Richard Russell: 12 Tips for the New Normal

November 10, 2011 by · Leave a Comment 

By Cullen Roche

Few investment legends have weathered more than Richard Russell.  Born in the Great Depression, Russell knows what it’s like to live in hard times.  And in this new normal he has some survival tips.  The following are courtesy of Russell’s Dow Theory Letters:

1 — Be a skinflint. Cut down on your spending. And be very nice to your boss, assuming you still have a job.

2 — Think in terms of NOT losing money. Forget about easy Wall Street profits. There aren’t going to be any easy profits — not without a huge new infusion of borrowed money.

3 — Be sceptical of everything you read. The media is desperate for circulation, and it will slap on the cover of its magazine or newspaper any damn fool statement that it thinks will sell.

4 — Have faith in your gold. As confidence in the whole monetary system slowly fades, the desire for gold will heighten.

5 — Remember, there’s often a large correction prior to the final speculative gold run.

6 — This time there may not be a “final gold rise,” because large interests may just decide never to sell their gold. They’ll keep their gold as a symbol of “eternal wealth” that can’t be destroyed of go bankrupt.

7– Check out carefully the Permanent Portfolio (PRPFX). So far, it has done well and held up well. It’s actually up so far this year, which is extraordinary. YTD return is 7.33%.

8 — Be very cynical about those “fabulous” money-making ads you hear on TV. Money is hard to make these days and risk in just about everything is high.

9 — Cut out expensive discretionary spending. Instead of eating at your favorite local restaurant, eat home and save many bucks. Supermarkets now stock endless “heat up” frozen dinners. Or better still, starting from scratch make your own dinners. Cooking is coming back.

10 — Take the long view. With stock dividends below 2.5%, the odds are that holding stocks “for the long run” is going to be discouraging or a loser.

11 — Money is made in the BUYING. When you buy anything at the right (low) price, the odds are that you’re going to make money through the passage of time.

12 — Wall Street is suffering. When the Street suffers, its natural tendency is to come up with new “ideas.” The ideas are usually risky (i.e., mortgage-backed packages). Be very sceptical of new Wall Street ideas and products.

Source: Dow Theory Letters

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Islamic Trusts Could Revive Gulf Property Market

June 9, 2011 by · Leave a Comment 

By Shaheen Pasha

2011-05-28T211614Z_2103306788_GM1E75T0ESH01_RTRMADP_3_EMIRATES

A dhow sails during the Al-Gaffal 60ft traditional dhow sailing race between the island of Sir Bu Nair near the Iranian coast, and Dubai May 28, 2011.

REUTERS/Stringer

DUBAI, June 2 (Reuters) – Jordanian Ashraf Hamdan began investing in Dubai’s real estate market in 2006, with a few modest rental investment forays before turning his sights on flashier projects as a wave of luxury developments hit the market.

The real estate bust in 2008 left investors like Hamdan with half-finished projects sitting in the desert sun and losses that were unlikely to be recouped.

“It was a costly learning experience for a real estate investor,” said the 53-year-old businessman. “But real estate is in our blood here in the Arab world. It’s a tangible investment, and from an Islamic perspective, that appeals to me.

“I’m just going to be looking for smarter, alternative ways to get into the market in the future.”

The emergence of Islamic real estate investment trusts (REIT) in the Middle East, which offer the chance to own shares in a portfolio of real estate assets with a steady paid dividend from the income earned on those assets, may lure investors like Hamdan back to the sector again.

Islamic REITS differ from their conventional counterparts by banning investment in any assets that pay interest or conduct business in any forbidden industry, like gambling, alcohol or adult entertainment.

Aside from providing an alternative investment in the Gulf Islamic finance industry it could also inject more transparency and regulation in a property sector plagued by unrealistic expectations of returns and occasionally murky dealings.

“Over the last two or three years, people have been in freeze mode where the focus was cash and other liquid things,” said Daniel Diembers, principal at Booz & Company in Dubai.

