Crack the Crunch with the Crunch Breaker
After the recession Posts
China coming out of recession – the numbers are mind-numbing…
December 8th, 2009
I suppose it’s as if we’ve been cowering in our bunkers for the past year whilst the recession rages around us; banks collapsing, mass unemployment, consumer fear.
We’ve become used to recession.
Poor figures. Bad news.
Agreed –the past few months have shown an improvement but we all know that any recovery is fragile.
So it was with some interest that I arrived in China recently. I had heard of mass redundancies there too – millions losing jobs as factory after factory closed.
What I found was an amazing ‘can do’ attitude by everyone. Yes – the recession had been tough but it was the fault of the US and UK, not Asia, it was explained to me.
In one meeting I had, I was told that the company, a major power in retailing globally, had decided to turn its attention away from the West and to China, which is where the future lay.
Open the South China Morning Post and the numbers are mind-numbing; it stated that growth in mainland China’s industrial and retail output accelerated last month. Industrial production, which accounts for over 40% of China’s economic output, rose 16.1% in October, up from September’s 13.3%. Annual growth would meet the 8% target.
Gordon Brown would be a permanent fixed grin if that was the case in the UK.
Retail sales were up over 16% too, in a sign that the Chinese are shopping again. Looking at the shopping malls and restaurants in Shanghai and Beijing, they certainly are.
Cynics would say that the numbers are massaged. Maybe that’s the case, but I have no doubt that this country is growing rapidly once more. Vehicle sales were up 72% on 2008, with sales of 1.22 million units for October alone. 30 years ago only senior government employees or the very rich owned a car at all.
This is the market of tomorrow. And if there is a wider post recession trend, then it is the rise and rise of Asia.
I for one will be spending more time developing this massive potential over the coming year.
So, Sorrell thinks its going to be a LUV shaped recession
November 12th, 2009
Sir Martin Sorrell, CEO of WPP (the biggest advertising group in the world) is a big cheese. My mate Si writes his speeches and my Missus used to work for him. So when he speaks, people tend to listen. (www.wpp.com)
And he did. This week.
According to the Times (www.timesonline.co.uk) Sir Martin offered a new expression to describe prospects for the world’s economy – he predicted an ‘LUV’ shaped recovery.
Once describing a previous downturn as bath-shaped, Sir Martin has now predicted a 3 speed discovery in 2010.
He said the recovery would be L-shaped for Western Europe, U-shaped for The US and V-shaped for Brasil, China, Russia and India and the so-called ‘Next 11’ nations which include Turkey, Indonesia and Vietnam.
Sir Martin said that things were now ‘less worse from July to September than from April to June’, but added ‘you would expect that to be the case, given the massive fiscal and monetary stimuli pumped into the world’s economy. If it hadn’t worked, we’d all be in real trouble’.
The big test is what happens when governments start to withdraw their fiscal packages.
The ship is turning but it hasn’t turned yet.
So we’re all going to be ‘LUV’d up …
It won’t be long before we all see a strong Chinese global brand
October 29th, 2009
I have been going to China for many years.
When I first went there were rickshaws everywhere, most people wore bamboo hats and parents would point to me and tell their children – ‘look – a bignose’ (I was told at the time that this is what Westerners were referred to as we have much bigger noses than the Chinese). The villages were surrounded by paddy fields, with farmers standing bare-foot in ankle-deep water, trousers rolled up.
Then a few years later I noticed a massive change. Where once there was a small village at the border with Hong Kong, a city mushroomed out of the fields and Shenzhen was born.
In Panyu, we built a new clothing factory with 5000 workers. Within 2 years Panyu had changed from being a town to becoming Panyu City of over 3 million. The mountain I had seen on my last visit was no longer there. ‘We have removed it’. I was proudly told.
And then just before the 2008 Olympic Games I was in Beijing, and for most parts it could have been a western city. The rickshaws of the past were long gone, now replaced by BMW’s and Mercedes, as the skyscrapers towered over the city skyline.
But China is a fascinating place, if not for its pace of change and innovation. I have never seen such an entrepreneurial spirit and this convinces me of one thing.
I confidently predict that China will soon develop a global brand that will become the envy of the world.
In my childhood I remember seeing electronic goods marked ‘Made in Japan’ which we would patronising refer to as ‘Jap crap’. Well the Japanese learned quickly, and the ‘Jap crap’ are now global brands such as Toyota, Sony and Honda.
China will take up the baton very soon.
London still number one in the financial world – really!?
