Is millionaire right to give away his $4.5m fortune?
Consider the curious case of Karl Rabeder, a self-made businessman from Austria who is giving away his $4.5 million fortune because he found being rich was making him unhappy. Is he mad or just eccentric?
Only The Daily Telegraph could come up with such a story. His fabulous $2.3 million home in the Austrian Alps (pictured above) is to go and his $1 million farm house in Provence. The interior furnishings business that made him rich has already gone.
Well earned riches
Most people in similar circumstances feel that they have worked very hard for what they have got, and generally think it should have been more or that they were cheated in someway. Mr. Rabeder apparently believes he will be happier living in a small hut and giving his money to charities in Central and Latin America to help the very poor.
The tipping point came on a three-week holiday staying in a five-star hotel in Hawaii that Mr. Rabeder and his wife thought soulless with themselves and the staff just actors on a stage.
Yet it would take a lot more than a bad holiday in America to persuade most people that being a multi-millionaire was not worth the candle. What about the financial security for the future?
If the big homes are a burden then downsize to something simpler and more practical. For most people this looks like a simple failure of imagination. They would have a Ferrari and be done with it. Mr. Rabeder is even selling his Audi A8.
Personal freedom
But then again the whole point of being wealthy is to be free to do what makes you happy. If giving your money away to enrich the poor gives you satisfaction then why not?
It is perfectly true that you can only live in one house at a time, drive one car and eat so many five-star meals without feeling sick. But this seems a curious allergic reaction to materialism and good living, a sort of personal communist revolution.
Perhaps in future years The Daily Telegraph will care to report back on their Karl whose Marxist credentials would have pleased the master, or will he be forgotten now that he is just another average citizen of modest means. Mad is the word.
UAE bans restaurant service charges
From tomorrow any restaurant in the UAE making a service charge is liable to be immediately shutdown. This marks an end to a two-month grace period from the Ministry of Economy for restaurants to comply with an official decree.
High restaurant bills have come under attack from consumers and government watchdogs alike as damaging to the tourism sector in the emirates. There is also a concern that service charges are not being passed on to staff as tips but retained by the owners and used to pay staff wages.
Tipping
From now onwards if you wish to leave a tip in the UAE it will be entirely at your discretion. ArabianMoney has been highlighting iniquitous service charges and the unjustifiably high prices in local restaurants for some time.
The removal of the service charge is a good start. But the over-charging for basic meals like steak and potatoes should also stop. Tourists getting a good deal on hotels in the UAE still sometimes find themselves ripped off at the dinner table.
Likewise the prices charged for a glass of wine are often outrageous and have nothing to do with the local taxes applied, and far more to do with profiteering. There is no need for this, and does anybody imagine that tourists do not notice that the prices are high here and that they can get better value elsewhere?
Tourism centre
For if the UAE is to remain and increase its competitive position as a centre for global tourism then it needs to offer the full value package, and not try to use bogus religious intolerance as an excuse to overcharge for drinks.
It is to be hoped that the full value of any tips left on the table will now go to often rather poorly paid staff, and not taken into some general pool where the owner gets a cut, as almost always happened with service charges in the past.
But in any case this is a step forward for the hospitality sector and a welcome move by the authorities whose decisive action is to be applauded.
Dollar now strengthening not weakening
From the euro to the UK pound and the yen, the greenback is showing unexpected strength this year and mounting a comeback.
Indeed, if you look back 35 years as Bloomberg has just done then the relative strength of the US dollar is up by three per cent. By contrast the UK pound is down 34 per cent.
Of course, the real concern is purchasing power, not relative strength, although if the US was really in long-term economic decline then its currency would be following the route of the pound sterling and the lost British Empire.
Purchasing power
Purchasing power is also critically important to investors in the long and short term. At worst you want to see the purchasing power of your savings maintained, and preferably you want to see some addition to compensate for not being able to spend it.
On this reckoning then none of the major currencies has done very well. Inflation has eroded the value of money considerably since 1975. Money kept in a savings account would indeed have lost a great deal of its purchasing power over time.
The point for investors though is to make investments in the currency that is out-performing the others. At present that is the US dollar whose long bear market seems to have ended at $1.50 to the euro.
Now it is the eurozone that is revealed as less than perfectly formed with nasty public debt problems in Portugal, Ireland, Greece and Spain; and actually debt issues in France, Belgium and Austria are also highly problematic.