“The Dubai bubble really helped the (property) market to mature. Now is the moment where it is all shifting. There is a lot of wealth up for grabs.”

Globally, the market capitalisation for REITs was around $570 billion at the end of 2009, a 2010 Ernst & Young study said. Islamic REITs play a small role, with Asia serving as the predominant hub for sharia-compliant trusts.

Renewed Confidence

Malaysia’s Axis Global Industrial real estate investment trust (REIT) is planning an initial public offering with an asset size of $1.05 billion, making it the world’s largest Islamic REIT.

Islamic REITs launched in Bahrain and Kuwait have been relatively small in size – Bahrain’s Inovest REIT and Kuwait’s Al Mahrab Tower REIT launched with less than $95 million in capital each – and neither has been publicly listed.

But an anticipated infrastructure boom in hot markets such as Saudi Arabia and Qatar and the launch of the UAE’s first Islamic REIT may buoy faith in real estate investments, creating a wider niche for the Sharia-compliant trusts to thrive.

Emirates REIT, which launched with seed capital from Islamic lender Dubai Islamic Bank last November, is aimed at medium-income investors and offers returns of 6 to 8 percent annually, said Mark Inch, director of Eiffel Holding and founding shareholder of Emirates REIT.

“There is a discipline and transparency that comes with a regulated REIT,” he said. “Buildings will not only be properly managed but financial management will also be completely transparent. It’s a prerequisite of bringing back confidence.”

Emirates REIT has 40 deals under review ranging between 40 million dirhams to 500 million dirhams and will be fully operational by the summer, Inch said. An initial public offering is planned within 18 months to two years once it secures assets of 1.5 billion dirhams.

The interest is growing. National Bank of Abu Dhabi is considering creating an Islamic REIT while the FTSE Group may develop an Islamic REIT index as the industry grows globally, officials at both said.
The Gulf region has dabbled in the REIT market over the years with little success.

A 2008 Islamic REIT launched by Saudi Arabia’s Sumou Holding and Geneva-based Encore Management fizzled in the kingdom as the financial crisis sapped enthusiasm. Other attempts to launch a REIT in the region, including a conventional one by troubled property developer Nakheel, were quickly squashed.

Asia, by comparison, has seen a boom in sharia-compliant REITS. Malaysia, considered to be at the forefront of Islamic finance, launched its first Islamic REIT in 2006. Singapore’s Sabana REIT, launched in 2010, was 2.5 times oversubscribed and saw heavy investor interest from the Gulf.

The Gulf has been held back by the slow pace of innovation in the real estate sector, as well as the Islamic finance industry in general, experts said.

In contrast to Malaysia, where the government is active in creating a strong regulatory environment, there is no regulatory standardisation in the Middle East. And investors are understandably wary of investing in a new real estate venture given the spectacular property collapse in the region.

Oz Ahmed, associate director of wholesale banking at HSBC Amanah in Malaysia, said Mideast investors seem ready for homegrown REITS given the high participation in Asian ones.

“There’s definite potential for issuers within the GCC to identify assets but people have to become comfortable with them,” he said.

“We’ve gotten to the point where we’re working well in the banking paradigm. Now practitioners are looking to develop products that come closer to Islamic finance principles.” (Editing by Amran Abocar and Jon Hemming)

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Indonesia to Kick Off $1 Billion Green Investment Fund

January 28, 2010 by · 1 Comment 

By Sunanda Creagh

2010-01-21T131423Z_273409850_GM1E61L1MT401_RTRMADP_3_RICE-INDONESIA

Workers carry sacks of rice at a paddy field in Karawang, in Indonesia’s West Java province January 21, 2009. Indonesian state procurement agency Bulog will release 300,000 tons of rice out of the government stock this week to stabilize domestic prices, its chief said on Thursday.