October 14th, 2009
I couldn’t quite believe it.
After the past 2 years, where the blood of bankers has flowed freely through the City of London and Canary Wharf, where the UK has been criticised world-wide for financial irresponsibility during the boom years (along with some of our US cousins), all seems to be rosy once more in London’s financial centre.
It seems incredulous, but the UK has taken the number one spot as the world’s leading financial centre, according to the latest league table from the World Economic Forum (http://www.weforum.org/en/index.htm). So, the reward for collapsed banks, massive debt that will be round the necks of our children (or their kids) for decades is to give the UK the prestigious number one slot.
The UK was number 2 last year behind the US, who have moved to 3rd place. Surprisingly Australia is at 2nd place (which supports other posts I have written on this blog site), with Singapore and Hong Kong behind the US. France and Germany don’t even feature in the top 10, so a slap in the face to Super Sarko and Frau Merkel.
Being irresponsible clearly wins through (for the UK at least…).
But on closer analysis, the UK is not in such great shape (as if we didn’t know). The WEF scored each country on various criteria. Out of the 7 criteria, the UK came 37th out of 55 nations for financial stability, behind Nigeria, Panama and Bangladesh.
Now I’m confused – how did we manage to rank first overall? If the WEF wasn’t an independent organisation, I would have put it down to government spin.
Mmmmm
Lehman Brothers one year on. What if its collapse had never happened??
October 9th, 2009
As has been spread across all the papers over the past week, it’s the first anniversary of the collapse of Lehman Brothers, which marked the start of the global crash into recession.
I had never really understood until very recently the full reasons behind the collapse of the bank and how near they were to agreeing a deal that would have saved not only the bank but also the rest of the world collapsing into an abyss.
The London Evening Standard (http://www.thisislondon.co.uk/standard/), carried a thought-provoking article surrounding the anniversary. It claimed that had the bank been rescued, Barack Obama may not now be President. Had the bank been rescued, Michael Jackson may now still be alive.
The logic was that the public anger against the banking sector in general and ‘fat cat’ bankers specifically led to a surge in anti Republican feeling and the sense of a need for change, which Obama was offering. The public saw him as the guy who would come up with the solutions (even if he didn’t have any.).
Michael Jackson would still be among us, the article claimed, he would not have been forced to agree to a gruelling tour to re-coup some of his lost millions. Preparing for the tour pushed him to the extreme.
But how close did Lehman Brothers come to being saved? It seems much closer than many of us would expect. And it all came down to a game of poker-like nerves.
The bank filed for bankruptcy on Monday 15th September 2008. On the Friday before, Bank of America had been trying to put together a deal to save Lehman Brothers. This collapsed after Henry Paulson, the then US Treasury chief, refused to give BoA assurances that Lehman’s liabilities would be underwritten by the US government.
Barclays, the UK Bank, came onto the scene, with Bob Diamond flying from London to Washington to try to put together a deal to buy Lehman. Diamond asked Paulson for the same assurances and these were refused, saying that he must get an assurance from the UK government. Alastair Darling, UK Finance Minister, flatly refused to give assurances, saying that it would be inappropriate for the UK government to underwrite the debts of a foreign bank.
So the negotiations broke down and by Sunday, the clock was ticking and nothing was happening. If no deal could be brokered, Lehman Brothers would close its doors at midnight on the Sunday, New York time. Paulson would not budge and neither would Darling. As midnight approached there was a total silence from London and Washington, with Barclays firmly believing that at the last moment Paulson would agree to the assurances.
Midnight came and went, and with it so too did Lehman Brothers.
Most commentators now believe that this should never have happened, as the collapse of Lehman led to total fear in the markets globally. Besides, Paulson agreed to support AIG 2 days later. He could easily have done the same for Lehman.
So all of this could have been avoided, Michael Jackson would still be alive and Barack Obama still a Senator from Chicago.
The Breaking of Generation Y. The post recession landscape.
September 3rd, 2009
“My parents told me to save. They also told me not to go to bed with a guy on a first date and not to pop E’s. I ignored all of it”…… (woman, 28, California)
The credit crunch has squeezed the incomes of the retired. It has forced those in their 50’s and 60’s to delay retiring by years.
But the biggest impact of the credit crunch is likely to be amongst people in the 25 to 35 age group.
• This was the generation who bought housing at the top of the market in 2006-2007, and who have seen the biggest collapse in their home’s value. Having only saved for a small deposit, or taking out a 100% or even a 125% mortgage, they are now holding nothing but negative equity.