What comes next is likely a major correction on Wall Street, a big stock sell-off after the record rally since last March, and in fact this has been slowly happening since early January. This will further strengthen the dollar as investors sell US stocks and get US currency in return and also flee to US short-term treasury bonds.
Dollar weakness returns?
Could US dollar weakness then resume in the summer say? It is by no means clear as the debt problems all over the world are considerable, not just those piling up in America.
Surely the thing to watch out for is another slip in purchasing power as inflation picks up. For one sure way to eliminate debt is to have an inflation of the money supply. That is what happened in the 70s.
But then again deflationary forces will be powerful as asset prices contract again with a stock market correction, and this may hold back inflation for sometime. In truth, nobody seems to get currency analysis right but you should always be aware of the trends.
Buying gold and silver in place of dollars might well make considerable sense when the dollar rally seems done, and before an inflation starts. But good luck on the timing!
Saudi posts post 8.4% slump in trade as UAE credit growth dives
Those global economists who think the Gulf Oil States will help to pull the world out of recession should look again at the latest data. Falling container volumes at the ports in Saudi Arabia signal a downturn, not a recovery, as does a big contraction in credit growth in the UAE.
Container volumes at the kingdom’s ports fell by 9.1 per cent to 11.9 million tonnes in November in comparison with the same month a year earlier, according to the Saudi Ports Authority. Imports were down 14.9 per cent to 4.9 million tonnes, while exports fell 4.9 per cent to 6.9 million tonnes.
8.4% fall in trade
For the January to November period total container volume in the Arab World’s largest economy slumped by 8.4 per cent to 129.3 million tonnes.
Then again consider credit growth in the UAE, the region’s second largest economy. Between 2003 and 2008 the annual growth in total bank credit grew from 18.4 to 38.4 per cent. Last year it plummeted to 2.4 per cent, and the Central Bank predicts credit growth will stay low in 2010.
Both the new figures for Saudi trade and credit growth in the UAE are consistent with economic recession, and that is clearly the immediate outlook for the Gulf Oil States.
The rebound in oil prices from the lows of December 2008 has prevented the situation from being worse than this, but total oil revenues fell in 2009 with lower prices and output. The knock-on effect on the non-oil sectors is clear, although this has been compounded by a real estate crash in the UAE.
Recession hits
However, the kingdom is not avoiding the slowdown as some economists hopefully suggested it might. Trade data is amongst the most reliable from which to make economic projections, and not generally prone to later statistical revisions.
That said the Saudi Arabian trade figures are better than the 16 per cent slump in China for 2009, the country most often cited as likely to lead the world out of the worst economic slump since the 1930s.
It could still be that in relative terms the Gulf States are something of a safe haven for business activity, but untouched by global realities they are most certainly not.
How reliable is super-bear Bob Prechter as a forecaster?
Bob Prechter is the most pessimistic of forecasters for 2010 and predicts a complete meltdown of the US stock market. Yet it is only fair to note that he has been predicting market meltdowns that either just did not happen, or were far less dramatic than advertised for more than 30 years.
In an appendix to ‘Conquer the Crash, Second Edition’ he proudly displays his first forecast from 1978. It forecast a dramatic surge in stock prices into the 1980s and then a massive market crash in the early 90s.
1990s crash?
What happened was not so far off up to the 1987 crash, or correction as Prechter correctly had it; but the surge in the stock market in the 1990s followed by a double top in the 2000s was nothing like his prediction, and the really big 90s crash was totally missing.
You can also pick back through his latest book for many examples of doom-laden warnings that just did not happen. And you can find an occasional flash of genius, like getting the 2008 oil spike spot on, except that the overshoot in prices was characteristically overdone.
The analysis is also wonderful stuff, a range of thought that sets people thinking. But does it have much more objective value than that? Perhaps.
Followers of the inflationist versus deflationists should read Prechter. However, his use of language is up with the best of lawyers and at several points he appears to twist what most of us might think as inflation into being deflation.
Hyperinflation and deflation
For example, while it is true that asset prices usually deflate in relative terms in a hyper-inflation, could that really then be said to be a deflation? This is trying to have your cake and eat it.
However, having read his latest book from cover to cover it is rather harder to take his current predictions at face value than before reading this volume. There have been too many false alarms and too many overshoots.
The best that can probably be said is that Prechter has made some very good directional calls in his time and made a serious contribution to our understanding of markets and of course business cycles. The actual predictions seem almost always over-exaggerated and sometimes plain wrong.
Factor that conclusion into his recent super-bearish forecast and you get a significant slump in stock prices but not a total wipe-out for 2010.
