary) Cooper.”
Harrods of Knightsbridge, here in London, currently showcases the latest premium city car offering, with Aston Martin Lagonda's much awaited and debated 'Cygnet'. Never have the Aston 'wings' adorned anything so brand-radical, such a small and up-right car sourced from a mainstream producer, re-worked heavily cosmetically and partially mechanically.
It is a landmark vehicle for the company, which although today stands bigger and stronger than almost ever thanks to Ford's previous governance – especially when compared to its its Lionel Martin 'origination' or David Brown / Victor Gauntlett 'stewardship' days – faces very different business challenges. Back into the private ownership hands of UK and Middle-Eastern investors, today the company must leverage its past experience which brought both increased professionalism, improved commercial acumen, scale growth and so production economies, advantageous infrastructure facilities, a worldwide dealer-base etc.
In short Ford help massively to provide the 'spring-board' for the firm to develop into a very different entity – stronger and more ambitious – and having to be so to convincingly compete against those 'parentally protected' such as: VW's Bentley, FIAT's Ferrari/Maserati, Daimler's Mercedes/AMG and assisted McLaren, BMW's M-series and even Rolls-Royce with its expected Ghost Sports-Coupe.
This independent AML however, like all premium auto-makers, did suffer heavily from the consumer impact of the financial collapse. So beyond pairing back to the bone operationally, this headwind event along with important others - such as the critical incoming CAFE-type emissions regulations - has made the management at its Gaydon HQ think differently about exactly how to create a tenable and ideally prosperous future.
It unsurprisingly sees that through expanding the business both in terms of breadth by re-introducing the Lagonda marque at some point, and expanding the Aston Martin product-line and so reach into new premium markets. That has meant the introduction of the 'Rapide' 4-door coupe and recent preview of 'Cygnet'. These more nominally mainstream cars thus respectively give additional 'breadth' and 'depth' through sub-sector entry, and thus herald new stakes in the ground as claims for new territory.
However, even before the event of the 2008 financial collapse and even on the back of record global unit sales, AML will have recognised that its independence and self-reliance would only be possible with external assistance from one or more major manufacturers. Hence, to try and obtain the reduced procurement costs available to their counterparts, to provide accessible technology streams ideally across the 5 prime vehicle engineering areas so that AML could better devise its own R&D strategy, and so to offer the possibility of adapting and utilising off-the-shelf systems, whole platforms or indeed whole vehicles. The ambition being that these out-sourced R&D and tooling items have already absorbed in part or fully through a 3rd party's own in-house project amortisation.
As CEO Ulrich Bez and the company's owners saw the 2007/8 demolition of both private wealth and effectively closed bank funding access the decision to act strategically and quickly on what were probably already seen as plotted strategic possibilities was taken: to both maintain backing of 'Rapide' with in house resources, and leverage Toyota and its (as yet to be applauded) iQ model to provide for Cygnet.
Thus Cygnet has been a leap of faith on many levels.
However, although large by UK independent manufacturer standards, AML is in structural capacity terms a minnow when compared to VW, Daimler or BMW, so fortunately without the obligation to fill factory production space. Indeed it was always known that 'Rapide' would be assembled elsewhere, as stated in the previous Arabic post, originally ideally in Kuwait given Investment DAR's national development interests, but almost always set for the likes of Steyr (as seen), Huliez, Pininfarina or similar to ensure project delivery timing and product quality.
The ability to process manage 'Rapide' outsourcing in a professional manner (as oppose to the ad-hoc method with earlier 1960s-80s projects) plus the experience of former interaction with Ford's PAG should have step by step generated a level of ease within AML regards running what are effectively joint-venture vehicle programmes.
Thus, from a market perspective, given he apparent buoyancy of the premium small car sector (and the CAFE need to off-set AML's large car V12 & V8 emissions) it was inevitable that a small car project exploration would take place. And given the realistically restricted options available, any project solution would involve adoption of a major car maker's A or B-segment vehicle. The Germans would not (understandably) be willing to share proprietary technology with what is seen as a high-threat competitor, so it was no surprise to investment-auto-motives that Toyota – already a supplier of power-train to UK sport-scar builders and with its own UK manufacturing presence and good political relations – provided the (iQ) platform as the basis for Cygnet. Indeed, from a commercial angle, almost a given 'on a plate' since the top-spec, fully-loaded Japanese iQ models – typically unavailable anywhere outside Japan – could be used as a base.
However, it has caused much debate, both by those shoppers and tourists in Harrods, within the auto-industry and amongst the public-facing car press.
Of the former, a very quick, informal survey of those those that eyed the IQ showed unsurprisingly men frowning and women smiling. In the latter it has divided 'for' and 'against' opinions respectively between the editor of Autocar magazine and a contributor to Marketing Week magazine.
The differential being that there is a major chasm between 'brand extension' as with Ferrari's use of caps, shirts etc (ie merchandise) and 'product-line extension' as reflected by a new vehicle product launch (ie as part of core range). The argument is that these two very different actions have different affects on the core personality, credibility and so reputation of a brand. Much of course depends upon the execution of the newly introduced product, in essence “how true is it to brand DNA amd general perception” and indeed “how much DNA-stretch do the products of a particular brand actually have ?” Get it right and the result flies off the shelf...get it wrong and it could convey the practice of cynical cold marketing.
From a generalist perspective regards the Cygnet case, investment-auto-motives agrees with the concerns of the marketeer. For most 'autophiles' who respect the lineage and GT/racing character of Aston Martin it is indeed a stretch far too far. The product execution of heavy 'design cue' adaption of an iQ is not credible. Akin to a shapeless, wannabe gym-bunny decked from head to foot in sports-logo sponsored lycra...but inevitably destined to sit infront of the TV.
This was precisely why investment-auto-motives wrote a column pointing out that Cygnet should be branded Lagonda, so as to sit alongside its future (possibly Daimler sourced) Lagonda badged SUV big brother. In essence to create the rational basis and segment stretch for a new domain of
vehicles, Lagonda as an affiliated but distinctly separate brand to A-M that had the innate new-brand flexibility that enabled credible adaption of others' products; that was the central raison d'etre.
[NB investment-auto-motives believes the down-sizing west presently lives through an era pertaining to the 'paradoxical premium'. This was previously noted in the TV advertising for Mini 4 (ie Countryman), and conveys to the consumer (and allows him/her in turn) to demonstrate a level of 'constructed irony' regards the premium good. It follows in the pastiche tradition, and is brilliantly demonstrated by a product and display toward the rear of Harrods.
Here the Theo Fennel brand has produced fine silver crafted 'coats and caps' for the classic everyday items of the English breakfast table, ie HP sauce bottle, Heinz ketchup bottle, Marmite jar, Coleman Mustard jar and other similar condiment items. These silver casings are blatantly superfluous to function, yet 'work' as they combine innate grandioseness with the balance of contextual humour. In short a psychologically and sociologically balanced premium offering for a mundane activity.
Such examples should be 'digested' to help inspire similar efforts within the automotive realm. A light-hearted attitudinal direction may have seen Cygnet 'play' further on its origins, in a similar vein to the 1998 New Beetle's inclusion of the abstract flower and vase alluding to original Beetle].
However, here is the rub for marque purists with regards to Aston Martin.
Having previously set-out the strategic imperative, it seems that a very real operational, short-term cash-flow rational has been the basis for the A-M badged Cygnet. Cygnet is very probably helping to underpin that all important corporate agenda right now: accessible and low cost working capital.
Gaydon has undoubtedly given the issue much thought, and reached its conclusion that beyond the fact that the global A-M global dealer-base needs new product beyond Rapide which accords to the times and broadens the client-base. Yet more important for the AML HQ is the fact that short-term pressures to generate income is very probably nigh on critical.
This period is all too telling, since having seen the peaks and troughs of the company's past, Dr Bez and colleagues undoubtedly wish to stabalise the sales/income curve. So as to overcome the all-too typical wide-swing cyclicity typically seen by independent premium sportscar makers. Gaining improved control of the demand-side of the business model as well as the supply-side is the ideal of all companies, but perhaps none so much as the likes of AML with so exposure to events such as recessions, oil crisis, 'down-shifting' sociological trends etc. (This is something both Morgan and Ferrari at either end of that spectrum in size and product offering have done).
The ultimate paradox for the brand purist is that – depending on its production numbers and 'exclusivity' – the parody Cygnet will sell well. There is always a market for limited number, exclusive club fashion goods, no matter what their logical or pseudo logical rationale. And that income will be welcomed by Ulrich Bez, Dave Richards, John Sinders and the Kuwait based EFAD Group / Investment DAR.
Whilst those high net worth ladies who have earned their own wealth take a male attitude toward the car, and would only ever buy a Vantage or better, the Cygnet is the perfect 'designer' Christmas present for those cosseted daughters, wives and girlfriends of wealthy men. Importantly, it is only available to Aston Martin customers, thereby generating a level of demand amongst a section of people who want to have themselves recognised as the preferred clients of AML.
Moreover, it will probably act as as the 'City run-about' for wealthy families who have a car 'tied' to their London, Paris or Milan apartments sat within basement car-parks. Or indeed as the 'Marina run-about' in the guise of a pseudo modern-day successor to the canopy-topped, wicker-seated FIAT 600 Jolly. But for most users inhabiting the suburban fringes, it simply allow them to say “my other car is an....Aston Martin”. Cygnet then, being AML client only, acts as lifestyle mirror for times when driving the 'real' Aston is inconvenient.
Indeed, very probably the Arabic owners of AML and Harrods will individually take one or two so as to help prop up the company and their associated holdings – and if one were in their position of company stewardship and wealth, one would have to ask “well why not?”.
Yet, let's hope that they also ask for the Lagonda-bronze body colour and an after-fit Lagonda badge. Why just start a fashion trend, when you personally have the capability to start a new company?
Those lucky few will just need to find a very large, car-sized, box that says “Eid Mubarak” and “Merry Christmas”.
Developed from the smaller 1993 'Vision A' concept, which size-wise sat equidistant between production A-class and >Smart ForTwo, so spawning 2 original concepts for the German corporation. A company which at the time had enough liquidity and credibility to take over Chrysler so as to seek platform synergies, accordant cost savings and operational stretch across a broader consumer market. History shows how this corporate ambition flailed, but the A class, along with its less numerous but technically visionary Audi A2, set the scene for establishing the genre as a credible sector.
Premium small cars had been undertaken before, as seen in the 1960s with the effectively coach-trimmed Mini offerings from Hooper Coachworks for Peter Sellers, Wood & Pickett for George Harrison of The Beatles), and the Downton variant, all of course based on the original primary premium small car, the performance orientated Mini Cooper & Cooper S. FIAT of course had Abarth & Giannini variants of the 500 (Cinquecento)and Renault the 8 Gordini.
The French in particular applied up-market fashion-label marketing ties for limited run editions - as seen with the Peugeot 205 Lacoste and others, this effectively copied in the late 1990s by Rover Group for the limited edition Paul Smith 'designer' Mini.
And obviously, those original, inspiring auto-centric monikers have been of course been revived, since the re-introduction of Mini by BMW, the 'Cooper character' utilised as the 'centre of gravity' when devising the reborn range. Abarth and Gordini more recently used to give provenance to the Italian and French makers' higher priced variants. So far the FIAT 500 Abarth Ferrari edition, and one-off Rolls-Royce trimmed Mini reflect the ultimate yet.
Thus it could be said that where possible in the 2000s, most small car makers have adopted the idea of “Putting on the (Mini) Ritz'...and in doing so, as the song says 'Trying very hard to look like (Gary) Cooper.”
Harrods of Knightsbridge, here in London, currently showcases the latest premium city car offering, with Aston Martin Lagonda's much awaited and debated 'Cygnet'. Never have the Aston 'wings' adorned anything so brand-radical, such a small and up-right car sourced from a mainstream producer, re-worked heavily cosmetically and partially mechanically.
It is a landmark vehicle for the company, which although today stands bigger and stronger than almost ever thanks to Ford's previous governance – especially when compared to its its Lionel Martin 'origination' or David Brown / Victor Gauntlett 'stewardship' days – faces very different business challenges. Back into the private ownership hands of UK and Middle-Eastern investors, today the company must leverage its past experience which brought both increased professionalism, improved commercial acumen, scale growth and so production economies, advantageous infrastructure facilities, a worldwide dealer-base etc.
In short Ford help massively to provide the 'spring-board' for the firm to develop into a very different entity – stronger and more ambitious – and having to be so to convincingly compete against those 'parentally protected' such as: VW's Bentley, FIAT's Ferrari/Maserati, Daimler's Mercedes/AMG and assisted McLaren, BMW's M-series and even Rolls-Royce with its expected Ghost Sports-Coupe.
This independent AML however, like all premium auto-makers, did suffer heavily from the consumer impact of the financial collapse. So beyond pairing back to the bone operationally, this headwind event along with important others - such as the critical incoming CAFE-type emissions regulations - has made the management at its Gaydon HQ think differently about exactly how to create a tenable and ideally prosperous future.
It unsurprisingly sees that through expanding the business both in terms of breadth by re-introducing the Lagonda marque at some point, and expanding the Aston Martin product-line and so reach into new premium markets. That has meant the introduction of the 'Rapide' 4-door coupe and recent preview of 'Cygnet'. These more nominally mainstream cars thus respectively give additional 'breadth' and 'depth' through sub-sector entry, and thus herald new stakes in the ground as claims for new territory.