REUTERS/Beawiharta

JAKARTA, Jan 26 (Reuters) – Indonesia plans a $1 billion green investment fund this year to drive infrastructure developments that aid growth and help cut greenhouse gas emissions, a finance ministry official said on Tuesday.

Indonesia has promised to slash its emissions by at least 26 percent from business as usual levels by 2020 but recently re-elected President Susilo Bambang Yudhoyono has also vowed to boost economic growth to 7 percent or more by 2014.

At global climate talks in Copenhagen last month, Yudhoyono announced a plan to develop the Indonesia Green Investment Fund, which will catalyse infrastructure development that could speed economic growth, boost food and clean water production and also help cut emissions blamed for global warming.

Indonesia’s sovereign wealth fund the Government Investment Unit will put $100 million into the fund and a further $900 million will come from foreign governments including Norway and Australia, plus institutional investors, said Edward Gustely, a senior adviser to the Ministry of Finance.

“We’re in the initial stages but the target is to have this fund operational within this year,” Gustely told Reuters, adding the fund would rival Brazil’s Amazon Fund in size and scope. “There’s no reason why this can’t, in the next five years, scale to $5 billion or more.”

Brazil launched its Amazon Fund last year to promote sustainable development and scientific research in the world’s largest rain forest, with donations from European countries and the first projects unveiled last month.

Indonesia last year became the first country to launch a legal framework for a U.N.-backed scheme called Reducing Emissions from Deforestation and Degradation, allowing polluters to earn tradeable carbon credits by paying developing nations not to chop down their trees.

Catalyst

Indonesia’s green investment fund will not offer loans or grants but rather top-up funding needed for projects where a bank lender is seeking an additional equity injection.

“Many technology providers and project sponsors don’t have the balance sheet to top up the required equity needed to secure financing,” said Gustely. “We would come in and play a catalyst role to ensure good projects with good asset quality, with good expertise and proper management, can be deployed and proceed.”

The Copenhagen talks failed to achieve a legally binding agreement to reduce greenhouse gas emissions but projects like the Indonesia Green Investment Fund were a way for countries to take initiative at home, said Gustely.

“This is driven by how to create more food, water and energy in a sustainable fashion while trying to achieve Indonesia’s growth objectives,” he said.

Fitrian Ardiansyah, climate change programme director for WWF Indonesia, welcomed the fund but said more needed to be done to reduce Indonesia’s greenhouse gas emissions.

“The Indonesian government heavily subsidies fossil fuels, but investment in renewable energy sources is too expensive. The government must help the private sector by making investment in renewable energy sources cheaper, which will address the problem. But at the moment coal plants continue to be built, which does not help,” he said.

(Additional reporting by Pip Freebairn; Editing by Neil Chatterjee)

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U.S., Turkey Launch New Trade, Investment Forum

December 24, 2009 by · Leave a Comment 

2009-12-21T113419Z_2140208691_GM1E5CL1I6101_RTRMADP_3_EU-TURKEY

Turkey’s EU Affairs Minister Egemen Bagis (L) talks to Turkish Foreign Minister Ahmet Davutoglu during a news conference at the European Union Council headquarters in Brussels December 21, 2009.    

REUTERS/Francois Lenoir  

WASHINGTON (Reuters) – The United States and NATO ally Turkey launched an initiative Monday aimed at boosting trade and investment ties, but said there were no plans for the two countries to negotiate a free trade agreement.

“We can … build on what is a good trade and commercial relationship and make it a much more robust one,” U.S. Trade Representative Ron Kirk said at a press conference with Turkish Deputy Prime Minister Ali Babacan.

The initiative creates a new Cabinet-level forum to discuss ways to expand bilateral trade and investment flows and to try to resolve disputes when they arise, similar to one the United States has with China.

“This framework … will be an important vehicle for expanding trade and investment and creating new jobs for the workers and the people” of both countries, said U.S. Commerce Secretary Gary Locke.

The announcement followed a White House meeting between President Barack Obama and Turkish Prime Minister Tayyip Erdogan to discuss Iran’s nuclear program and U.S. plans to send more troops to Afghanistan.

