Last week, I had a visit from an earnest young lieutenant in the Abu Dhabi Defence Force who wanted my opinion on the price of oil.
"I need to know, because it is the future of my country," he told me.
Flattered to be mistaken for an oracle, I had to tell him I could not explain current oil prices, which have become divorced from oil supply and demand, much less predict where crude would stand in a year or even a month from now. Much would depend on the timing and speed of economic recovery, I suggested, and on what oil traders collectively thought about that.
My visitor said he knew all was in Allah's hands, but when would the economy buck up?
Again I could not help him. Never before in my lifetime had banks stopped lending money to each other and everyone, everywhere stopped buying things. The resulting downwards economic spiral was unprecedented and anybody trying to figure out how it would end was groping in the dark. I certainly did not know. Nor, in my opinion, did anyone else.
The young Emirati sincerely thanked me for these less than profound insights and left The National's newsroom deep in thought.
The next day, a news agency reported that the United States Oil Fund (USO), the first and so far only exchange-traded investment fund that buys crude oil futures contracts, had denied causing last year's record peak and subsequent collapse in oil prices.
That was odd, because no one had suggested it had done any such thing.
Rather, the fund was being investigated by US regulators over trading activities this year that might have widened the record price spread between contracts for oil delivery in consecutive months. That, in turn, could briefly have raised the financial incentive for traders holding physical barrels of crude to store them for later sale.
What the USO actually said in a filing with the US Securities and Exchange Commission was that analyst reports alleging its buying and selling activities were causing unusually wide price swings "mischaracterised" the fund's impact on the market price of oil. The probe itself was also strange, because there had been no suggestion that the USO had intended to manipulate oil prices or had broken the law.
The fund's most contentious practice of "rolling" its holdings in an expiring crude oil future into the contract for the subsequent month is standard among "paper" traders, who have no interest in the messy business of taking physical delivery of crude.
But because the USO's paper holdings are so much bigger than those of other traders, the large volume of buying and selling over a short period entailed by its rolls can significantly drive down the price of the expiring contract while lifting the price of the next-month contract.
In late February, the USO sold off 20 per cent of the outstanding March crude futures on the New York Mercantile Exchange - presumably to refiners and others who actually wanted the oil - upsetting the market.
The USO is under investigation because it is the world's biggest trader in certain futures contracts, and not for doing anything illegal. A finding that its activities increase oil price volatility could therefore be taken as an argument for restricting all trading in oil futures.
Another US regulatory body, the Commodity Futures Trading Commission, is planning hearings over the next two months on just that issue. This is viewed as part of the Obama administration's effort to stabilise financial markets and could result in restrictions on "speculative trading", possibly through limiting the quantity of energy futures contracts that an institution may hold.
That would be bad news for the USO, but would it help oil companies groping for a reliable crude-price forecast on which to base investment decisions? Would it help oil-exporting countries achieve more stable government revenues, or consuming nations protect their citizens from unexpected jumps in fuel costs?
Maybe not by much, because in the long run price volatility is only noise. Supply and demand still determine the signal of rising and falling price trends. Only a glut of oil can feed a sustained build-up in crude inventories, not a fleeting drop in prices, however exaggerated.
Less noise might help energy planners discern the signal but so would strengthening the signal. The latter requires, among other things, greater transparency over oil production and output capacity from governments that like to keep such information secret. Strangely enough, such governments are quick to denounce "speculators" who guess at the status of supplies.
For traders uncomfortable with analysing imperfect supply and demand data, there are other means to predict short-term price moves in noisy markets. Some come from the esoteric world of technical analysis and involve mathematical concepts such as the Fibonacci series.
Exactly what an abstract sequence of numbers derived from adding together sequential integers has to do with oil prices escapes this oracle's understanding, and possibly that of most commodity traders. But those who have figured it out believe they can make money from the knowledge, or from convincing others that they can.
What is left for the rest of us? Analysing tea leaves, as more than one colleague has suggested? Or perhaps in this dismal economy, designers should abandon their devotion to consumer trifles such as high-definition TV, and instead develop a high-definition crystal ball.
@Email:tcarlisle@thenational.ae
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
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Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
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Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
The Year Earth Changed
Directed by:Tom Beard
Narrated by: Sir David Attenborough
Stars: 4
The bio
Studied up to grade 12 in Vatanappally, a village in India’s southern Thrissur district
Was a middle distance state athletics champion in school
Enjoys driving to Fujairah and Ras Al Khaimah with family
His dream is to continue working as a social worker and help people
Has seven diaries in which he has jotted down notes about his work and money he earned
Keeps the diaries in his car to remember his journey in the Emirates
COMPANY%20PROFILE%20
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Stamp%20duty%20timeline
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COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Major honours
ARSENAL
BARCELONA
- La Liga - 2013
- Copa del Rey - 2012
- Fifa Club World Cup - 2011
CHELSEA
- Premier League - 2015, 2017
- FA Cup - 2018
- League Cup - 2015
SPAIN
- World Cup - 2010
- European Championship - 2008, 2012
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
MATCH INFO
Everton 2 (Tosun 9', Doucoure 93')
Rotherham United 1 (Olosunde 56')
Man of the Match Olosunde (Rotherham)
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%3Cp%3EAuthor%3A%20Salha%20Al%20Busaidy%3C%2Fp%3E%0A%3Cp%3EPages%3A%20316%3C%2Fp%3E%0A%3Cp%3EPublisher%3A%20The%20Dreamwork%20Collective%C2%A0%3C%2Fp%3E%0A
Abu Dhabi race card
5pm: Maiden (PA) | Dh80,000 | 1,600m
5.30pm: Maiden (PA) | Dh80,000 | 1,400m
6pm: Liwa Oasis (PA) Group 2 | Dh300,000 | 1,400m
6.30pm: Arabian Triple Crown Round-2 (PA) Group 3 | Dh300,000 | 2,200m
7pm: Wathba Stallions Cup (PA) Handicap | Dh70,000 | 1,600m
7.30pm: Maiden (TB) | Dh80,000 | 2,200m
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
A list of the animal rescue organisations in the UAE
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.