However, even before the event of the 2008 financial collapse and even on the back of record global unit sales, AML will have recognised that its independence and self-reliance would only be possible with external assistance from one or more major manufacturers. Hence, to try and obtain the reduced procurement costs available to their counterparts, to provide accessible technology streams ideally across the 5 prime vehicle engineering areas so that AML could better devise its own R&D strategy, and so to offer the possibility of adapting and utilising off-the-shelf systems, whole platforms or indeed whole vehicles. The ambition being that these out-sourced R&D and tooling items have already absorbed in part or fully through a 3rd party's own in-house project amortisation.
As CEO Ulrich Bez and the company's owners saw the 2007/8 demolition of both private wealth and effectively closed bank funding access the decision to act strategically and quickly on what were probably already seen as plotted strategic possibilities was taken: to both maintain backing of 'Rapide' with in house resources, and leverage Toyota and its (as yet to be applauded) iQ model to provide for Cygnet.
Thus Cygnet has been a leap of faith on many levels.
However, although large by UK independent manufacturer standards, AML is in structural capacity terms a minnow when compared to VW, Daimler or BMW, so fortunately without the obligation to fill factory production space. Indeed it was always known that 'Rapide' would be assembled elsewhere, as stated in the previous Arabic post, originally ideally in Kuwait given Investment DAR's national development interests, but almost always set for the likes of Steyr (as seen), Huliez, Pininfarina or similar to ensure project delivery timing and product quality.
The ability to process manage 'Rapide' outsourcing in a professional manner (as oppose to the ad-hoc method with earlier 1960s-80s projects) plus the experience of former interaction with Ford's PAG should have step by step generated a level of ease within AML regards running what are effectively joint-venture vehicle programmes.
Thus, from a market perspective, given he apparent buoyancy of the premium small car sector (and the CAFE need to off-set AML's large car V12 & V8 emissions) it was inevitable that a small car project exploration would take place. And given the realistically restricted options available, any project solution would involve adoption of a major car maker's A or B-segment vehicle. The Germans would not (understandably) be willing to share proprietary technology with what is seen as a high-threat competitor, so it was no surprise to investment-auto-motives that Toyota – already a supplier of power-train to UK sport-scar builders and with its own UK manufacturing presence and good political relations – provided the (iQ) platform as the basis for Cygnet. Indeed, from a commercial angle, almost a given 'on a plate' since the top-spec, fully-loaded Japanese iQ models – typically unavailable anywhere outside Japan – could be used as a base.
However, it has caused much debate, both by those shoppers and tourists in Harrods, within the auto-industry and amongst the public-facing car press.
Of the former, a very quick, informal survey of those those that eyed the IQ showed unsurprisingly men frowning and women smiling. In the latter it has divided 'for' and 'against' opinions respectively between the editor of Autocar magazine and a contributor to Marketing Week magazine.
The differential being that there is a major chasm between 'brand extension' as with Ferrari's use of caps, shirts etc (ie merchandise) and 'product-line extension' as reflected by a new vehicle product launch (ie as part of core range). The argument is that these two very different actions have different affects on the core personality, credibility and so reputation of a brand. Much of course depends upon the execution of the newly introduced product, in essence “how true is it to brand DNA amd general perception” and indeed “how much DNA-stretch do the products of a particular brand actually have ?” Get it right and the result flies off the shelf...get it wrong and it could convey the practice of cynical cold marketing.
From a generalist perspective regards the Cygnet case, investment-auto-motives agrees with the concerns of the marketeer. For most 'autophiles' who respect the lineage and GT/racing character of Aston Martin it is indeed a stretch far too far. The product execution of heavy 'design cue' adaption of an iQ is not credible. Akin to a shapeless, wannabe gym-bunny decked from head to foot in sports-logo sponsored lycra...but inevitably destined to sit infront of the TV.
This was precisely why investment-auto-motives wrote a column pointing out that Cygnet should be branded Lagonda, so as to sit alongside its future (possibly Daimler sourced) Lagonda badged SUV big brother. In essence to create the rational basis and segment stretch for a new domain of
vehicles, Lagonda as an affiliated but distinctly separate brand to A-M that had the innate new-brand flexibility that enabled credible adaption of others' products; that was the central raison d'etre.
[NB investment-auto-motives believes the down-sizing west presently lives through an era pertaining to the 'paradoxical premium'. This was previously noted in the TV advertising for Mini 4 (ie Countryman), and conveys to the consumer (and allows him/her in turn) to demonstrate a level of 'constructed irony' regards the premium good. It follows in the pastiche tradition, and is brilliantly demonstrated by a product and display toward the rear of Harrods.
Here the Theo Fennel brand has produced fine silver crafted 'coats and caps' for the classic everyday items of the English breakfast table, ie HP sauce bottle, Heinz ketchup bottle, Marmite jar, Coleman Mustard jar and other similar condiment items. These silver casings are blatantly superfluous to function, yet 'work' as they combine innate grandioseness with the balance of contextual humour. In short a psychologically and sociologically balanced premium offering for a mundane activity.
Such examples should be 'digested' to help inspire similar efforts within the automotive realm. A light-hearted attitudinal direction may have seen Cygnet 'play' further on its origins, in a similar vein to the 1998 New Beetle's inclusion of the abstract flower and vase alluding to original Beetle].
However, here is the rub for marque purists with regards to Aston Martin.
Having previously set-out the strategic imperative, it seems that a very real operational, short-term cash-flow rational has been the basis for the A-M badged Cygnet. Cygnet is very probably helping to underpin that all important corporate agenda right now: accessible and low cost working capital.
Gaydon has undoubtedly given the issue much thought, and reached its conclusion that beyond the fact that the global A-M global dealer-base needs new product beyond Rapide which accords to the times and broadens the client-base. Yet more important for the AML HQ is the fact that short-term pressures to generate income is very probably nigh on critical.
This period is all too telling, since having seen the peaks and troughs of the company's past, Dr Bez and colleagues undoubtedly wish to stabalise the sales/income curve. So as to overcome the all-too typical wide-swing cyclicity typically seen by independent premium sportscar makers. Gaining improved control of the demand-side of the business model as well as the supply-side is the ideal of all companies, but perhaps none so much as the likes of AML with so exposure to events such as recessions, oil crisis, 'down-shifting' sociological trends etc. (This is something both Morgan and Ferrari at either end of that spectrum in size and product offering have done).
The ultimate paradox for the brand purist is that – depending on its production numbers and 'exclusivity' – the parody Cygnet will sell well. There is always a market for limited number, exclusive club fashion goods, no matter what their logical or pseudo logical rationale. And that income will be welcomed by Ulrich Bez, Dave Richards, John Sinders and the Kuwait based EFAD Group / Investment DAR.
Whilst those high net worth ladies who have earned their own wealth take a male attitude toward the car, and would only ever buy a Vantage or better, the Cygnet is the perfect 'designer' Christmas present for those cosseted daughters, wives and girlfriends of wealthy men. Importantly, it is only available to Aston Martin customers, thereby generating a level of demand amongst a section of people who want to have themselves recognised as the preferred clients of AML.
Moreover, it will probably act as as the 'City run-about' for wealthy families who have a car 'tied' to their London, Paris or Milan apartments sat within basement car-parks. Or indeed as the 'Marina run-about' in the guise of a pseudo modern-day successor to the canopy-topped, wicker-seated FIAT 600 Jolly. But for most users inhabiting the suburban fringes, it simply allow them to say “my other car is an....Aston Martin”. Cygnet then, being AML client only, acts as lifestyle mirror for times when driving the 'real' Aston is inconvenient.
Indeed, very probably the Arabic owners of AML and Harrods will individually take one or two so as to help prop up the company and their associated holdings – and if one were in their position of company stewardship and wealth, one would have to ask “well why not?”.
Yet, let's hope that they also ask for the Lagonda-bronze body colour and an after-fit Lagonda badge. Why just start a fashion trend, when you personally have the capability to start a new company?
Those lucky few will just need to find a very large, car-sized, box that says “Eid Mubarak” and “Merry Christmas”.
Wednesday 1 December 2010
PESTEL Trends – Arabian Auto-Culture – The Need Re-Direct the Car Culture Drift.
The world over, history has proven that powerful cars and young men can often create an ever increasingly dangerous public environment. Given that the car acts as such a potent facilitator for physical & spiritual freedom, and acts as perhaps the most publicly apparent status symbol, it is little surprise that youth and cars make for a potentially hazardous mix.
This has been the case from 1950s America and its quarter-mile drags encapsulated by the Hot-Rod & Muscle-Car culture, for 1960s Britain and tuned Ford 'Pops' and Mini's, for 1970s Germany and 1980s Mexico with tuned VWs, and for 1990s Japan with big RWD coupe performance models which led to the 2000 craze for 'drifting'.
'Drifting' is the colloquial term for 'power-slide over-steer' and it has been a trend that has migrated from suburban Japan to across the world in the last 20 years, popularised by the availability of affordable powerful used cars and coverage via high-visibility public and private media platforms.
A plethora of 1990s-2000s sports-coupes and performance saloons became available – typified by the Mitsubishi Starion / GTO (its named derived from former Pontiac and the pre-cursing original Ferrari), the Toyota 3000GT / Supra / Soarer, the Nissan 200SX /350Z, the Honda Prelude. This trend generated the iconic Subaru Impreza & Mitsubishi Evo - the rallying achievements of which set the tone for drifting and stunt-driving – followed by the 'FWD' 'Hot 4s' such as Honda's Integra and Type-R series.
As stated, popularisation was generated by initially coverage by mainstream broadcasters of side-show events at official motor-sport, with the trend trickling down amongst dare-devil youngsters (and the not-so-young) which was self-promoted via typically camera-phones and video-phones, the scenes of which were and are uploaded to primarily youtube.com and other similar social-media sites.
Aided by video-console games such as Grand Theft Auto and a raft of driving games, the first decade of the 2000s has seen a massive growth in this youth-culture phenomenon, it being a natural result from 20 and 30 somethings previously high disposable income levels, the parallel game-related virtual world and ever greater need for status. Thus the amalgum created a turbo-charged car-culture.
Yet it of course also comes with high social and economic costs. Costs which national governments and regional police forces obviously identify as detrimental to the overall public good. Of course, well policed, ably governed city-centres, suburbs and environs typically limit the ability of potentially dangerous, adrenalin-charged drivers (and 'egg-on' passengers) to do as they please.
But even in such controlled areas - as typically seen in Japan, the UK and across Northern Europe - the two obviously opposed agendas of youth and police often leads to a type of 'hide & seek' eventuality that creates an unfortunate climate of ever greater risk-taking. This picture especially seen across the cities and towns of more provincial areas where arguably the car serves a greater ability for enjoyment, and that all important 'momentary escape' from the all too real 'hum-drum' of dis-satisfied young lives.
Today the Drifting trend is virtually global, from the archetypical night-scapes of neon-lit Tokyo Prefectures that give a road-grid for Japanese rich-kids, to the day-time adventures of newly motorised yet essentially poor twenty-somethings in Sao Paulo; using minimally-powered but crucially RWD cars.
[NB Given the inescapable fact that most affordable small cars are FWD, there has also been wide-spread use these].
Yet it is across the Middle-East that both types of rich and not so rich 'Aspirant Hero Drifter' are seen. Side by side within the ever-developing cities and geographically spanning quite remote regions separated by vast tracts of desert and very different regional economic fortunes. These of course linked by desert roads and the automobile.
From Abu Dhabi in the UAE, to Jeddah in Saudi Arabia to Aden in the Yeman, the availability of cheap oil, the socialized male 'entitlement' to the car and the high rate of infrastructure build (which provides new roads and the 'room to play' on de-congested highways) when combined means that in many cases (as with the west) the car has been re-utilised as part personal toy from its previous role as practical family tool. This runs across the social spectrum, but of course is most evident within the indigenous young male population who tend to enjoy high levels of personal income plus no or limited personal responsibilities.
So the activity has become a niche aspect of an already ingrained Arabic vehicle culture. One which spans a broad diversity from supercars to humble hatchbacks, from 'desert adventure' 4WDs to antiquated haulage trucks. Indeed, without wanting to appear blasphemous - vehicles have become almost physical icons with powerful significance. Sheikh Hamah bin Hamdan Al Nahyan demonstrates this with his giant-scale classic Dodge Powerwagon (eight times original size and acts as a house on wheels), his globe motorhome (one millionth the size of the earth), and his 200 item car collection that is open free to the public. As is evident, the car has almost as much cultural significance as the Camel or the Falcon.
So unsurprisingly, it has become an inward and outward expression. In the same vein as has been the case for the US with previously the 1950s James Dean types driving stripped pre-WW2 Ford coupes in the Mid-West, or the filmic inspired 'Blaxpoitation' Caddy's and Lincolns in 1970s Harlem, or the long history of Latino association with 'low-rider' Chevy Impalas and similar throughout Southern Californian and Florida.
This desire for 'tribal' self-expression comes in many forms: aesthetic and dynamic and has been a major aspect as how car culture has developed within all global regions.
Thus Arabia effectively mirrors and endeavours to develop what is seen on the US west coast scene. That as a 'start-point' the endemic Arab vs American differences, almost spurring on the Arabic youth in a competitive manner. Many go to extremes with vehicle development to metaphorically 'out-gun' the West, being bigger, better or braver; and so arguably go driving extremes to compete not just locally amongst peers, but also internationally upon the more virtual world stage enabled by youtube etc. Most extreme-driving participants will argue that they are in control of theie vehicle, and indeed 99% of the time this is the case given the high level of driving skills nurtured. But this of course leaves the 1% room for error.