• This was the generation of easy credit, who discovered that a credit card was better than cash, because if you played it right, you never had to pay the money back. NOW IT’S PAYBACK TIME.
• This is a generation who never learned to save and therefore don’t have a cushion of money to fall on. Older adults always try to have an ‘emergency fund’ of £20,000 / Euros / Dollars to fall back on in hard times. Young adults never saw the point of saving. NOW IT’S TOO LATE.
• Younger business leaders have never seen how banks operate – offering long credit lines in the good times and withdrawing it when it gets tough. Many are in shock with what is happening to their businesses.
Recessions impact younger consumers hard because they cannot believe how easy it is to lose all their money.
Innovation of the year! Is this a post recession trend?
August 24th, 2009
It all started when I was handed a flyer when rushing for the Tube (subway, metro) near to where I live in West London. Some guys were strategically standing in my path (the same way as ‘chuggers’ do) giving out flyers. My first reaction was, as always, to avoid them and (in a very London way) to keep my eyes down, avoid any eye contact whatsover and get to the Tube by the shortest possible route.
I could’t avoid the flyer though and just pushed it in my pocket. I short while later, when looking for something else, I found the (offending) flyer. Zipcar.
Hmmm.
Later that evening I rushed past the same guys still handing out flyers, again doing my best at avoiding them and making eye contact. On my walk home I passed a smart VW Golf with a small sign next to it which said simply ‘ZipCars live here’.
My interest was tweaked, so I got online to find out more.
Well, the net result is that I no longer have my gleaming Beamer but have chosen to use ZipCar instead. It’s brilliant. And I am sure that this recession will lead to a lot more people doing the same as me. I save a fortune AND I become a carbon footprint saint….
Just think – you find a car very near to where you live using the Zipcar website, access the car using a credit card type devise, find the key, use it by the hour, day or longer and just return it to where you left it. No insurance, no lease, no congestion charge to pay, no tax disc or residents permit. No searching for a parking space late at night. AND just think of the environment!
So when I realised how much I was paying for NOT using my car, ZipCar made complete sense.
I think it’s a great innovation that can only be a winner – in fact everyone seems to win. Obviously it’s of no use to someone living out in the country or miles from anywhere, but for city dweller it’s perfect.
I see this as a very real post recession trend. I wonder if it’s taking off elsewhere. It deserves to.
Guess which country escaped the recession?
July 31st, 2009
I wrote about this a few months ago and it seems my hunch was right – our antipodean friends down under are winning through when the rest of the world is limping along.
According to the UK financial paper CITY AM, Australia has managed to avoid the recession.
There has been alot written about the recession being a global phenomenon, affecting every developed country. Yet Australia is a glaring exception; it has not only avoided the worst of the destruction, but has not even gone into recession, which is truly astonishing.
Although Australian GDP contracted by 0.6% in the 4th quarter of 2008, it expanded by 0.4% in the first quarter of 2009, which seems to have gone unnoticed in Britain and elsewhere. But why has this happened?
The Reserve Bank of America started to hike interest rates in 2002, many years before the rest of the world realised that an irrational exuberance had set it. The bank had taken early action to cool the property market which in 2002 in Australia was spiralling out of control and the impending bubble threatening the economy. Sounds familiar?
Plus the Australian banks steered clear of sub prime loans – accounting for just 1% of the total in 2007 versus 13% in the US, so their banking infrastructure remained intact – there have been no bail-outs of banks and state-financed recapitalisations.
Their action led to a slowdown in home loan lending – from a peak of 21.5% in 2002 to only 7% in May 2007. As a result the housing market cooled down and Australians started to save money.
Even today the base rate in Australia is at 3.5%, much higher than the rest of the world – but the economy is ticking along despite this and they still have plenty of ammunition to reduce rates further if needed.
This may well be case-study material for the post recession analysts, one thing’s for sure. I will be happier than ever to jump on plane to Oz to visit some of my customers.
Us Brits lose our appetite for eating out
July 27th, 2009
I love looking at trends and other pieces of information – I’m a real junkie for this in a nerdy sort of way, ever more so during this rollercoaster time we’re in. So when I saw an article in the Times recently on changing eating habits, my interest was tweaked.
I guess I’m a fairly good example of someone who lives a reasonably affluent lifestyle in West London. Nothing over the top (I can assure you), but I do enjoy a bit of retail therapy, have the occassional overseas holiday and eat out 2-3 times a week. Well that’s what I did anyway.