Obama told reporters he believed Turkey, a predominantly Muslim country and long-time U.S. ally, could be an ‘important player’ in moving Iran toward resolving its dispute with the West over its nuclear program.

Erdogan said Turkey stands ready to do whatever it can to achieve a diplomatic solution on the nuclear issue.

Turkey, which has applied for membership of the European Union, is the United States’ fourth-largest trading partner in the Muslim world and 27th overall.

U.S-Turkey trade has dropped from a record of nearly $15 billion in 2008, but there is every reason to expect the two countries can surpass that “when the world economy gets back on its feet,’’ Locke said.

Babacan said the two countries would seek suggestions from business on how to increase trade in areas ranging from energy to agriculture to military equipment.
He downplayed the chances of Ankara using the forum to press Washington to reduce high U.S. tariffs that Turkey faces on textiles and some other exports.

Kirk said the initiative was not intended as a stepping stone to talks with Turkey on a free trade agreement. (Reporting by Doug Palmer; Editing by Chris Wilson)

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U.S., Turkey Launch New Trade, Investment Forum

December 10, 2009 by · Leave a Comment 

WASHINGTON (Reuters) – The United States and NATO ally Turkey launched an initiative Monday aimed at boosting trade and investment ties, but said there were no plans for the two countries to negotiate a free trade agreement.

“We can … build on what is a good trade and commercial relationship and make it a much more robust one,’’ U.S. Trade Representative Ron Kirk said at a press conference with Turkish Deputy Prime Minister Ali Babacan.

The initiative creates a new Cabinet-level forum to discuss ways to expand bilateral trade and investment flows and to try to resolve disputes when they arise, similar to one the United States has with China.

“This framework … will be an important vehicle for expanding trade and investment and creating new jobs for the workers and the people’’ of both countries, said U.S. Commerce Secretary Gary Locke.

The announcement followed a White House meeting between President Barack Obama and Turkish Prime Minister Tayyip Erdogan to discuss Iran’s nuclear program and U.S. plans to send more troops to Afghanistan.

Obama told reporters he believed Turkey, a predominantly Muslim country and long-time U.S. ally, could be an “important player’’ in moving Iran toward resolving its dispute with the West over its nuclear program.

Erdogan said Turkey stands ready to do whatever it can to achieve a diplomatic solution on the nuclear issue.

Turkey, which has applied for membership of the European Union, is the United States’ fourth-largest trading partner in the Muslim world and 27th overall.

U.S-Turkey trade has dropped from a record of nearly $15 billion in 2008, but there is every reason to expect the two countries can surpass that “when the world economy gets back on its feet,’’ Locke said.

Babacan said the two countries would seek suggestions from business on how to increase trade in areas ranging from energy to agriculture to military equipment.
He downplayed the chances of Ankara using the forum to press Washington to reduce high U.S. tariffs that Turkey faces on textiles and some other exports.

Kirk said the initiative was not intended as a stepping stone to talks with Turkey on a free trade agreement. (Reporting by Doug Palmer; Editing by Chris Wilson)

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Iraq Parliament Passes Key Investment Law

December 10, 2009 by · 1 Comment 

BAGHDAD (Reuters) – Iraq’s parliament passed an investment law on Monday that would allow foreigners to own land for housing projects, and is designed to streamline regulations and applications for foreign investment, lawmakers said.

Iraq hoped for a tide of foreign investment as the sectarian bloodshed triggered by the 2003 U.S. invasion subsided in the last two years, but bureaucracy, red tape and outdated land ownership laws have deterred businessmen.

“This is a huge achievement for everybody, the parliament, the cabinet and the Iraqi people. This will remove many obstacles blocking the investment process in Iraq,” National Investment Commission Chairman Sami al-Araji told Reuters.

The investment law does not cover the oil sector, nor hotel construction, but housing is a potentially huge growth industry.