Indeed 'drifting' per se has been adapted to what is know as the 'Saudi Drift' which comprises essentially of stunt-style show-boating on broad straight-roads in near deserted periphery districts.
As for the socially concerning act of stunt driving and traditional 'drifting', it has become a popular escapade amongst all Arab classes, indigenous and immigrant; from the flagrantly mega-rich with say a 'top-end' Porsche GT, Mercedes SLR or Aston Martin, to the 'mere' wealthy in BMW M5 series, to the middle classes in Toyota Camrys and Honda Accords, and even amongst those at the bottom of the ladder (who are typically male immigrants who financially club together to buy a car for both work transport and motorised weekend and holy-day fun).
[NB obviously powerful front engined, rear wheel drive models are better 'facilitators' whilst mid-engined Porsche's and Ferraris offer greater 'challenge' to participants, but also more dangerous social consequences given the inability to 'play' a mid-engined car so easily].
The ruling elites and police forces have watched this socialized male 'outlet' grow over the years, but no doubt find themselves caught between a rock and a hard-place, given that they must recognise both the social role this phenomenon offers as a 'socio-cultural glue' set against the high potential for personal and community tragedy.
Importantly, general car-culture and the popularity for Drifting is perhaps more prolific in the Arab world given its historic and endemic reverence regards 'manliness' and the innate hierarchical nature of the societal framework. And as such, thus encapsulates a broader age-range of the male demographic. Moreover, as seen in the west, the emergence of increasingly emancipated young women within a freer social scene offers both a new dimension to the all-male car culture, but also assists the 'drive' toward greater showing off and so propensity for danger.
So undoubtedly questions surround this pursuit of auto-entertainment, one which which has both its left and right feet respectively planted in sociological and economic roots. These are the roots that the governing classes are trying to husband by creating new branches which when ideally managed promote regional development, social integration and reduce the potential for social harm.
Moving the wealthy street-racers (who act as social leaders) from the suburbs and onto officially authorised and typically government-grant developed [F1 and GT class level) race-tracks has been a major effort over the last 5 years or so. Tracks such as Abu Dhabi's Yas Marina, Bahrain's International Circuit, Jeddah Race Way and the Losail Circuit in Qatar have been either specifically built or are being upgraded to not only encourage world-class motor-sport events that highlight a nation's standing, but also draw in amateur race events and public track-day events. These theoretically critically offer the track owners a smaller though more stable 'year-round' income stream, and offer a safe yet competitive environment for wealthy locals to play at being motoring heroes.
Furthermore, the development of these locations into broader entertainment parks, spanning music concerts, festivals and complete entertainment complexes - such as Ferrari World on Yas Island - add yet greater commercialisation opportunities, which also add to the social fabric of the city or state.
As seen perhaps most evidently at Yas Marina, beyond the obvious income-stream of Ferrari World type projects, a vitally engrained design remit when building these kind of infrastructure projects is to integrate within the architecture both the innate Arabic spirit and the desire to create globally iconographic silhouettes. To demonstrate that the Gulf respects its history and yet should be regarded as thoroughly modern
This ambition to promote historic and modern* 'Arabic Culture', aswell as demonstrating the Middle- East as the new 'Global Cultural Hub', has obviously been part of the regional development agenda for some years. Hence the new construction work – in the midst of the construction slowdown – that sees new satellite locations for The Louvre in the UAE and Saudi Arabia, and for the The Guggenheim also in Abu Dhabi, on Saadiyat Island. Internationally, Islamic Art has come to the for recently with exhibitions and auctions, such as the recent Sotheby's event, which primarily showcased contemporary works ranging from early 20th century European influenced Arabic works to late modern works.
Thus, clearly the 'east-meets-west' globalisation effect is regaining strength after the tensions of the last decade, with satellite museum and gallery projects helping to re-establish those inter-cultural links that have historically grown and waned.
[NB Here the news that Pearson Publishing's iconic 'Penguin Classics' brand will be serving the Mid-East market renowned western titles whilst also re-publishing classic Islamic texts is culturally and geo-politically a very welcome development].
Although there has been a strong vocalisation of opposition to such global commercialisation of museums and a galleries – typically by groups of curators and academics – such important cross-fertilization should be applauded since it both transmits-out and absorbs-in differing influences at artistic, popular and public levels. This especially important to the young who will have either studied in Europe or the US, or had wished they had been able to. Whilst the Mid-East is far far more informed about western ways than most outside the region would believe, this 2-way bridging of higher-brow cultures is important. Why shouldn't an American can read 'The Rubaiyat of Omar Khayyam', whilst a Bahraini reads Byron?
The Royal families and ruling elites of the Middle-East no doubt well recognise the importance of cultural development on local, global and ideally 'glocal' levels.
Hence the key will be to identify how the Arab culture can evolve within the context of previously dominant European and American cultures, yet also alongside those new cultural forces emerging from China,India, Brazil and elsewhere.
Thus having as broad a 'picture-scope' as possible will be key in the ongoing economic develop of the Gulf, as its seeks to continues to expand beyond reliance on oil & gas, yet also has learned from the property bubble that both helped and hindered its diversification plans.
As seen in Qatar, “Education, Education, Education” is seen as a prime pillar for future capability and expansion, the work of Sheikha Moza bint Nasser Al-Missned combined with public funding attracting big-name institutions from the US. Yet as has been seen, the apparent educational capacity has yet to filled, with the question of the ratio between local and foreign students seemingly unfixed and perhaps intendedly flexible.
Yet finding a way to deepen the presence of, and ideally marry, the arts, the sciences and use commerce as an enabler will be key. Using the academic realm to leap-frog other nations' R&D and industry sector capabilities where possible. The Qatari Royals know that will be the starter motor for the newly build economic engine.
And it is perhaps in the ambitions and hands of the 'internationally minded' young that progress will be made, ideally aiding the creation of investment possibilities within the automotive sector and its affiliate sectors, including the potential for technology-transfer. Even though automotive is thought to sit relatively low on the development agenda – surpassed by what is viewed as higher-value pharmaceutical, eco-energy, telco and the like – it is a value-generative force that should be harnessed. Especially so given the auto-obsession of the Arabic youth.
The regional web-logs devoted to local car-culture and drifting are peppered with English-based conversation between informed and educated members of the Arab youth, which highlight that the participants of this craze are anything but the 'brainless and bored' contributors of many global car-culture web forums. There is recognition amongst portions of the higher-brow young that the activity deservedly has a bad name given the irresponsibility that it both draws towards it, and indeed draws out of participants. Hence even the young see the need for improved control, but a control that does not eradicate the adrelin rush, or fragment the 'tribal bond building'.
What is noticeable is the desire for the youth of the Arabian countries to develop their own forms of self-expression, themselves noting that car-culture effectively started in the US - as have most modern trends – but also noting how it was Japan that evolved its own car culture to reflect its own identity – such as the Samurai Warrior tradition. These now global trends in turn being both absorbed and adapted (ie the 'Saudi Drft'), with what seems an intense desire to 'self-create' in their chosen fields. In short an identity led evolution of 'nation-layered' car culture.
This then is good news since it demonstrates that there exists a willingness by the though-leaders of young car-obsessed Arabians that this sphere has evolutional potential. To move beyond what are essentially imported car-crazes seen at the social level, and the imported (motor-sport) business models at the economic level.
The islamic world has in the past had grand ambitions regards regards the automobile, but in reality little has emerged as permanently to date. This ranges from Malaysia's previous ambition for its domestic Proton to become the archetype high volume 'Global Islamic Car', to at the other extreme of niche manufacture, the UK based Persian entrepreneur Arash Farhad developing high-end supercars. In the GCC, an intendedly grown core competence for aluminium smelting has generated spin-off sectors such as alloy-wheel casting and fabrication, yet these items are in turn exported for high-quality finishing elsewhere. This probably part of a trade-pact agreement amongst Arab states or Asia, given possible high labour content, yet it does also highlight the need to walk-up the value chain.
Thence, just as the GCC wishes to bridge international cultures, so it must build a staircase between its present low-value manufacturing and service capabilities and its high-value aspirations. To do so its member states must continue to investigate, adopt and possibly adapt a commercial framework drawn from past experiences both to its East and to its West.
It was hoped some years ago that the partially Middle-Eastern owned Aston Martin Lagonda could have constructed its new 'Rapide' 4-door coupe in the region. But from CEO's (Ulrich Bez's) perspective, the commercial obstacles and risk involved proved (rightly) too much of an idealistically-driven gamble.Too much of a risk to the company itself, then facing the real need for an additional model income stream, and of course its profit-sharing responsibility toward its shareholders.
Yet that flailed ambition would provide insight and future guidance, and so should be deeply investigated as a case study, the conclusion and recommendations of which to be used as a building block in creating that much needed 'developmental staircase'.
In short, the time seems right to halt the 'automotive cultural drift' witnessed at both social and economic levels, and to identify exactly how the car and the context of its use, can instead be used as a dual purpose 'perpetual motion vehicle' - something that sits equidistant between its new infrastructure projects and its renewed artistic heart.
As the sands of time shift, so should focus on the GCC's automotive world.
This has been the case from 1950s America and its quarter-mile drags encapsulated by the Hot-Rod & Muscle-Car culture, for 1960s Britain and tuned Ford 'Pops' and Mini's, for 1970s Germany and 1980s Mexico with tuned VWs, and for 1990s Japan with big RWD coupe performance models which led to the 2000 craze for 'drifting'.
'Drifting' is the colloquial term for 'power-slide over-steer' and it has been a trend that has migrated from suburban Japan to across the world in the last 20 years, popularised by the availability of affordable powerful used cars and coverage via high-visibility public and private media platforms.
A plethora of 1990s-2000s sports-coupes and performance saloons became available – typified by the Mitsubishi Starion / GTO (its named derived from former Pontiac and the pre-cursing original Ferrari), the Toyota 3000GT / Supra / Soarer, the Nissan 200SX /350Z, the Honda Prelude. This trend generated the iconic Subaru Impreza & Mitsubishi Evo - the rallying achievements of which set the tone for drifting and stunt-driving – followed by the 'FWD' 'Hot 4s' such as Honda's Integra and Type-R series.
As stated, popularisation was generated by initially coverage by mainstream broadcasters of side-show events at official motor-sport, with the trend trickling down amongst dare-devil youngsters (and the not-so-young) which was self-promoted via typically camera-phones and video-phones, the scenes of which were and are uploaded to primarily youtube.com and other similar social-media sites.
Aided by video-console games such as Grand Theft Auto and a raft of driving games, the first decade of the 2000s has seen a massive growth in this youth-culture phenomenon, it being a natural result from 20 and 30 somethings previously high disposable income levels, the parallel game-related virtual world and ever greater need for status. Thus the amalgum created a turbo-charged car-culture.
Yet it of course also comes with high social and economic costs. Costs which national governments and regional police forces obviously identify as detrimental to the overall public good. Of course, well policed, ably governed city-centres, suburbs and environs typically limit the ability of potentially dangerous, adrenalin-charged drivers (and 'egg-on' passengers) to do as they please.
But even in such controlled areas - as typically seen in Japan, the UK and across Northern Europe - the two obviously opposed agendas of youth and police often leads to a type of 'hide & seek' eventuality that creates an unfortunate climate of ever greater risk-taking. This picture especially seen across the cities and towns of more provincial areas where arguably the car serves a greater ability for enjoyment, and that all important 'momentary escape' from the all too real 'hum-drum' of dis-satisfied young lives.
Today the Drifting trend is virtually global, from the archetypical night-scapes of neon-lit Tokyo Prefectures that give a road-grid for Japanese rich-kids, to the day-time adventures of newly motorised yet essentially poor twenty-somethings in Sao Paulo; using minimally-powered but crucially RWD cars.
[NB Given the inescapable fact that most affordable small cars are FWD, there has also been wide-spread use these].
Yet it is across the Middle-East that both types of rich and not so rich 'Aspirant Hero Drifter' are seen. Side by side within the ever-developing cities and geographically spanning quite remote regions separated by vast tracts of desert and very different regional economic fortunes. These of course linked by desert roads and the automobile.
From Abu Dhabi in the UAE, to Jeddah in Saudi Arabia to Aden in the Yeman, the availability of cheap oil, the socialized male 'entitlement' to the car and the high rate of infrastructure build (which provides new roads and the 'room to play' on de-congested highways) when combined means that in many cases (as with the west) the car has been re-utilised as part personal toy from its previous role as practical family tool. This runs across the social spectrum, but of course is most evident within the indigenous young male population who tend to enjoy high levels of personal income plus no or limited personal responsibilities.
So the activity has become a niche aspect of an already ingrained Arabic vehicle culture. One which spans a broad diversity from supercars to humble hatchbacks, from 'desert adventure' 4WDs to antiquated haulage trucks. Indeed, without wanting to appear blasphemous - vehicles have become almost physical icons with powerful significance. Sheikh Hamah bin Hamdan Al Nahyan demonstrates this with his giant-scale classic Dodge Powerwagon (eight times original size and acts as a house on wheels), his globe motorhome (one millionth the size of the earth), and his 200 item car collection that is open free to the public. As is evident, the car has almost as much cultural significance as the Camel or the Falcon.
