Slump in winter resorts?

Geilo is deserted pre Easter. Strange. Windy.

What fascinating times we live in

Gordon Brown, PM of the country on the brink of deflation trying to squeeze more fiscal stimulus out of reluctant G20 partners while his CB governor and Chancellor say the UK is so indebted it can't afford more of it. Oops, Gordon took the hint.

Paul Krugman saying the Geithner Toxic Assets Demolition Plan solves nothing at all. Just subsidies to those who don't need them. Summers disagreeing. For how long?

(Hempton has got his own touch on saving the world: Bronte Capital: Paul Krugman’s false logical step. Not so much disagreeing as making a nerdy point.)

Could the world economy collapse because the US Congress cannot bear even 6 months of government managed banks and because Merkel and Sarkozy think they have done enough? It was someone else's fault anyway wasn't it?

Hopefully this is just a reality show and we are back in real life soon.

Snow has started falling again. It is March and minus 5C out there.

More snow coming

March. Thought spring had come at last, but no. Snow is forecast.

Also the IMF has just come out with a new prognosis for the world economy saying that things are not getting better till rich countries get their financial systems in order. Rotten equities and loans need to be taken due care of and banks recapitalized. If we all do the right things in concert and abstain from protectionism there could be improvement by the end of 2010 they say.
They may be right, but in a political world the prospects for that are not bright.

So to lighten up my own day I finally got myself an Omnia - not the HD, but this one does almost everything you ask of it.

Got to go wax my skis now.

Spring is here - at least in London

Hardly more 'House for sale' signs to be seen than ususal. In these for England so trying times you would expect a veritable forest of them here in London SW. But people don't bother any more they say. So hard to sell it is better to wait it out. For how long though?

More upbeat in the US where AIG employees are still due to receive huge bonuses. Contractual obligations? The recession could become even deeper if they don't get the extra millions to spend. But on the other hand, does it really help increasing the consumption of bank account numbers in Jersey?

Daffodils are already out here. The theory may have to be seasonally adjusted.

Risk takers' day

Yesterday the governor of the central bank of Norway confirmed that over the last 6 months more than 120 billion US$ of the Norwegian Oil Fund savings have been lost on Wall Street. This is more than a quarter of the money that should compensate for pension payments that an ageing workforce cannot support. Active fund management – fund managers picking "winners" like Lehman Brothers – has exacerbated the loss. If they had abstained from this and followed the indexes, we would have been almost 10 billion US$ better off today. Admittedly it is mostly paper losses for now, but given better times it will take many decades just to regain them.

The governor also confirmed that over the years the fund has been miserably managed. Since its inception in 1998 the annual real return rate on the capital has been only 1 per cent. Had managers stuck to the Treasury's benchmark portfolio, return would probably have come closer to the target of 4 per cent per year and passive management of bond could have delivered 6 pct.

Too high a proportion of shares is probably to blame. The bond part of the portfolio lost only 0.5 pct in value while shares lost 40 pct. For good measure a new strategy proposed by fund managers and agreed by Parliament before the meltdown is now being implemented to increase the proportion of shares in the fund from 40 to 60 pct. Higher risk exposure is exactly what we need!

According to the central bank governor there are not many places beside shares to invest for a fund this size and in the long run it is always lucrative to own a big part of the world's industries.

Well, some of them could actually go bust, and in the long run, as J.M. Keynes said, we are all dead.

It is not thawing yet.

Icy tracks

It had to happen. The Norwegian Pension Fund – based on oil revenues, managed by the Central Bank and invested in shares and bonds abroad – has by now incurred losses in excess of its accumulated earnings since 1998. Since last year 60,000 US$ has gone down the drain of every Norwegian household! Admittedly we still have the shares, but how many of the companies invested in are guaranteed against going bust?

When the fund was set up share prices were soaring and portfolio investment seemed a good idea. Some maintained that more of it should be put into infrastructure and real estate. Building roads for instance, buying up the Borough of Chelsea like the Arabs did or purchasing a Canary Island. No one really knew what the best alternative would be. Portfolio investment looked good. It was what all other funds did and so we did it too. And we did it in an ethical way. No investment in tobacco, child labour or shady regimes. On hindsight it would probably have been more lucrative to keep the money in the bank – albeit not one of the Icelandic ones.

The petroleum fund has been very important to Norway. It freed us from external debt, made people feel they could afford to stay out of the EU and it provided mental insulation against the crisis. As it now shrinks, the oil price falls, new offshore fields become less viable, sub contractors go out of business and firms tumble all over the place that feeling may wane. Perhaps it is time to rethink the fund’s investment strategy? It seems that Wal-Mart, McDonalds, Johnnie Walker, Camel and Hustler are the best slump business opportunities.

What we really need now is a new gadget to turn gloomy sentiments into optimism. Samsung is due to put its new HD phone on the shelves soon. That might help. Also a ski trip is called for, although most of the new snow that came over the week end has melted. But not to worry, a new batch is due on Thursday.

Just beware of the risk of sliding down the icy tracks.