Iraq hopes to build millions of new housing units. The old real estate laws only allowed the lease of land to foreign investors for a limited time.

The new law aims to speed up the process of applying for investment licenses and to clarify federal and provincial powers when dealing with investors.

It must now be approved by Iraq’s presidential council.

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Mideast Firms Ramp Up in Iraq, Western Firms Trail

December 3, 2009 by · Leave a Comment 

By Deepa Babington

2009-11-27T155315Z_1505821627_GM1E5BR1TSO01_RTRMADP_3_IRAQ-OIL

Workers dig a new oil well at South Rumaila oil field, in southern Iraq November 26, 2009. Britain’s BP and China’s CNPC have clinched a final agreement to operate Iraq’s biggest field, Rumaila, and groups led by Italy’s Eni and U.S. major Exxon Mobil have secured initial deals over Zubair and West Qurna Phase One. Picture taken November 26, 2009. 

REUTERS/Atef Hassan

BAGHDAD, Nov 30 (Reuters) – While Western firms notch up high-profile energy deals in Iraq, smaller regional firms from Iran to Turkey are quietly building a broader Iraqi presence by pumping billions of dollars into housing and other projects.

Pledges by companies to invest in Iraq are suddenly taking off as violence falls sharply and the government seeks help to rebuild after years of war, sanctions and bloodshed.

Investors have announced $156.7 billion worth of projects in Iraq this year, not all of which are likely to bear fruit, Dunia Frontier Consultants said in a report.
Much of the spotlight has fallen on mega-deals by Big Oil firms like Exxon Mobil <XOM.N> and BP <BP.L> for oilfields, but high security costs — 26 percent of total costs according to one estimate — have deterred Westerners from other sectors.

Meanwhile, Iranian investors have been piling into the Shi’ite Muslim tourism business, Turkish companies have cornered the market in the Kurdish north and Gulf companies, some run by Iraqi expatriates, are nailing construction deals.

Middle East firms are perhaps more accustomed to operating in difficult environments, and have an easier time navigating Iraqi red tape and corruption, analysts said.

“It is easier for Gulf and regional companies to operate here because they know the mentality here,” said Munther al Fattal, director of investment promotion at the U.S. agency for international development’s Tijara project.

“Security has greatly improved but there still are a lot of impediments such as bureaucracy and lack of transparency.”

While most investment projects announced in Iraq never seem to get off the ground, the growing business clout of regional firms is increasingly obvious.

Turkish firms have been investing in projects in the north and plan an $8 billion mixed development project in the south, while Iranian firms have catered to tourism supporting Shi’ite pilgrimages to the holy cities of Najaf and Kerbala as well as industrial projects in Basra in the south, Dunia says.

Lebanese investors have opened up a bank and plan to set up a $500 million residential city and dairy factory in Diwaniya, while investors from the United Arab Emirates have been eyeing residential complexes and infrastructure projects.

US is Small Fry Outside Energy

The United Arab Emirates has emerged as the top foreign investor in Iraq this year with pledges of $37.7 billion, followed by South Korea and the United States, Dunia said.

But South Korea owes its number two spot almost entirely to a planned $20 billion investment in a new industrial city in Anbar province’s untapped gas fields, which appears to be little more than a pipedream or at the very least, aspirational.

The U.S. position in the rankings is almost entirely due to Exxon’s $25 billion contract for the West Qurna oilfield, which has yet to be ratified by the Iraqi cabinet. U.S. investment into Iraq accounts for less than 1 percent of the total if government contracts and oil are excluded.

A look at smaller deals offers a more revealing picture of the players with a wider presence in Iraq.

Lebanon tops the list of investment deals below $1 billion, followed by South Korea, Iran, the UAE and Turkey, Dunia said.

Once again, South Korea’s position in the list is misleading, exaggerated due to a single energy project.

“Once the major energy deals are stripped away, it is largely regional players that dominate,” the Dunia report said.