So unsurprisingly, it has become an inward and outward expression. In the same vein as has been the case for the US with previously the 1950s James Dean types driving stripped pre-WW2 Ford coupes in the Mid-West, or the filmic inspired 'Blaxpoitation' Caddy's and Lincolns in 1970s Harlem, or the long history of Latino association with 'low-rider' Chevy Impalas and similar throughout Southern Californian and Florida.
This desire for 'tribal' self-expression comes in many forms: aesthetic and dynamic and has been a major aspect as how car culture has developed within all global regions.
Thus Arabia effectively mirrors and endeavours to develop what is seen on the US west coast scene. That as a 'start-point' the endemic Arab vs American differences, almost spurring on the Arabic youth in a competitive manner. Many go to extremes with vehicle development to metaphorically 'out-gun' the West, being bigger, better or braver; and so arguably go driving extremes to compete not just locally amongst peers, but also internationally upon the more virtual world stage enabled by youtube etc. Most extreme-driving participants will argue that they are in control of theie vehicle, and indeed 99% of the time this is the case given the high level of driving skills nurtured. But this of course leaves the 1% room for error.
Indeed 'drifting' per se has been adapted to what is know as the 'Saudi Drift' which comprises essentially of stunt-style show-boating on broad straight-roads in near deserted periphery districts.
As for the socially concerning act of stunt driving and traditional 'drifting', it has become a popular escapade amongst all Arab classes, indigenous and immigrant; from the flagrantly mega-rich with say a 'top-end' Porsche GT, Mercedes SLR or Aston Martin, to the 'mere' wealthy in BMW M5 series, to the middle classes in Toyota Camrys and Honda Accords, and even amongst those at the bottom of the ladder (who are typically male immigrants who financially club together to buy a car for both work transport and motorised weekend and holy-day fun).
[NB obviously powerful front engined, rear wheel drive models are better 'facilitators' whilst mid-engined Porsche's and Ferraris offer greater 'challenge' to participants, but also more dangerous social consequences given the inability to 'play' a mid-engined car so easily].
The ruling elites and police forces have watched this socialized male 'outlet' grow over the years, but no doubt find themselves caught between a rock and a hard-place, given that they must recognise both the social role this phenomenon offers as a 'socio-cultural glue' set against the high potential for personal and community tragedy.
Importantly, general car-culture and the popularity for Drifting is perhaps more prolific in the Arab world given its historic and endemic reverence regards 'manliness' and the innate hierarchical nature of the societal framework. And as such, thus encapsulates a broader age-range of the male demographic. Moreover, as seen in the west, the emergence of increasingly emancipated young women within a freer social scene offers both a new dimension to the all-male car culture, but also assists the 'drive' toward greater showing off and so propensity for danger.
So undoubtedly questions surround this pursuit of auto-entertainment, one which which has both its left and right feet respectively planted in sociological and economic roots. These are the roots that the governing classes are trying to husband by creating new branches which when ideally managed promote regional development, social integration and reduce the potential for social harm.
Moving the wealthy street-racers (who act as social leaders) from the suburbs and onto officially authorised and typically government-grant developed [F1 and GT class level) race-tracks has been a major effort over the last 5 years or so. Tracks such as Abu Dhabi's Yas Marina, Bahrain's International Circuit, Jeddah Race Way and the Losail Circuit in Qatar have been either specifically built or are being upgraded to not only encourage world-class motor-sport events that highlight a nation's standing, but also draw in amateur race events and public track-day events. These theoretically critically offer the track owners a smaller though more stable 'year-round' income stream, and offer a safe yet competitive environment for wealthy locals to play at being motoring heroes.
Furthermore, the development of these locations into broader entertainment parks, spanning music concerts, festivals and complete entertainment complexes - such as Ferrari World on Yas Island - add yet greater commercialisation opportunities, which also add to the social fabric of the city or state.
As seen perhaps most evidently at Yas Marina, beyond the obvious income-stream of Ferrari World type projects, a vitally engrained design remit when building these kind of infrastructure projects is to integrate within the architecture both the innate Arabic spirit and the desire to create globally iconographic silhouettes. To demonstrate that the Gulf respects its history and yet should be regarded as thoroughly modern
This ambition to promote historic and modern* 'Arabic Culture', aswell as demonstrating the Middle- East as the new 'Global Cultural Hub', has obviously been part of the regional development agenda for some years. Hence the new construction work – in the midst of the construction slowdown – that sees new satellite locations for The Louvre in the UAE and Saudi Arabia, and for the The Guggenheim also in Abu Dhabi, on Saadiyat Island. Internationally, Islamic Art has come to the for recently with exhibitions and auctions, such as the recent Sotheby's event, which primarily showcased contemporary works ranging from early 20th century European influenced Arabic works to late modern works.
Thus, clearly the 'east-meets-west' globalisation effect is regaining strength after the tensions of the last decade, with satellite museum and gallery projects helping to re-establish those inter-cultural links that have historically grown and waned.
[NB Here the news that Pearson Publishing's iconic 'Penguin Classics' brand will be serving the Mid-East market renowned western titles whilst also re-publishing classic Islamic texts is culturally and geo-politically a very welcome development].
Although there has been a strong vocalisation of opposition to such global commercialisation of museums and a galleries – typically by groups of curators and academics – such important cross-fertilization should be applauded since it both transmits-out and absorbs-in differing influences at artistic, popular and public levels. This especially important to the young who will have either studied in Europe or the US, or had wished they had been able to. Whilst the Mid-East is far far more informed about western ways than most outside the region would believe, this 2-way bridging of higher-brow cultures is important. Why shouldn't an American can read 'The Rubaiyat of Omar Khayyam', whilst a Bahraini reads Byron?
The Royal families and ruling elites of the Middle-East no doubt well recognise the importance of cultural development on local, global and ideally 'glocal' levels.
Hence the key will be to identify how the Arab culture can evolve within the context of previously dominant European and American cultures, yet also alongside those new cultural forces emerging from China,India, Brazil and elsewhere.
Thus having as broad a 'picture-scope' as possible will be key in the ongoing economic develop of the Gulf, as its seeks to continues to expand beyond reliance on oil & gas, yet also has learned from the property bubble that both helped and hindered its diversification plans.
As seen in Qatar, “Education, Education, Education” is seen as a prime pillar for future capability and expansion, the work of Sheikha Moza bint Nasser Al-Missned combined with public funding attracting big-name institutions from the US. Yet as has been seen, the apparent educational capacity has yet to filled, with the question of the ratio between local and foreign students seemingly unfixed and perhaps intendedly flexible.
Yet finding a way to deepen the presence of, and ideally marry, the arts, the sciences and use commerce as an enabler will be key. Using the academic realm to leap-frog other nations' R&D and industry sector capabilities where possible. The Qatari Royals know that will be the starter motor for the newly build economic engine.
And it is perhaps in the ambitions and hands of the 'internationally minded' young that progress will be made, ideally aiding the creation of investment possibilities within the automotive sector and its affiliate sectors, including the potential for technology-transfer. Even though automotive is thought to sit relatively low on the development agenda – surpassed by what is viewed as higher-value pharmaceutical, eco-energy, telco and the like – it is a value-generative force that should be harnessed. Especially so given the auto-obsession of the Arabic youth.
The regional web-logs devoted to local car-culture and drifting are peppered with English-based conversation between informed and educated members of the Arab youth, which highlight that the participants of this craze are anything but the 'brainless and bored' contributors of many global car-culture web forums. There is recognition amongst portions of the higher-brow young that the activity deservedly has a bad name given the irresponsibility that it both draws towards it, and indeed draws out of participants. Hence even the young see the need for improved control, but a control that does not eradicate the adrelin rush, or fragment the 'tribal bond building'.
What is noticeable is the desire for the youth of the Arabian countries to develop their own forms of self-expression, themselves noting that car-culture effectively started in the US - as have most modern trends – but also noting how it was Japan that evolved its own car culture to reflect its own identity – such as the Samurai Warrior tradition. These now global trends in turn being both absorbed and adapted (ie the 'Saudi Drft'), with what seems an intense desire to 'self-create' in their chosen fields. In short an identity led evolution of 'nation-layered' car culture.
This then is good news since it demonstrates that there exists a willingness by the though-leaders of young car-obsessed Arabians that this sphere has evolutional potential. To move beyond what are essentially imported car-crazes seen at the social level, and the imported (motor-sport) business models at the economic level.
The islamic world has in the past had grand ambitions regards regards the automobile, but in reality little has emerged as permanently to date. This ranges from Malaysia's previous ambition for its domestic Proton to become the archetype high volume 'Global Islamic Car', to at the other extreme of niche manufacture, the UK based Persian entrepreneur Arash Farhad developing high-end supercars. In the GCC, an intendedly grown core competence for aluminium smelting has generated spin-off sectors such as alloy-wheel casting and fabrication, yet these items are in turn exported for high-quality finishing elsewhere. This probably part of a trade-pact agreement amongst Arab states or Asia, given possible high labour content, yet it does also highlight the need to walk-up the value chain.
Thence, just as the GCC wishes to bridge international cultures, so it must build a staircase between its present low-value manufacturing and service capabilities and its high-value aspirations. To do so its member states must continue to investigate, adopt and possibly adapt a commercial framework drawn from past experiences both to its East and to its West.
It was hoped some years ago that the partially Middle-Eastern owned Aston Martin Lagonda could have constructed its new 'Rapide' 4-door coupe in the region. But from CEO's (Ulrich Bez's) perspective, the commercial obstacles and risk involved proved (rightly) too much of an idealistically-driven gamble.Too much of a risk to the company itself, then facing the real need for an additional model income stream, and of course its profit-sharing responsibility toward its shareholders.
Yet that flailed ambition would provide insight and future guidance, and so should be deeply investigated as a case study, the conclusion and recommendations of which to be used as a building block in creating that much needed 'developmental staircase'.
In short, the time seems right to halt the 'automotive cultural drift' witnessed at both social and economic levels, and to identify exactly how the car and the context of its use, can instead be used as a dual purpose 'perpetual motion vehicle' - something that sits equidistant between its new infrastructure projects and its renewed artistic heart.
As the sands of time shift, so should focus on the GCC's automotive world.
Wednesday 24 November 2010
Company Focus – GM – IPO: Re-Creating the Mighty Economic Cog.
Last week saw the long-awaited return of 'New GM' to the capital markets. As previously mentioned, the timing of its return and that of the drip-fed $600bn stimulus announcement appear - on the surface at least - to demonstrate the US government's willingness to partially stage-manage events to ensure that GM was – and will be implicitly well buoyed.
The post-Chapter 11 process of renewal has seemingly gone 'swimmingly': the speedy restructuring effort witnessing an (incredible $27bn) abolition of creditor rights, a re-alignment of UAW expectations to 'real-world' levels, capacity reduction to suit the peak to trough loss of 6m TIV units (thus profitable at 10.5m production), the shrinkage of the supplier roster to gain volume efficiencies, 4 legendary but poor performing brands/divisions either sold or moth-balled, inventory slashed, dealership numbers cut to promote local profitability, etc etc.
In short, the necessary formulaic strategic and operational business revision required across the board in North America, aspects of which should have taken place in an ordered controlled manner over the preceding years to provide an over-bloated inefficient company with the ability to right-size itself as macro-economic headwinds demanded.
The argument that it was purely the unexpected dramatic loss of sales and loss of access to wholesale credit that felled old GM is far too simplistic. [NB General Dynamic noted the need for US industrial change back in the early 1990s, and though the profitability of the 'SUV era' obviously post-poned the necessary re-structuring shock, the very basic premises of “Who Says Elephants Can't Dance” was always a very basic set-play template for old GM. One it chose to ignore].
However, “the past is another country” as they say – a phrase that is all too prosaic to the average American – and so GM has been re-born into what seems a very different place to that of 3, 5 or 10 years ago, where the US's ability to set the industrial global agenda has been diminished. Yet as a global company, GM obviously operates across all continents and nigh on all nations. Whilst it light-heatedly reports its dominant 85% market share of Kazakhstan's small market it does so to try and highlight its acceptance in EM, EM+ and developing nations; even though such individual successes maybe more accordant to US foreign-policy efforts.
This historical military-backed and capital-markets assisted 'soft-power' that helped GM's rise in the 20th century for nigh on 80 years. However the US is unarguably loosing its dominant grasp across the world as EM(+)(+) economic growth garners independent confidence and such nations use their own political positioning between the US and China for their own ends. Hence without that level of 'direct' previous politically aided dominance, GM will have to fight for its share of mind and market increasingly by its own efforts.
But perhaps not quite yet!
Since the renewed GM gains from additional political leverage in the short and mid-term. A combination of the recent $600bn US QE2 stimulus measure announced will continue to erode the US Dollar – even in the face of momentary reversals caused by volatility in other currencies; as seen with the Euro recently and possibly the S. Korean Won if cross-border hostilities continue.
This in turn of course buoys both US exports and continues the US$'s role as a carry-trade currency (given its near zero percent interest rate) which when 'recycled' in turn provides speculative uplift to the multi-material commodity trading market. Recent days have seen this uplift falter as 'risk-off' activity is swayed by Chinese slowdown concerns, and so provide an excuse for profit taking; but the fact that so many commodity types are both physically and derivatively traded in US$ (given regional $-pegs etc) suggests that the 'risk-on' mode will return.
The drip feed stimulus of course assists all US 'home-players' as they benefit from the $600bn powered expansion of wholesale credit markets for corporate use, and its feed-through into the retail credit market via both captive finance houses (ie Ford and Chrysler) and those 'associated' (ie GM with Ally).