Recovery setback

Another 20 cm of snow showelled down today. No quantitative easing on that front and hence, no crisis recovery any time soon.

Newly fallen snow around O°C is also not the easiest basis to ski on. Backwards slippery cross country skis are a real pain. I enjoyed it for 5 km today only to learn that the inn in the woods was out of sour cream and raspberry jam waffles. No hobbits spotted either and no moose. Nice to be out though, and slipping the 5 km back most certainly benefitted my arm strenght.

Did you know that Norway spent 14 pct of last year's gdp on loans to banks and other crisis management? According to the IMF only UK spent more.

Not a word on how this will affect my pension.

Does aid work?

Does development assistance work? Of course it does. It works excellently for the 50000+ western aid employees who's paychecks depend on it. It works well for an equal number of politicians and government officials in developing countries who can line their pockets with it. It works for a much larger number of NGO employees who get most of their funding from western state budgets. It works fine for the producers of Toyota Land Cruisers, for satellite phone makers, American corn farmers, producers of solar panels, air freighters, consultancy firms, the academia, conference speakers and hotel owners. In short, it keeps the big aid industry running.

But what about Africa's poor? Does it work for them too? Occasionally. There is food for the hungry and vaccines for the children. But growth and prosperity promised by Western aid projects since the 1950ies are difficult to spot. The snows of Kilimanjaro are thawing but the number of poor does not fall.

Which is a good thing if you take a cynical view. Obviously aid cannot exist for long without the "bottom billion" as its customer base. Eradicating poverty is aid's #1 "production target". Achieving it however would mean undermining the livelihoods of an army of aid workers. They would need to find something else, probably less personally rewarding, to do. Luckily therefore, the industry's foremost sign of success being its own extinction, it has hitherto failed excellently.

The aid industry may also be a bit like a religion or church, with deities, rituals and clergy. There could even be something for the Winter God in it.

Apart from other things, a dollar a day may help clean an expatriate's swimmingpool.

The Snows on Kilimanjaro

Last night thawing continued and snow rumbled off the roof. Also stock exchanges rose, oil prices increased, Germans bought new cars as never before and Gordon Brown got standing ovations for advising the US Congress on free trade.

My climate-business cycle theory that come spring good times will roll again, seems well supported by this and I think the carpet of white snow on the ground this morning should be put down to statistical error.

It has however been suggested that the theory may not adequately explain the situation south of Sahara. There is snow on the Kilimanjaro, it has been thawing for a while but poverty stricken Africans have seen little improvement and the slump is worsening their livelihoods. More research is needed but the model should perhaps also take more explicitly into account the annual avalanche of development aid. It should not be ruled out that it may have corrupted the ways of some governments. I'll come back to this.

In the meantime: How many Icelandic investment bankers does it take to screw in a light bulb? A: Just one, but it really gets screwed.

Mailblog

Help is on the way. It is thawing out there.

Revenge of The Winter God

Is nature vengeful in your country? Here you need to take particularly care when writing about snow and ice. I have clearly blogged too flippantly about it. On leaving work yesterday I found The Winter God, obviously standing on the roof above, had thrown icicle spears at the windscreen of my car and smashed it. Alas, no picture of the cracks. Much too busy getting away glancing nervously over my shoulder for more.

This made me ponder the power of deity. My slightly blasphemous hypothesis which I offer to you, is that The Winter God is also responsible for the financial/economic crisis. The almost perfect correlation between the depth of snow and the severity of the slump is striking. A causal link is highly probable and as melting sets in you will see that times get better.

If it lingers on, there is good skiing in July.

Transport leg

I had a long tour planned today to get the feel of my new skis only to discover that someone in the store had stepped on them and made a crack. They can't be used and have to be exchanged. Minor setbacks like this cannot be allowed to stop a big expedition though. The roller coaster well prepared 13 km of ski tracks to Kikut where therefore covered on my old planks. Snow conditions were wonderful and there were not too many track-demolishing kid-sleds out to block the way. Hot chocolate with raspberry jam & sour cream waffles made excellent provisions before turning back. Waffles like these could well have been Amundsen's secret weapon to beat Scott.

I still have not got the Omnia HD which I was hoping Samsung would issue me with. I'm therefore turning to Olympus for a picture of an old snow covered Ent - here captured with a 10mp Mju1030SE.


On the way I also came by this group of Hobbits tenting in the snow. They are shy so I could go no closer and hence the slightly pixellated photo.

Imagine, these creatures spend their entire weekend in the snow. But then, with their excessively hairy feet they don't mind basking in it despite night temperatures below minus 10C. I guess they don't miss broadband either.

Sunday means that stock markets don't fall and businesses don't go bust. For all we know the economy may be recovering already but Monday may prove that wrong.

Some countries have been through this before. The British PM John Major lunched with president Yeltsin during a visit to Moscow and asked him to characterize in one word the state of the Russian economy. "Good", Yeltsin said. "And if you should use two words?" Major asked. "Not good" Yeltsin replied.

See you on Monday.