Some analysts say the dominance of Middle East players is likely to continue.

“Most of the investment will come from Gulf States and Jordan — with a significant contribution from Iran,” said Gavin Jones of Upper Quartile, an Edinburgh-based research firm.

He said repatriation of wealth by Iraqis living in Jordan or the Gulf could account for a sizeable chunk.

(Editing by Michael Christie; Editing by Victoria Main) ((deepa.babington@thomsonreuters.com, Baghdad newsroom, +964 7901 917 023, deepa.babington.reuters.com@reuters.net))

11-50

Interview–Pakistan Wants Trade, not Aid

November 19, 2009 by · Leave a Comment 

By Amena Bakr

DUBAI, Nov 1 (Reuters) – Pakistan plans to send an official delegation to the United States in mid-November to attract investment in a bid to revive its economy following a series of militant attacks, a senior official said on Sunday.

Last month, suicide bomb blasts targeted the United Nations, army headquarters, police and general public, killing more than 150 people.

“The recent attacks did have a negative impact on the perception (of the country), but at the same time Pakistan is a growing country and investors have to be in it for the long term,” Waqar Ahmed Khan, Pakistan’s minister of investment, told Reuters during a visit to Dubai.

A delegation headed by Khan, along with businessmen from Pakistan, will head to Washington on Nov. 18, he said.

“From the United States we are seeking trade, not aid, because that’s what’s going to really help stimulate our economy,” he said, adding that opening up trade between the two countries would support political stability.

“The growth of the economy and fighting terrorism go hand-in-hand and the government is committed to protecting investors’ interests.”

U.S. President Barack Obama has also said increased aid and trade will be tools to fight Islamic extremism both in Afghanistan and neighboring Pakistan.

Congress has just approved a bill tripling aid to Pakistan to $1.5 billion a year for the next five years, but with conditions attached that have unleashed a storm of protest from Pakistanis who say the country is being humiliated.

Investment Interest

Last month, a delegation headed by the Turkish prime minister was in Islamabad to discuss investment opportunities, said Khan.

“The Turkish investors are now in talks to establish textile factories, lease land for agriculture projects and are also looking at the livestock and dairy industries,” he said.

Pakistan’s GDP growth is expected to be between 2.5 and 3.5 percent in the fiscal year 2009/10, up from 2.0 percent in the previous year, the central bank said in its annual report released on Thursday.

“Despite all the recent attacks I think that the GDP will remain on the positive side this year, and I also expect foreign investment to increase during the forth quarter,” said Khan, without giving further details.

Net foreign investment in Pakistan fell 28.9 percent to $671.1 million in the first three months of the 2009/10 fiscal year, beginning on July 1, compared with $943.4 million in the same period a year earlier.

(Reporting by Amena Bakr; Editing by Nick Macfie)

11-48

INTERVIEW-Pakistan seeks US trade, not aid, says minister

November 12, 2009 by · Leave a Comment 

By Amena Bakr, Reuters

DUBAI, Nov 1-Pakistan plans to send an official delegation to the United States in mid-November to attract investment in a bid to revive its economy following a series of militant attacks, a senior official said on Sunday.

Last month, suicide bomb blasts targeted the United Nations, army headquarters, police and general public, killing more than 150 people.

“The recent attacks did have a negative impact on the perception (of the country), but at the same time Pakistan is a growing country and investors have to be in it for the long term,” Waqar Ahmed Khan, Pakistan’s minister of investment, told Reuters during a visit to Dubai.

A delegation headed by Khan, along with businessmen from Pakistan, will head to Washington on Nov. 18, he said.

“From the United States we are seeking trade, not aid, because that’s what’s going to really help stimulate our economy,” he said, adding that opening up trade between the two countries would support political stability.

“The growth of the economy and fighting terrorism go hand-in-hand and the government is committed to protecting investors’ interests.”

U.S. President Barack Obama has also said increased aid and trade will be tools to fight Islamic extremism both in Afghanistan and neighboring Pakistan.