This also provides the Detroit 3 (and GM especially) with global commodity purchasing power, able to counter-act the last few year's trend for primary and secondary sector players (typically miners and processors) to call the pricing shots based on then short-supply materials.
Thus the new Obama package allows the US domestics renewed credit vigour relative to their home market and a type of 'pincer movement' at both ends of the supply chain on the global stage. The aforementioned 'commodities grab', plus critically either the ability to enact a 'pricing-power' fight in ROW regions given the devalued US$, or maintain localised pricing and benefit from an tailwind of FX improved repatriated income from its ROW operations.
Thus GM (and Ford & Chrysler) have in reality little to complain about, whilst their international competitors (and international politicians) very probably see the implicit Washington interventionism for what it explicitly is!
Macro global dynamics demonstrate that the RoW EM regions are on a one-way upward trajectory and have been for a decade, so GM's task is to hold and ideally grow its individual nation market-shares in EM regions as their economies give a rising tide to all credible automotive manufacturers.
Thus, the IPO floatation was almost designed around the fact that all boats will be lifted by continued though slowed EM market growth. Its timing aligned to the stimulus announcement and drip-feed to provide a 'kick off the starting blocks'. This will be readily recognised by leading institutional & SWF investors, and investment-auto-motives believes, was a major reason as to why the natural demand-base of GM stock-buyers switched from being foreign 'long-range' funds and SWFs to primary demand stemming from domestic US institutionals.
[NB Saudi Arabia's 'Kingdom Holding' run by Prince Alwaleed bin Talal well recognising the impetus of Dollar mutuality between its own national resource base and GM's 'kick-start'; hence its $500m holding of GM, representing 1% of the new subscription].
Yet, ultimately important investors will want to see GM master is the ability to not just match, but beat the EM region TIV rise. Done so with competitive new product, hard-line UAW re-negotiations in 2011 (to which it should hopefully continueto accord), new levels of customer service provision etc; so that when combined with a new 'trim' business mentality it can offer rebuoyed global presence, good unit margins and so ideally leading mainstream producer ROIs. Thus an ability to not just out-muscle Detroit's Ford & Chrysler (as it has always done) but critically against the Japanese powerhouses suffering from Yen strength, and the South Korean brands still globally-bound by their high exportation levels. And importantly to try and be seen as a true competitor to Volkswagen given its pre-eminent position in China and South & Central America.
[NB as of 24.11.2010 VW PfD sits at around E119.00, whilst GM Co sits at $33.48. VW benefited from a rocketing ride over the last 12 months, up 108% in a sector that on average saw only a 27% rise. GM Co is up just 48c from its debut price last week, and as stated in previous posts is set to trade flat until the stimulus monies work through the capital markets and starts the GM price lift].
GM has to yet prove it's renewed 'global' ambition is not simply a 'rising all boats' default of inherited regional presence in China, Latin America, SE Asia and the Middle East. Efforts such as the new Cadillac city-car concept seen at the LA show (the Cadillac Urban Luxury Concept) typify the GM 'show-boating' that it has always under-taken on the PR front to present itself as a contemporary brand, but the reality is that presently in its home market it is not even represented in the top 5 of most popular models sold – coming in at number 6 with Malibu: destined to slide as it ages.
With so much expectation abound from the expanded range of stakeholders, new GM cannot let itself simply 'drift' on the back of: 1) the multi-aspect stimulus 'piggy-back' that exploits the supply chain and international markets, and 2) the fat of the EM+ lands.
Presented at $33.00 to the markets, GM Co must prove that it is worth its relative (pricing-metrics) 'super-valuation' to its obvious counter-part Ford and the myriad of other auto-sector players, old and new.
Almost poetically, the GM Co IPO was preceded by BitAuto.com, an NYSE listing of a Chinese-based on-line car dealer-price comparison site, and was followed by Aeroflex Holding Corp which deals in high-value micro-electronics systems. By virtue of their appearance, these two 'neighbours' serendipitously illustrate the importance of GM's own future ability for self-control: to both be master of its higher integral-value product design process, and its handle on what is still a very transparent and price malleable vehicle market-place.
GM has had its enforced 'weight-reduction' regime, and has had its 'push-off-the-blocks'; now it must show its corporate 'muscle-building' potential to all, but especially so those US and foreign entities who have financially backed the General, and by virtue assisted re-couperation of the US economy. The heart of the GM wealth-creation engine is seen throbbing, and the cogs of the financial transmission mechanism meshing, now it needs to prove its previous 'market torque' to show it has a truly bounce-back corporate rubber soul, since many heads of industry, finance and government are looking on after providing record assistance.
The post-Chapter 11 process of renewal has seemingly gone 'swimmingly': the speedy restructuring effort witnessing an (incredible $27bn) abolition of creditor rights, a re-alignment of UAW expectations to 'real-world' levels, capacity reduction to suit the peak to trough loss of 6m TIV units (thus profitable at 10.5m production), the shrinkage of the supplier roster to gain volume efficiencies, 4 legendary but poor performing brands/divisions either sold or moth-balled, inventory slashed, dealership numbers cut to promote local profitability, etc etc.
In short, the necessary formulaic strategic and operational business revision required across the board in North America, aspects of which should have taken place in an ordered controlled manner over the preceding years to provide an over-bloated inefficient company with the ability to right-size itself as macro-economic headwinds demanded.
The argument that it was purely the unexpected dramatic loss of sales and loss of access to wholesale credit that felled old GM is far too simplistic. [NB General Dynamic noted the need for US industrial change back in the early 1990s, and though the profitability of the 'SUV era' obviously post-poned the necessary re-structuring shock, the very basic premises of “Who Says Elephants Can't Dance” was always a very basic set-play template for old GM. One it chose to ignore].
However, “the past is another country” as they say – a phrase that is all too prosaic to the average American – and so GM has been re-born into what seems a very different place to that of 3, 5 or 10 years ago, where the US's ability to set the industrial global agenda has been diminished. Yet as a global company, GM obviously operates across all continents and nigh on all nations. Whilst it light-heatedly reports its dominant 85% market share of Kazakhstan's small market it does so to try and highlight its acceptance in EM, EM+ and developing nations; even though such individual successes maybe more accordant to US foreign-policy efforts.
This historical military-backed and capital-markets assisted 'soft-power' that helped GM's rise in the 20th century for nigh on 80 years. However the US is unarguably loosing its dominant grasp across the world as EM(+)(+) economic growth garners independent confidence and such nations use their own political positioning between the US and China for their own ends. Hence without that level of 'direct' previous politically aided dominance, GM will have to fight for its share of mind and market increasingly by its own efforts.
But perhaps not quite yet!
Since the renewed GM gains from additional political leverage in the short and mid-term. A combination of the recent $600bn US QE2 stimulus measure announced will continue to erode the US Dollar – even in the face of momentary reversals caused by volatility in other currencies; as seen with the Euro recently and possibly the S. Korean Won if cross-border hostilities continue.
This in turn of course buoys both US exports and continues the US$'s role as a carry-trade currency (given its near zero percent interest rate) which when 'recycled' in turn provides speculative uplift to the multi-material commodity trading market. Recent days have seen this uplift falter as 'risk-off' activity is swayed by Chinese slowdown concerns, and so provide an excuse for profit taking; but the fact that so many commodity types are both physically and derivatively traded in US$ (given regional $-pegs etc) suggests that the 'risk-on' mode will return.
The drip feed stimulus of course assists all US 'home-players' as they benefit from the $600bn powered expansion of wholesale credit markets for corporate use, and its feed-through into the retail credit market via both captive finance houses (ie Ford and Chrysler) and those 'associated' (ie GM with Ally).
This also provides the Detroit 3 (and GM especially) with global commodity purchasing power, able to counter-act the last few year's trend for primary and secondary sector players (typically miners and processors) to call the pricing shots based on then short-supply materials.
Thus the new Obama package allows the US domestics renewed credit vigour relative to their home market and a type of 'pincer movement' at both ends of the supply chain on the global stage. The aforementioned 'commodities grab', plus critically either the ability to enact a 'pricing-power' fight in ROW regions given the devalued US$, or maintain localised pricing and benefit from an tailwind of FX improved repatriated income from its ROW operations.
Thus GM (and Ford & Chrysler) have in reality little to complain about, whilst their international competitors (and international politicians) very probably see the implicit Washington interventionism for what it explicitly is!
Macro global dynamics demonstrate that the RoW EM regions are on a one-way upward trajectory and have been for a decade, so GM's task is to hold and ideally grow its individual nation market-shares in EM regions as their economies give a rising tide to all credible automotive manufacturers.
Thus, the IPO floatation was almost designed around the fact that all boats will be lifted by continued though slowed EM market growth. Its timing aligned to the stimulus announcement and drip-feed to provide a 'kick off the starting blocks'. This will be readily recognised by leading institutional & SWF investors, and investment-auto-motives believes, was a major reason as to why the natural demand-base of GM stock-buyers switched from being foreign 'long-range' funds and SWFs to primary demand stemming from domestic US institutionals.
[NB Saudi Arabia's 'Kingdom Holding' run by Prince Alwaleed bin Talal well recognising the impetus of Dollar mutuality between its own national resource base and GM's 'kick-start'; hence its $500m holding of GM, representing 1% of the new subscription].
Yet, ultimately important investors will want to see GM master is the ability to not just match, but beat the EM region TIV rise. Done so with competitive new product, hard-line UAW re-negotiations in 2011 (to which it should hopefully continueto accord), new levels of customer service provision etc; so that when combined with a new 'trim' business mentality it can offer rebuoyed global presence, good unit margins and so ideally leading mainstream producer ROIs. Thus an ability to not just out-muscle Detroit's Ford & Chrysler (as it has always done) but critically against the Japanese powerhouses suffering from Yen strength, and the South Korean brands still globally-bound by their high exportation levels. And importantly to try and be seen as a true competitor to Volkswagen given its pre-eminent position in China and South & Central America.
[NB as of 24.11.2010 VW PfD sits at around E119.00, whilst GM Co sits at $33.48. VW benefited from a rocketing ride over the last 12 months, up 108% in a sector that on average saw only a 27% rise. GM Co is up just 48c from its debut price last week, and as stated in previous posts is set to trade flat until the stimulus monies work through the capital markets and starts the GM price lift].
GM has to yet prove it's renewed 'global' ambition is not simply a 'rising all boats' default of inherited regional presence in China, Latin America, SE Asia and the Middle East. Efforts such as the new Cadillac city-car concept seen at the LA show (the Cadillac Urban Luxury Concept) typify the GM 'show-boating' that it has always under-taken on the PR front to present itself as a contemporary brand, but the reality is that presently in its home market it is not even represented in the top 5 of most popular models sold – coming in at number 6 with Malibu: destined to slide as it ages.
With so much expectation abound from the expanded range of stakeholders, new GM cannot let itself simply 'drift' on the back of: 1) the multi-aspect stimulus 'piggy-back' that exploits the supply chain and international markets, and 2) the fat of the EM+ lands.
Presented at $33.00 to the markets, GM Co must prove that it is worth its relative (pricing-metrics) 'super-valuation' to its obvious counter-part Ford and the myriad of other auto-sector players, old and new.
Almost poetically, the GM Co IPO was preceded by BitAuto.com, an NYSE listing of a Chinese-based on-line car dealer-price comparison site, and was followed by Aeroflex Holding Corp which deals in high-value micro-electronics systems. By virtue of their appearance, these two 'neighbours' serendipitously illustrate the importance of GM's own future ability for self-control: to both be master of its higher integral-value product design process, and its handle on what is still a very transparent and price malleable vehicle market-place.
GM has had its enforced 'weight-reduction' regime, and has had its 'push-off-the-blocks'; now it must show its corporate 'muscle-building' potential to all, but especially so those US and foreign entities who have financially backed the General, and by virtue assisted re-couperation of the US economy. The heart of the GM wealth-creation engine is seen throbbing, and the cogs of the financial transmission mechanism meshing, now it needs to prove its previous 'market torque' to show it has a truly bounce-back corporate rubber soul, since many heads of industry, finance and government are looking on after providing record assistance.
Wednesday 17 November 2010
Macro Level Trends – UK plc – The Royal Reflection in a Marriage of Culture and Commerce.
Sometimes a close juxtaposition of events can be telling sign of the times.
The London announcement of the engagement between HRH Prince William and Katherine Middleton is followed a day later by the New York/Toronto listing of General Motors.
Of course, on the surface, the worlds of Royalty and Commerce are polar opposites, in days gone by the aristocracy – let alone royalty - wouldn't allow their family names to be 'sullied' by the notion of being directly linked to 'trade'. Instead, in the historical tradition of leadership a military career was followed, balanced by cultural learning and pursuits to help provide a rounded character.
Yet the 19th, 20th and early 21st centuries all saw fundamental change in the very foundations of the western social structure were, a re-setting exemplified by the decline of European aristocracy, the rise of American, European and latterly Asian industrial families, with an inter-linking of 'blue-blood' with 'new money'. A minute step-by-step change social ways. That integration of changed social attitudes perhaps best reflected by the abdication of the throne by Edward VIII for Mrs Simpson, and the end of the Debutant's London Ball in the 1950s . That decade also witnessed an emergence for strong post WW2 US-Euro political ties, and was thus bolstered by the coupling of the Prince of Monaco and (Hollywood's) Grace Kelly; almost as scripted to buoy public perception.
This level of convergence between different worlds is of course not quite the case for William and Katherine given their mutual roots from St Andrews University. This somewhat to the chagrin of the popular press who hope to portray the marriage as an archetypical modern-day princess fairytale. Thus, akin to the stories told about the Prince of Denmark and Princess of Sweden marrying non-titled partners.