For some reason I’ve changed my habits and I am not on my own. This recession has affected people in different ways – some have lost their jobs, others have had salaries cut, whilst all of us have had to change the way we live.
Some of us have flocked to retailers where we would never have dreamed of entering before. In 2007 in Germany for example, the more affluent German shoppers wouldn’t be seen dead in Aldi or Lidl, but now they see it as ‘chic’ to show off their austerity by using Lidl shopping bags to carry their Prada purchase.
But the trends for change in this recession have been most marked in the way we eat out. Certainly in the UK, and especially in London, eating out has become a way of life, and has been one of the big success stories over the past four decades. But this recession has brought the phenomenal growth in informal eating to an abrupt halt. Research published by Allegra Strategies has shown that UK spending on infornal eating – typically where a meal costs £20 ($30) or less has fallen for the first time in 40 years.
The research has shown that in the UK, 15,000 jobs have been lost in this sector and they continue to drop. The report says that the trend is supported by a huge array of offers from supermarkets such as ‘feed your family for a fiver’ or ‘dine in for a £10′ currently being promoted by Sainsburys and Marks + Spencers.
The report says that people are cutting back in all areas – from sacrificing a morning coffee to visiting restaurants less frequently – establishments that typically charge around £20 have been hardest hit. These include the Chinese ‘ethnic’ category as well as Indian establishments.
The report concludes that restaurants will have to become more consumer-focused as customers won’t forget what they have learnt in the recession. Eating oout may have become an everyday experience in the good times, but post-recession people won’t pay over the odds for a meal.
People may still continue to eat out but the overall value of the meal will no doubt decline – instead of buying fish and chips, peope will perhaps buy sausage and chips at half the price. Prices are definitley down across the board.
Trend predictions for the post recession landscape
June 23rd, 2009
I had to share some thoughts and comments that came up recently in a meeting on future trends – in particular in relation to what the social landscape may look like once we come out of this recession.
Sure – some is a bit tongue-in-cheek but there are some interesting nuggets too. So here is what I found out;
When an expansion turns to bust, the fashions, attitudes and styles that accompanied the good times suddenly start to seem out of date. Consciously or subconsciously people start to dump them to reflect the newer, more sombre mood.
The crash of 1929 put an end to flappers and the minidress, replacing them with a decade of decadence and Jazz.
The recessions of 1973-75 marked an end to the hippy era, to be replaced by Punk and skinheads.
The recession of the early 1980’s and 90’s didn’t just kill off the steel and shipbuilding industries – it killed off disco and big hair.
So what for the 2007-2009 post recession phase?
- ANGRY BECOMES THE NEW MOOD. Expect the Emo youth trend to become something angrier and darker.
- AGEING FASHIONS DIE. Expect noughties fashions to become rapidly unfashionable as women continue to wear them into their 30’s and 40’s. Low rise jeans can’t be that sexy if your Mum wears them too…
- UNEMPLOYMENT BECOMES COOL. Being out of work loses its stigma and becomes a mainstream lifestyle among the young. In the 1980’s recession cool bands such as UB40 became ‘de rigeur’. (a UB40 is a UK government unemployment form for those of you not familiar with the UK).
VIVA LA REVOLUCION. The recession of 1990 saw the collapse of communism in Central and Eastern Europe and the end of socialism as a standard philosophy in Western Europe. This time round recession is a direct result of a major failure of capitalism.
Expect radical socialist and extreme beliefs to make a comeback amongst young people.
- A NEW GENERATION GAP. By 2010 expect youth to be in revolt over what they see as capitalisitic greed of older generations born in the 1970’s and 1980’s. Expect a new gap to open up between those who tasted the riches of capitalism between 1993 and 2007 and those who have to look for their first job in 2009 or later.
Lost money on your house? Serves you right you filthy fascist speculator pig…..
- GREEN ISSUES GO ON HOLD. Green was a major issue in the 1980, and Germany in particular was concerned about the effect of acid rain and its effect on its forests. The recession of 1990 ended all that as consumers focussed on protecting their income and families.
Expect the environment to take a back seat for a year or two, despite Obama’s endeavours.
- INTO THE NEW DECADE. Expect the noughties mood to crystallise as the decade disappears over the next year, and for people to become increasingly nostalgic for the time when wearing white earbud headphones was trendy, and people had money, credit and prospects.
WE OFTEN ONLY RECOGNISE A ZEITGEIST AS IT PASSES