Congress has just approved a bill tripling aid to Pakistan to $1.5 billion a year for the next five years, but with conditions attached that have unleashed a storm of protest from Pakistanis who say the country is being humiliated.

Investment Interest

Last month, a delegation headed by the Turkish prime minister was in Islamabad to discuss investment opportunities, said Khan.

“The Turkish investors are now in talks to establish textile factories, lease land for agriculture projects and are also looking at the livestock and dairy industries,” he said.

Pakistan’s GDP growth is expected to be between 2.5 and 3.5 percent in the fiscal year 2009/10, up from 2.0 percent in the previous year, the central bank said in its annual report released on Thursday.

“Despite all the recent attacks I think that the GDP will remain on the positive side this year, and I also expect foreign investment to increase during the forth quarter,” said Khan, without giving further details.

Net foreign investment in Pakistan fell 28.9 percent to $671.1 million in the first three months of the 2009/10 fiscal year, beginning on July 1, compared with $943.4 million in the same period a year earlier.

(Reporting by Amena Bakr; Editing by Nick Macfie)

11-47

Offbeat Investment

September 3, 2009 by · Leave a Comment 

By Martin de Sa’Pinto

ZURICH, August 24 (Reuters) – Few investors would be happy to see their assets turn sour, but an alternative investment launched recently offers them the chance to make a healthy return from just such a development.

Vinegar may be a unorthodox investment but Stefan Marti, managing director of vinegar maker Baerg Marti, said it has captured the imagination of many investors, especially from Russia and Asia.

“I was showing my bottled vinegar to some Japanese clients, and they asked me to sell them a barrel rather than bottles. They wanted their own barrel personalised with their logo so they could be identified with the product,” Marti told Reuters.

He said the clients were excited by the product and by its production process — it is matured in the Swiss mountains at an altitude of 3,000 metres for five years or longer in Limousin or cherry oak — which gave it a strong appeal as an investment.

Turmoil in the financial markets in 2008 and the first quarter of 2009 has boosted the attractiveness of unusual asset classes like fine wines, art, rare coins and violins, which investors hoped could perform through the crisis.

Although rallying equities and corporate bonds are pulling investors in once again, interest from around the world in Baerg Marti’s vinegar has been growing, Marti said.

Investors could see returns that outstrip those of many more conventional funds and expected average returns of 200 to 300 percent over five years, he said. However, as the project is new there are no past performance figures.

Baerg Marti is offering 5-year contracts on the vinegars, which use Swiss produce, including apples, strawberries and blueberries, at a cost of 11,500 Swiss francs ($10,850) per barrel, plus a yearly storage fee of 150 francs.

There will be no performance fee, although Marti said one may be introduced for high volume buyers.

When mature, the best balsamic vinegars can cost 3,000 francs and more for just 1 litre, Marti said. A barrel contains some 30 litres.

Investors would be tied in to the five year contract, after which they could hold the investment, resell the vinegar or use it.

The vinegar benefits from temperature changes high in the Swiss mountains, however, one risk is from earth tremors, which can damage the quality.

Marti, who said the main interest in the investment so far has come from Japan, China and Russia. He said the barrels were insured for 11,500 francs for the investment period.

The market is liquid enough to give investors an exit, with demand from buyers in many parts of the world, Marti said, although he was unable to say what sort of bid-offer spread investors could expect if they needed to sell quickly.

He said the initial number of investors would be restricted as the first site, on the Mutthorn mountain in Switzerland’s Bernese Alps, can hold a maximum of 500 barrels. Another site was in preparation, and would be ready in seven or eight months. ($1=1.060 Swiss francs)

11-37

Middle East Hit by U.S. Financial Crisis

October 16, 2008 by · Leave a Comment 

Courtesy New America Media, Shane Bauer

Editor’s Note: Even oil-rich Arab countries, which until recently were smug about being insulated from the financial debacle on Wall Street, are starting to worry. Analysts are predicting that they are sure to increase regulations and start pulling their economies away from the United States. NAM contributor Shane Bauer is a journalist and photographer based in the Middle East.