Instead, the real story seems to be a meeting of personal minds and outlook, yet also representing the proto-social context which recognised the need for social evolution of the monarchy. An evolution which demands (to be candid) 'solid stock breeding' with the right attributes as well as national popularism to re-spark the very meaning of monarchy as the new generation matures. In short, a story of adaption to the increasingly speedily evolving modern world, one in which at this time of austerity, core British values are seen to overtake the traditional halo of 'pomp and circumstance'. Hence, the beginning of the 21st century sees a dwindling of overtly brandished heraldry and 'distance' – though necessarily maintained for formal occasions.
Instead, recognising that the very nature of militarily derived pageantry and formality has been 'counter-foiled' to a great degree by the 'cut and thrust' domination of global commerce in an ever expanding 'globalised' world.
Thus, a long and ongoing re-orientation from the obvious yesteryear 'show of might' to recognising the importance of soft-power within commerce is of course common to all royal families. This greatly assisted by a past knowledge of shared interests and values that underpin trustworthy working relationships amongst European and international royals and their representatives.
This is well illustrated by the most recent commercial deal between the Crown Estate and the Norwegian SWF via a 25% leased sale of its Regent Street property base.
Most monarchies were built upon land interests given the greater importance of that resource in the past. That accrued wealth still very much evident today, yet the modern commercial world is a far cry from from a feudal agrarian world, or that of new-land exploration, or indeed that of industrialised manufacture. Today specific agricultural and specific manufacture activity occupy only a small portion of any advanced, globally traded, capital market:whether that be the FTSE500, S&P500, TSX index, the CAC30, HKSE's Hang Seng index or similar elsewhere.
This is part and parcel of the modern commercial world, one build over the last century and one in which investment banks increasingly took charge of the commercial reigns from those royal and aristocratic families who historically had reigned the local and international econonomies.
However, relative to the modern-day royal remit, the significance of a willful yet fair character is still key - this assisted by formal military training via Sandhurst or elsewhere – and so must not be relegated or dismissed. Such character-forming generating in the past an ability to obtain land, build empire and rule over it. Yet it and more is still core today; a timeless capability stemming from a convergence of both self-discipline and ambitious attitude. Character formation, and in particular the slant of educational learning in an ever expanding and complex world, remains key.
And it is here, regards the traditional nature of royal education, that an argument could be set forward that purports greater acclimatisation - indeed submersion - within the commercial arenas by which a country and the world turns.
Short active military careers followed by symbolic leadership obviously remain necessary, as does the need to cultivate a sensibility to the arts/humanities, yet more important that ever is the need to nurture an understanding of the commercial world that lies between these 2 realms, a world in which competition and creativity are central tenants to national (and sovereign) success.
Industry, commerce and trade are typically built upon a merging of the sciences and arts, brought together by a plethora of strategic, operational and managerial methods.
Any aspirational prime minister or chancellor will have undoubtedly formally and/or informally studied PPE (Politics, Philosophy & Economics) yet whilst historically also the domain of a well-educated royal, the set learning path may be inadvertently restricted to 'the norm' of military and the arts, whilst giving less regard to the central elements of the modern industrial and commercial machine.
This may or may not be the case, but if so begs attention.
In a metaphorical sense, just as perhaps Prince Charles will know by heart the key historic schools/themes of architecture and their intrinsic elements & methods (most obviously Palladian) so the architecture of the industrial and service based commercial world – in both its vertical depth and horizontal stretch – should be an engrossing subject of study for all young royals; thus able to provide tangibility to the normal absorption of PPE.
This has been the case for the aristocracy who since the late Victorian age – and especially post WW1 – became greater participants in 'the City', mimicking the sons (and latterly daughters) of the American 'nouveau -riche' industrialists. The path into stock and bond brokerage and latterly all-important corporate financial analysis became a well trodden one for many, firstly in the 'new world' then in the 'old-world' and now amongst the increasingly powerful of the 'emergent-world'.
Prince William is an RAF flight-officer within a 'Search and Rescue Force', which itself is a prescient commercial case-study of the cost-benefit analysis under which all of the UK's Armed Forces are being scrutinised.
As non-core to national defence, the 'SARF' division/wing is in future to be run with a far more analytical bearing to ensure economy and efficiency whilst also providing a more than adequate rescue cover for the coastline, seaboard and inland areas.
This transition of the activity from being state run to privately run is perhaps a prime learning opportunity for Prince William, and his fellow officers who themselves will act as industry facing representatives. After all, the very nature of the UK's military forces are changing, and so affecting their scope, shape and function, to both better fit inherent demands and the new-era economic climate.
[ NB. The contract has been awarded to Soteria, a consortium of Thales, CHC helicopter operator and the Royal Bank of Scotland – to use the Sikorsky S92 model]
investment-auto-motives suspects this is very well the case already, indeed the rational for his placement in SARF; which by its changed name denotes its changed standing. Yet perhaps beyond any purely 'conceptual' exposure to this 'real-time' subject, a deep and possibly expanded 'business studies' investigation could be undertaken by HRH and others, to fully appreciate the commercial challenges, ramifications and opportunities, such a service re-alignment makes for the companies involved and the nation itself. A kind of case-study where the likes of 'Sandhurst meets the LSE meets MIT meets Harvard/INSEAD'. Where SARF can be evaluated in-the-round from national interest, economic, technical and strategic viewpoints.
[Obviously investment-auto-motives views the re-birth of GM as a parallel exercise given the involvement of Canadian 'bail-out' monies which appear to have required agreement from The Queen and/or her council. This would also provide appreciation of the expansiveness and international reach of the global auto-industry ].
Such a task (or tasks) could be onerous depending upon its scale, especially for a full-time serving officer, but if it is not already the case that young royals are exposed to such multi-dimensional perspectives, this could be a golden opportunity. For both themselves as educational insight, and to possibly co-create a learning template that could be ascribed to latter-day officers who, in a new era, cannot afford to be unexposed to the realities and impact of commercial issues on the armed forces.
It seems that historically, it has been the case that those individuals ranked Major or above have been the ones tasked to be industry facing as part of their own expanded responsibilities. This late exposure to the commercial imperative may in the past have been seen to be problematic as the cultural chasm between the 2 worlds has caused communication, expectation and over-run/over-cost problems. (The fault equally shared between 2 distinctly different worlds). So the second decade of the 21st century could mark a turning-point where-by lower-ranked and typically younger officers are given a much better commercial grounding and exposure.
Again, this may well be all in hand, and if so 'all to the good'. Yet as this transition moves forward so the royal family itself could be seen to be active in bringing together these 2 worlds. And equally so, perhaps use that learning – and broadened exposure - to perhaps become a greater force in helping to steer the inherent interests of the royal family, across the spectrum, from the 'invisible' operations of the Crown Estate all the way through to the 'highly visible' aspects such as Palace & Castle tours and souvenir goods, through to the expanding business-lines and broadened retail channels of 'Duchy Originals'. Plus perhaps yet more.
Today's commercial world is under-going a massive period of re-formation, one in which professionalism, courtesy and trust are needed as never before to regenerate the economic machine. Yet also at this time TV series such as 'The Apprentice' have done a true dis-service to the business world by seemingly condoning and promoting a self-serving, Machiavellian mindset; something noted time and time again by commentators in the financial press.
Thus, about time that a better face to business be painted, to both inspire and encourage tomorrow's entrepreneurs, board-members and middle-managers. This impetus could feasibly be symbolically led by the younger members of the royal lineage, who are set to build upon the efforts of their forebears, and can espouse a much needed 'honourable face' and 'intelligent mindset' for UK's 20 & 30-somethings aswell as within the realms of national and international commerce.
The London announcement of the engagement between HRH Prince William and Katherine Middleton is followed a day later by the New York/Toronto listing of General Motors.
Of course, on the surface, the worlds of Royalty and Commerce are polar opposites, in days gone by the aristocracy – let alone royalty - wouldn't allow their family names to be 'sullied' by the notion of being directly linked to 'trade'. Instead, in the historical tradition of leadership a military career was followed, balanced by cultural learning and pursuits to help provide a rounded character.
Yet the 19th, 20th and early 21st centuries all saw fundamental change in the very foundations of the western social structure were, a re-setting exemplified by the decline of European aristocracy, the rise of American, European and latterly Asian industrial families, with an inter-linking of 'blue-blood' with 'new money'. A minute step-by-step change social ways. That integration of changed social attitudes perhaps best reflected by the abdication of the throne by Edward VIII for Mrs Simpson, and the end of the Debutant's London Ball in the 1950s . That decade also witnessed an emergence for strong post WW2 US-Euro political ties, and was thus bolstered by the coupling of the Prince of Monaco and (Hollywood's) Grace Kelly; almost as scripted to buoy public perception.
This level of convergence between different worlds is of course not quite the case for William and Katherine given their mutual roots from St Andrews University. This somewhat to the chagrin of the popular press who hope to portray the marriage as an archetypical modern-day princess fairytale. Thus, akin to the stories told about the Prince of Denmark and Princess of Sweden marrying non-titled partners.
Instead, the real story seems to be a meeting of personal minds and outlook, yet also representing the proto-social context which recognised the need for social evolution of the monarchy. An evolution which demands (to be candid) 'solid stock breeding' with the right attributes as well as national popularism to re-spark the very meaning of monarchy as the new generation matures. In short, a story of adaption to the increasingly speedily evolving modern world, one in which at this time of austerity, core British values are seen to overtake the traditional halo of 'pomp and circumstance'. Hence, the beginning of the 21st century sees a dwindling of overtly brandished heraldry and 'distance' – though necessarily maintained for formal occasions.
Instead, recognising that the very nature of militarily derived pageantry and formality has been 'counter-foiled' to a great degree by the 'cut and thrust' domination of global commerce in an ever expanding 'globalised' world.
Thus, a long and ongoing re-orientation from the obvious yesteryear 'show of might' to recognising the importance of soft-power within commerce is of course common to all royal families. This greatly assisted by a past knowledge of shared interests and values that underpin trustworthy working relationships amongst European and international royals and their representatives.
This is well illustrated by the most recent commercial deal between the Crown Estate and the Norwegian SWF via a 25% leased sale of its Regent Street property base.
Most monarchies were built upon land interests given the greater importance of that resource in the past. That accrued wealth still very much evident today, yet the modern commercial world is a far cry from from a feudal agrarian world, or that of new-land exploration, or indeed that of industrialised manufacture. Today specific agricultural and specific manufacture activity occupy only a small portion of any advanced, globally traded, capital market:whether that be the FTSE500, S&P500, TSX index, the CAC30, HKSE's Hang Seng index or similar elsewhere.
This is part and parcel of the modern commercial world, one build over the last century and one in which investment banks increasingly took charge of the commercial reigns from those royal and aristocratic families who historically had reigned the local and international econonomies.
However, relative to the modern-day royal remit, the significance of a willful yet fair character is still key - this assisted by formal military training via Sandhurst or elsewhere – and so must not be relegated or dismissed. Such character-forming generating in the past an ability to obtain land, build empire and rule over it. Yet it and more is still core today; a timeless capability stemming from a convergence of both self-discipline and ambitious attitude. Character formation, and in particular the slant of educational learning in an ever expanding and complex world, remains key.
And it is here, regards the traditional nature of royal education, that an argument could be set forward that purports greater acclimatisation - indeed submersion - within the commercial arenas by which a country and the world turns.
Short active military careers followed by symbolic leadership obviously remain necessary, as does the need to cultivate a sensibility to the arts/humanities, yet more important that ever is the need to nurture an understanding of the commercial world that lies between these 2 realms, a world in which competition and creativity are central tenants to national (and sovereign) success.
Industry, commerce and trade are typically built upon a merging of the sciences and arts, brought together by a plethora of strategic, operational and managerial methods.
Any aspirational prime minister or chancellor will have undoubtedly formally and/or informally studied PPE (Politics, Philosophy & Economics) yet whilst historically also the domain of a well-educated royal, the set learning path may be inadvertently restricted to 'the norm' of military and the arts, whilst giving less regard to the central elements of the modern industrial and commercial machine.
This may or may not be the case, but if so begs attention.
In a metaphorical sense, just as perhaps Prince Charles will know by heart the key historic schools/themes of architecture and their intrinsic elements & methods (most obviously Palladian) so the architecture of the industrial and service based commercial world – in both its vertical depth and horizontal stretch – should be an engrossing subject of study for all young royals; thus able to provide tangibility to the normal absorption of PPE.
This has been the case for the aristocracy who since the late Victorian age – and especially post WW1 – became greater participants in 'the City', mimicking the sons (and latterly daughters) of the American 'nouveau -riche' industrialists. The path into stock and bond brokerage and latterly all-important corporate financial analysis became a well trodden one for many, firstly in the 'new world' then in the 'old-world' and now amongst the increasingly powerful of the 'emergent-world'.
Prince William is an RAF flight-officer within a 'Search and Rescue Force', which itself is a prescient commercial case-study of the cost-benefit analysis under which all of the UK's Armed Forces are being scrutinised.
As non-core to national defence, the 'SARF' division/wing is in future to be run with a far more analytical bearing to ensure economy and efficiency whilst also providing a more than adequate rescue cover for the coastline, seaboard and inland areas.