Stock traders in the Middle East

SANA’A, Yemen–While Washington was hashing out the terms of its largest financial bailout in history, Arab bankers were saying everything in the Middle East was as good as ever.

A full-page ad in one Middle Eastern magazine advertised a proposed business park called Falcon City, another fantasy land to add to the skyscrapers and glitter of oil-rich Dubai. Office buildings were shaped to resemble the Eiffel Tower, the Great Wall of China, the Pyramids of Egypt, and the Taj Mahal.

“As a residential or business address, each wonder is a totally amazing investment,” the caption read.

A few days later, the same newsstands spelled dread. Images of fear-stricken men in white robes and kafiyyas, their eyes fixed on strings of red numbers, splashed the front pages. Headlines announced that the Middle East’s markets were crashing, and columnists spit fire, calling on the Arab world to free itself “from the shackles of American imperialism.”

The degree to which Arab investors, which have some $800 billion invested internationally, will rein in their international investments will likely depend on how heavily they are impacted by the crisis. But analysts say that at the very least, Arab countries are sure to increase regulations and start pulling their economies away from the United States.

“U.S. influence has long been waning, both in its capacity to inspire and to intimidate,” says David Levy, senior fellow and director of the Middle East Initiative at the Washington, D.C., think tank the New America Foundation. “The region has been increasingly looking elsewhere for investments and markets. The crisis on Wall Street will only hasten that process.”

2008-10-12T102958Z_01_DUB09_RTRMDNP_3_DFM-LIMITDOWN But Arab analysts say the United States was becoming increasingly unattractive for investment well before the financial crisis hit. Washington had rejected several investment attempts in recent years by Arab companies on the basis that they were, well, Arab.

The last rejection came when some Gulf companies showed interest in investing nearly $20 billion to help save Citi Group and Merrill Lynch when they were initially threatened with bankruptcy. The deal was stopped in Congress when opponents said an increase in Arab investment in the United States would present a national security problem.

As Arab stock markets fall for their third day since reopening after a one-week post-Ramadan holiday, one thing is clear: those with the most open markets and the strongest ties to the U.S. economy are being hit the hardest.

In the past three days alone, banks in the Persian Gulf have lost about $150 billion. On Tuesday, the Tadawul All-Shares Index, home to the Arab world’s biggest market, finished at its lowest close in four years.

Countries that last week were saying that their economies were “insulated” from international financial disasters are now bailing out their banks. The central bank of the United Arab Emirates pumped $17.5 billion into its banks this week and said it is ready to give more if needed.

Jan Randolph, an economic analyst at Global Insight, says that “Arab investors and banks are going to start looking locally for investments.”

The president of the Union of Arab Banks, Adnan Yusif, has announced that there needs to be an increase in regional investment, and economists have been calling for a meeting of financial ministers and policy makers to come up with a regionwide plan to deal with the crisis.

But inter-Arab economic cooperation might not be easy. The Middle East is home to some of the world’s most closed economies, like Syria, as well as countries whose names are virtually synonymous with unfettered growth, like the United Arab Emirates.

Antagonisms over competing economic ideologies run deep in the Arab world, and the current crisis seems to be reigniting debates about how much regional economies should be bound to the global economy.

“If this crisis does send real shockwaves through the region, and you start seeing that economies more closed to the world are more protected, people might start seeing open economies as a double-edged sword,” says David Levy.

Masa’ad al-Kurdi of the Saudi-owned Al-Majella magazine writes that neo-liberal globalization is to blame for the crisis. “The developing world’s economies are dependent on the U.S., the world’s largest importer, to buy their exports,” he argues. As the dollar weakens, “developing countries are going to pay the most,” writes Al-Kurdi, who concludes that “the United States of America is driving the world into the abyss.”

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