This transition of the activity from being state run to privately run is perhaps a prime learning opportunity for Prince William, and his fellow officers who themselves will act as industry facing representatives. After all, the very nature of the UK's military forces are changing, and so affecting their scope, shape and function, to both better fit inherent demands and the new-era economic climate.
[ NB. The contract has been awarded to Soteria, a consortium of Thales, CHC helicopter operator and the Royal Bank of Scotland – to use the Sikorsky S92 model]
investment-auto-motives suspects this is very well the case already, indeed the rational for his placement in SARF; which by its changed name denotes its changed standing. Yet perhaps beyond any purely 'conceptual' exposure to this 'real-time' subject, a deep and possibly expanded 'business studies' investigation could be undertaken by HRH and others, to fully appreciate the commercial challenges, ramifications and opportunities, such a service re-alignment makes for the companies involved and the nation itself. A kind of case-study where the likes of 'Sandhurst meets the LSE meets MIT meets Harvard/INSEAD'. Where SARF can be evaluated in-the-round from national interest, economic, technical and strategic viewpoints.
[Obviously investment-auto-motives views the re-birth of GM as a parallel exercise given the involvement of Canadian 'bail-out' monies which appear to have required agreement from The Queen and/or her council. This would also provide appreciation of the expansiveness and international reach of the global auto-industry ].
Such a task (or tasks) could be onerous depending upon its scale, especially for a full-time serving officer, but if it is not already the case that young royals are exposed to such multi-dimensional perspectives, this could be a golden opportunity. For both themselves as educational insight, and to possibly co-create a learning template that could be ascribed to latter-day officers who, in a new era, cannot afford to be unexposed to the realities and impact of commercial issues on the armed forces.
It seems that historically, it has been the case that those individuals ranked Major or above have been the ones tasked to be industry facing as part of their own expanded responsibilities. This late exposure to the commercial imperative may in the past have been seen to be problematic as the cultural chasm between the 2 worlds has caused communication, expectation and over-run/over-cost problems. (The fault equally shared between 2 distinctly different worlds). So the second decade of the 21st century could mark a turning-point where-by lower-ranked and typically younger officers are given a much better commercial grounding and exposure.
Again, this may well be all in hand, and if so 'all to the good'. Yet as this transition moves forward so the royal family itself could be seen to be active in bringing together these 2 worlds. And equally so, perhaps use that learning – and broadened exposure - to perhaps become a greater force in helping to steer the inherent interests of the royal family, across the spectrum, from the 'invisible' operations of the Crown Estate all the way through to the 'highly visible' aspects such as Palace & Castle tours and souvenir goods, through to the expanding business-lines and broadened retail channels of 'Duchy Originals'. Plus perhaps yet more.
Today's commercial world is under-going a massive period of re-formation, one in which professionalism, courtesy and trust are needed as never before to regenerate the economic machine. Yet also at this time TV series such as 'The Apprentice' have done a true dis-service to the business world by seemingly condoning and promoting a self-serving, Machiavellian mindset; something noted time and time again by commentators in the financial press.
Thus, about time that a better face to business be painted, to both inspire and encourage tomorrow's entrepreneurs, board-members and middle-managers. This impetus could feasibly be symbolically led by the younger members of the royal lineage, who are set to build upon the efforts of their forebears, and can espouse a much needed 'honourable face' and 'intelligent mindset' for UK's 20 & 30-somethings aswell as within the realms of national and international commerce.
Wednesday 10 November 2010
Macro Level Trends - Globalisation – 11.11.11: Poignant Remembrance in 2010
In a very different character to the usual commentary and essays, the following words are an unashamed re-generation and modification of the comments made in this blog at this important time 2 years ago.
At that time investment-auto-motives recognised that the severe fracture of the western economic model from the consequences of the financial crisis would put severe strain on international relations between west and east hemispheres and those north and south, but potentially the greatest stemming from US – Chinese relations. The current subtle currency wars were predicted as a latter-day result, and unfortunately this has come to be as regions seek to both protect themselves and best place themselves in this new and fragile era
Recent days have witnessed western premieres seek to both placate eastern concerns about future political movements and the desire to be seen to strengthen trade relations; most prominently in the guise of the UK's Prime Minister Cameron visiting China and the US's President Obama in India and environs.
These visits are of course symbolic by their timeliness with remembrance of historic disputes that have manifested beyond purely financial wars into the atrocity of physical warfare.
It is at this juncture in the calendar that the UK remembers both its own fallen and those of allies and indeed foes. 11am on 11th day of the 11th month marks Remembrance with accompanying day and weekend church services eulogising the 92nd anniversary since the end of WW1.
Of course, many nations across the face of the globe hold similar services both now and at varying times throughout the year. Here in the UK, from the humble village church to the gravitas of the Cenotaph in Whitehall. In Germany prayers will be said for the re-burial of those lost during WW2 in Minsk, now located in Belarus, and symbolising a pertinent element of Germany's efforts to build an expanding and re-stablised EU to avoid regional conflict. And some months ago on 6th August Japan physically and spiritually gathered in Hiroshima's Peace Memorial Park
Yet, perhaps not for half a century have such sentiments had such a meaningful voice, given the level of political friction that exist both regionally and internationally.
The end of WW1 was not “the great war to end all wars”, indeed the very meaning of 'armistice' indicates 'truce' not finale, a sad fact highlighted only a generation later by WW2. It was that conflict that in turn led to the major super-powers of the day to create the Bretton Woods agreement that would stabilise the fundamentals of global trade. A major landmark, given that it was the perception of unfair inter-regional trade practices that has been the perennial problem behind a long history of international conflict. Similar efforts exist today with talk of moving beyond Basel 3 toward something that offers a greater substance-based rational for currency value identification. This being much of the nation-buying led consideration for gold, yet with additional exploration of expansion of ADRs (or similar) or IMF enabled SDRs (or similar) as new internationally-prescribed stabalisation instruments.
Ninety-two years on from that philosophical and literal spark in the Balkans that set the first of a billion bullets flying, the leaders of the G20 nations undoubtedly made initial progress in 'saving the world' back in 2008 with use of multi-lateral stimulus action. But the S.Korean summit this weekend will illustrate - beneath the surface - the new dis-chord. One that has emerged largely between a still spendthrift US and much more conservative tendencies consistently led by Germany's Merkel (much to her credit) and now ajoined by the policy-decisions of the UK, South Africa and elsewhere.
Thus it is seen that the creation of what was originally seen to be a long-term, far-reaching and transformative multi-lateral accord of the so-called 'Spirit of Bretton Woods 2' is seen at this juncture to be viewed as over-zealous. The level of rebound in many G20 member economies demonstrate the myriad of differences each region and nation faces: giving real demarkations of 'strong' versus 'weak'. Thus G20 international health discrepancies obviously split opinion, both between the lead EU countries and the US, but also within a fractured EU; demonstrating that local and regional issues in the relative 'micro' vein take precedence over a now past fear of global melt-down that previously held in the 'macro' vein.
Undeniably, different regions have suffered at different rates and therefore will be far less inclined to a radical re-alignment of trade policy-making set against an increasingly out-moded global policy mandate.
So whilst there was initial 2008 agreement for international fiscal co-ordination of stimulus packages so that each nation or region can assist themselves - ranging from the US's $700bn TARP to talk of an EU Fund to Japan's $51bn effort to China's $589bn by the CCP – the idea of an all-pervasive, completely global agreement has unsurprisingly now looks less appealing; even if re-tabled by America's new drip-fed $600bn QE2 programme, set for mid-2011.
The rest of the world sees it as a slippery-slope given their own – perhaps more manageable – circumstances, and so don't agree with its use. Moreover, other countries probably see it as a pre-curser to what would could inevitably be a global currency de-valuation war in which nobody ultimately wins. It would be one which goes far beyond today's 'fair-game' internal efforts of industry generated cost-base re-alignment (ie structural reform) to improve national global competitiveness.
Historical case studies show that such heavy actions only drive international ill-will and give local support to importation tariff-setting which in turn damages relations and the economically rational global-flow of capability-led free-trade
As stated 2 years ago, there is no singularly similar action plan that each individual national economy can or should undertake, each effort although globally co-ordinated through increasingly aligned open-gates trade-policies must be appropriate to domestic and foreign trade needs and growth plans. This basic premis is obvious given the 'differing states of differing states'. But exactly how this is achieved efficiently and permanently will be a major headache as both the US and China experience such differing internal growth patterns – even if that gap is slowly and only nominally closing
Given the size of the global financial fall-out there have been calls for increased regional and international regulation, and the push to align US accounting standards from GAAP to IFRS will undoubtedly be used as an argument co-coalesce the 21 or so central bank models currently in existence.
However, utilising the GAAP to IFRS vehicle to successfully promote global fiscal policy alignment has thus far been a problem given the negative effect it previously had on US standard results. However, multi-national blue-chips are increasingly moving to offer both accounting standards as an increasing level of income is derived from the rest of the world. Thus with its income stream centre-of-gravity moving eastwards, so its accounting principles should rightly be re-orientated around the standards of the income sources.
Such practices undoubtedly help calm investor waters by demonstrating a more level manner by which to compare the US against Europe, the Middle-East, Asia and South America.
This does create short to medium-term pain for the US economy – and should be undertaken whilst Wall St stays buoyed - but ultimately could strengthen its foothold against the ever more internationally accepted Euro (and possible petro-Euro), and even the broached idea of a Yuan accepted counterpart (and indeed the idea of petro-Yuan denomination if Ems saw it in their favour as was the historical case with the US petro-Dollar). But an accounting alignment especially useful regards creating an extended period for attracting foreign direct investment (FDI) into the US.
At this poignant and prescient time, having seen the well-founded G20 differences at the Korean summit, all nations must continue to remember the lessons drawn from the first half of the 20th century, and act responsibly.
As the spectre of terrorism hopefully wanes (even if the odd blip appears as seen recently) and the topic of climate change becomes the ethereal yet powerful new enemy for all, we will hopefully witness a new age of agreement in both the global fiscal framework of currency valuation aswell as better founded domestic government policy that provides for a global mutuality, Something that does not constrain the independence that the newly powerful 'emerged' BRIC+ nations demand.
To not achieve this will dangerously put the world back 96 years or more, to revisit a time of sullied, anemic economies that creates insularity and engenders nationalism, xenophobia and possibly neo-fascist international moves motivated by a sense of economic loss that was previously seen as 'rightfully' theirs.
To conclude, whilst we remember the past and those who suffered, we should not and cannot sleep-walk back toward the dark-past if the world's peoples are to win as a whole.
We must see the individual and national Chinaman, American, Arabian, European, African and Asian as worthy capability-led trading partners, not economic threats. And arguably for the most part regards an arguably over-indulged west – to be psychologically re-generated by the dynamicism of the east giving a new competitive force for international good.
At that time investment-auto-motives recognised that the severe fracture of the western economic model from the consequences of the financial crisis would put severe strain on international relations between west and east hemispheres and those north and south, but potentially the greatest stemming from US – Chinese relations. The current subtle currency wars were predicted as a latter-day result, and unfortunately this has come to be as regions seek to both protect themselves and best place themselves in this new and fragile era
Recent days have witnessed western premieres seek to both placate eastern concerns about future political movements and the desire to be seen to strengthen trade relations; most prominently in the guise of the UK's Prime Minister Cameron visiting China and the US's President Obama in India and environs.
These visits are of course symbolic by their timeliness with remembrance of historic disputes that have manifested beyond purely financial wars into the atrocity of physical warfare.
It is at this juncture in the calendar that the UK remembers both its own fallen and those of allies and indeed foes. 11am on 11th day of the 11th month marks Remembrance with accompanying day and weekend church services eulogising the 92nd anniversary since the end of WW1.
Of course, many nations across the face of the globe hold similar services both now and at varying times throughout the year. Here in the UK, from the humble village church to the gravitas of the Cenotaph in Whitehall. In Germany prayers will be said for the re-burial of those lost during WW2 in Minsk, now located in Belarus, and symbolising a pertinent element of Germany's efforts to build an expanding and re-stablised EU to avoid regional conflict. And some months ago on 6th August Japan physically and spiritually gathered in Hiroshima's Peace Memorial Park
Yet, perhaps not for half a century have such sentiments had such a meaningful voice, given the level of political friction that exist both regionally and internationally.
The end of WW1 was not “the great war to end all wars”, indeed the very meaning of 'armistice' indicates 'truce' not finale, a sad fact highlighted only a generation later by WW2. It was that conflict that in turn led to the major super-powers of the day to create the Bretton Woods agreement that would stabilise the fundamentals of global trade. A major landmark, given that it was the perception of unfair inter-regional trade practices that has been the perennial problem behind a long history of international conflict. Similar efforts exist today with talk of moving beyond Basel 3 toward something that offers a greater substance-based rational for currency value identification. This being much of the nation-buying led consideration for gold, yet with additional exploration of expansion of ADRs (or similar) or IMF enabled SDRs (or similar) as new internationally-prescribed stabalisation instruments.
Ninety-two years on from that philosophical and literal spark in the Balkans that set the first of a billion bullets flying, the leaders of the G20 nations undoubtedly made initial progress in 'saving the world' back in 2008 with use of multi-lateral stimulus action. But the S.Korean summit this weekend will illustrate - beneath the surface - the new dis-chord. One that has emerged largely between a still spendthrift US and much more conservative tendencies consistently led by Germany's Merkel (much to her credit) and now ajoined by the policy-decisions of the UK, South Africa and elsewhere.
Thus it is seen that the creation of what was originally seen to be a long-term, far-reaching and transformative multi-lateral accord of the so-called 'Spirit of Bretton Woods 2' is seen at this juncture to be viewed as over-zealous. The level of rebound in many G20 member economies demonstrate the myriad of differences each region and nation faces: giving real demarkations of 'strong' versus 'weak'. Thus G20 international health discrepancies obviously split opinion, both between the lead EU countries and the US, but also within a fractured EU; demonstrating that local and regional issues in the relative 'micro' vein take precedence over a now past fear of global melt-down that previously held in the 'macro' vein.
Undeniably, different regions have suffered at different rates and therefore will be far less inclined to a radical re-alignment of trade policy-making set against an increasingly out-moded global policy mandate.
So whilst there was initial 2008 agreement for international fiscal co-ordination of stimulus packages so that each nation or region can assist themselves - ranging from the US's $700bn TARP to talk of an EU Fund to Japan's $51bn effort to China's $589bn by the CCP – the idea of an all-pervasive, completely global agreement has unsurprisingly now looks less appealing; even if re-tabled by America's new drip-fed $600bn QE2 programme, set for mid-2011.
The rest of the world sees it as a slippery-slope given their own – perhaps more manageable – circumstances, and so don't agree with its use. Moreover, other countries probably see it as a pre-curser to what would could inevitably be a global currency de-valuation war in which nobody ultimately wins. It would be one which goes far beyond today's 'fair-game' internal efforts of industry generated cost-base re-alignment (ie structural reform) to improve national global competitiveness.
Historical case studies show that such heavy actions only drive international ill-will and give local support to importation tariff-setting which in turn damages relations and the economically rational global-flow of capability-led free-trade
As stated 2 years ago, there is no singularly similar action plan that each individual national economy can or should undertake, each effort although globally co-ordinated through increasingly aligned open-gates trade-policies must be appropriate to domestic and foreign trade needs and growth plans. This basic premis is obvious given the 'differing states of differing states'. But exactly how this is achieved efficiently and permanently will be a major headache as both the US and China experience such differing internal growth patterns – even if that gap is slowly and only nominally closing
Given the size of the global financial fall-out there have been calls for increased regional and international regulation, and the push to align US accounting standards from GAAP to IFRS will undoubtedly be used as an argument co-coalesce the 21 or so central bank models currently in existence.
However, utilising the GAAP to IFRS vehicle to successfully promote global fiscal policy alignment has thus far been a problem given the negative effect it previously had on US standard results. However, multi-national blue-chips are increasingly moving to offer both accounting standards as an increasing level of income is derived from the rest of the world. Thus with its income stream centre-of-gravity moving eastwards, so its accounting principles should rightly be re-orientated around the standards of the income sources.
Such practices undoubtedly help calm investor waters by demonstrating a more level manner by which to compare the US against Europe, the Middle-East, Asia and South America.
This does create short to medium-term pain for the US economy – and should be undertaken whilst Wall St stays buoyed - but ultimately could strengthen its foothold against the ever more internationally accepted Euro (and possible petro-Euro), and even the broached idea of a Yuan accepted counterpart (and indeed the idea of petro-Yuan denomination if Ems saw it in their favour as was the historical case with the US petro-Dollar). But an accounting alignment especially useful regards creating an extended period for attracting foreign direct investment (FDI) into the US.
At this poignant and prescient time, having seen the well-founded G20 differences at the Korean summit, all nations must continue to remember the lessons drawn from the first half of the 20th century, and act responsibly.
As the spectre of terrorism hopefully wanes (even if the odd blip appears as seen recently) and the topic of climate change becomes the ethereal yet powerful new enemy for all, we will hopefully witness a new age of agreement in both the global fiscal framework of currency valuation aswell as better founded domestic government policy that provides for a global mutuality, Something that does not constrain the independence that the newly powerful 'emerged' BRIC+ nations demand.
To not achieve this will dangerously put the world back 96 years or more, to revisit a time of sullied, anemic economies that creates insularity and engenders nationalism, xenophobia and possibly neo-fascist international moves motivated by a sense of economic loss that was previously seen as 'rightfully' theirs.
To conclude, whilst we remember the past and those who suffered, we should not and cannot sleep-walk back toward the dark-past if the world's peoples are to win as a whole.
We must see the individual and national Chinaman, American, Arabian, European, African and Asian as worthy capability-led trading partners, not economic threats. And arguably for the most part regards an arguably over-indulged west – to be psychologically re-generated by the dynamicism of the east giving a new competitive force for international good.
Thursday 4 November 2010
Micro Level Trends – American QE2 – How the Federal Reserve's 'Printing Presses' Appears to Underpin GM's Factory Presses
The effect of a continued fragile US economy on public sentiment were well demonstrated this week as the results of the mid-term elections lived-up to forecast expectation. The House and the Senate saw a large swing away from the Democrats toward Republicans on the back of public disillusionment and the outcome of prolific 'Tea Party' campaigning that has managed to give the Republicans a new lease of life.
To the overseas observer these US mid-terms will probably be remembered for the message-delivery method and manner which questioned the innate workings of the American political machine, albeit at a high level so as to convey core themes.
Yet the workings of the nation's political machine and the workings of the nation's economic machine are undoubtedly interwoven, the efforts of the Keynesian 'pump-prime' having saved the country from financial collapse in 2008, now seen to be lack-lustre in its mid-term potency, thereby questioning its impact on the longer-term outlook. The 'bail-out' of the US via QE1 came at a very hefty price, especially so in terms of (inter)national, federal and state debt levels. The incurred indebtedness now weighing very heavy on efforts to properly resuscitate the economic well-being.
Of course at its heart is economic philosophy, and attitude toward the fewer, and less powerful, fiscal and monetary tools left in the Fed's & Treasury's shared tool-box. The primary question for capital markets and the public at large as to whether yet another round of well warned prime-pumping via QE2 will actually provide enough effective benefit that feeds through beyond Wall St to Main St. This round of QE is of a different character, its size of $600bn, $100bn larger than previously expected, but drip-fed from mid 2011 in lots of approximately $75bn per month, depending upon conditions.
As a presentation of a QE approach this then looks sensible, but the broader question is whether in effect the new round of fiscal stimulus actually assists a proper re-orientation of the US economy or whether it maintains what could be argued as an over-valued 'false-floor' to the national economy; from QE1's frenzied liquidity feed to capital markets; especially toward those US corporations that are well exposed to Asian and South American income streams.
investment-auto-motives concurs with the Wall St Journal's 'Heard on the Street' column (2nd Nov), stating that much of the heavy lifting was done by QE1, so to what end QE2 if both equities and bond markets have already strengthened? The real concern is that QE2 has little ultimate trickle-down effect and inadvertently maintains the divide between Wall St and Main St, as the labour-force content of the country's cost-base grinds painfully through its necessary shrinkage, whilst the low cost of capital available makes for a bonanza period in corporate stock buy-backs and M&A activities; something investment-auto-motives expected to naturally occur even before QE2.
No critically observant markets follower has believed the “strong dollar” rhetoric, even after recent gains against the Euro and Pound, with the reality of a long-weakened US$ key to America's need to export its way out of the mire. As ASEAN and Mercosaur regions grew apace over the last year, so US exports ranging from agricultural equipment to specialist factory plant to pharma also benefited, but as the RoW slightly cooled so it seems the US authorities saw a need to re-involve themselves. Thus the Dollar's mid-week tumble immediately after the Fed's QE2 announcement only accords to expectation by both government, the markets and critically foreign investors who will either spy FX value-driven buys at stock and company level for the fundamentally strong, or seek to withdraw from what they view as an increasingly destabalised region, with preference going to still strong BRIC+ countries, safe-havens such as the Hong Kong exchange and expected rebound markets such as the UK.
Even given this apparent negativity, the intrinsic role and remit of QE2 may be far more than the broad exercise in re-assisting the economy presented. It may in effect have been designed to be a type of implicit buoyancy-aid specifically for those domestic and Canadian institutional investors who to date may have had little confidence in the mid-term traction of the re-born General Motors.
GM's general performance both at IPO launch and its critical short & mid-term stock trading dynamic is critical not only for the company itself, but the nation at large. Although a re-invented 'smoke-stack', given its broad up-stream and down-stream value-chain reaches across a myriad of spheres, GM will be seen as a bell-weather for the US economy
Thus for investment-auto-motives, the announcement of QE2 here and now, coming only a few weeks before the price-setting and availability of New GM stock – in its various guises of: new common stock, 3-for-1 exchanges and convertible preferred shares – is very telling indeed.
Perhaps it was well recognised that political and financial collateral damage could well be incurred from previously potentially higher IPO 'investment losses' to the Treasury, Canadian and Ontario Governments, the UAW and to Motors Liquidation Co holders/investors.
Instead the path ordained appears to see GM listed at the higher end of its $26-29 range with the almost implicit assumption that the month on month dispersion of latter-day liquidity will either prop-up any 6-month interim flailing, or otherwise help boost what have been 'flat' or slow-growth GM shares.
At a time when GM should be seen to fully let-go of its mother's apron strings, after 2 quarters of impressive results and the confidence to talk about the very real macro-headwinds it still faces, it seems that the 'Government Motors' nick-name - whilst slowly fading - may take another year or so to fully disappear.
To the overseas observer these US mid-terms will probably be remembered for the message-delivery method and manner which questioned the innate workings of the American political machine, albeit at a high level so as to convey core themes.
Yet the workings of the nation's political machine and the workings of the nation's economic machine are undoubtedly interwoven, the efforts of the Keynesian 'pump-prime' having saved the country from financial collapse in 2008, now seen to be lack-lustre in its mid-term potency, thereby questioning its impact on the longer-term outlook. The 'bail-out' of the US via QE1 came at a very hefty price, especially so in terms of (inter)national, federal and state debt levels. The incurred indebtedness now weighing very heavy on efforts to properly resuscitate the economic well-being.
Of course at its heart is economic philosophy, and attitude toward the fewer, and less powerful, fiscal and monetary tools left in the Fed's & Treasury's shared tool-box. The primary question for capital markets and the public at large as to whether yet another round of well warned prime-pumping via QE2 will actually provide enough effective benefit that feeds through beyond Wall St to Main St. This round of QE is of a different character, its size of $600bn, $100bn larger than previously expected, but drip-fed from mid 2011 in lots of approximately $75bn per month, depending upon conditions.
As a presentation of a QE approach this then looks sensible, but the broader question is whether in effect the new round of fiscal stimulus actually assists a proper re-orientation of the US economy or whether it maintains what could be argued as an over-valued 'false-floor' to the national economy; from QE1's frenzied liquidity feed to capital markets; especially toward those US corporations that are well exposed to Asian and South American income streams.
investment-auto-motives concurs with the Wall St Journal's 'Heard on the Street' column (2nd Nov), stating that much of the heavy lifting was done by QE1, so to what end QE2 if both equities and bond markets have already strengthened? The real concern is that QE2 has little ultimate trickle-down effect and inadvertently maintains the divide between Wall St and Main St, as the labour-force content of the country's cost-base grinds painfully through its necessary shrinkage, whilst the low cost of capital available makes for a bonanza period in corporate stock buy-backs and M&A activities; something investment-auto-motives expected to naturally occur even before QE2.
No critically observant markets follower has believed the “strong dollar” rhetoric, even after recent gains against the Euro and Pound, with the reality of a long-weakened US$ key to America's need to export its way out of the mire. As ASEAN and Mercosaur regions grew apace over the last year, so US exports ranging from agricultural equipment to specialist factory plant to pharma also benefited, but as the RoW slightly cooled so it seems the US authorities saw a need to re-involve themselves. Thus the Dollar's mid-week tumble immediately after the Fed's QE2 announcement only accords to expectation by both government, the markets and critically foreign investors who will either spy FX value-driven buys at stock and company level for the fundamentally strong, or seek to withdraw from what they view as an increasingly destabalised region, with preference going to still strong BRIC+ countries, safe-havens such as the Hong Kong exchange and expected rebound markets such as the UK.
Even given this apparent negativity, the intrinsic role and remit of QE2 may be far more than the broad exercise in re-assisting the economy presented. It may in effect have been designed to be a type of implicit buoyancy-aid specifically for those domestic and Canadian institutional investors who to date may have had little confidence in the mid-term traction of the re-born General Motors.
GM's general performance both at IPO launch and its critical short & mid-term stock trading dynamic is critical not only for the company itself, but the nation at large. Although a re-invented 'smoke-stack', given its broad up-stream and down-stream value-chain reaches across a myriad of spheres, GM will be seen as a bell-weather for the US economy
Thus for investment-auto-motives, the announcement of QE2 here and now, coming only a few weeks before the price-setting and availability of New GM stock – in its various guises of: new common stock, 3-for-1 exchanges and convertible preferred shares – is very telling indeed.
Perhaps it was well recognised that political and financial collateral damage could well be incurred from previously potentially higher IPO 'investment losses' to the Treasury, Canadian and Ontario Governments, the UAW and to Motors Liquidation Co holders/investors.
Instead the path ordained appears to see GM listed at the higher end of its $26-29 range with the almost implicit assumption that the month on month dispersion of latter-day liquidity will either prop-up any 6-month interim flailing, or otherwise help boost what have been 'flat' or slow-growth GM shares.
At a time when GM should be seen to fully let-go of its mother's apron strings, after 2 quarters of impressive results and the confidence to talk about the very real macro-headwinds it still faces, it seems that the 'Government Motors' nick-name - whilst slowly fading - may take another year or so to fully disappear.
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