MBS Blog

As a resident of Odessa, I can attest to the fear out there regarding the free fall of the hryvnia.  People are downright scared and the empty stores, restaurants and cafes indicate they are not spending.

As this article from www.unian.net states, it is extremely difficult to get dollars and euros at banks or kiosks.

On a positive note, this could force the Ukrainian Government to enact needed changes which were put off during better times. After the crisis recedes, and with economic reforms, Ukraine will be at the forefront of emerging markets.

Panic as Ukraine’s currency plummets

The national currency of Ukraine, whose pro-West government wants to join the European Union, has almost halved in value in the last six months, prompting panic amongst its heavily indebted population.
The sudden fall in the hryvnia has sent Ukrainians rushing to exchange booths to change local money for hard currency, in scenes that recalled the hyperinflation suffered by the country in the early 1990s.
Not only do Ukrainian consumers have to pay back loans taken out in more prosperous times but many will also have to pay them back in dollars.

The hryvnia (UAH) was on Friday trading at 7.49 UAH against the dollar compared with 5.05 UAH at the beginning of the year and 4.84 UAH in July.

The National Bank of Ukraine has allowed the hryvnia to trade freely in line with the conditions of a 16.4-billion-dollar (12.8 billion euro) IMF loan aimed at helping the country through the financial crisis.
The hyrvnia — a currency introduced in 1996 and named after money used in ancient Kiev — has endured the ignominy of suffering one of the worst devaluations, along with the Icelandic krona, in the global financial crisis.

“I consider myself a cultivated gentleman. But at the moment I`m thinking of taking petrol and a lighter and setting the National Bank of Ukraine on fire,” said Egor Sobolev, a journalist who owes 60,000 dollars for his flat.

“We are paid in hryvnia and for the moment our family budget allows us to make monthly payments of 1,000 dollars, but if the hyrvnia falls to 10 or 15 to the dollar the Bank has a big chance of going up in flames!”

As of December 1, Ukrainian consumers had notched up debts of 235.5 billion hryvnia (31 billion dollars) some 70 percent of which (176 billion hryvnia or 23 billion dollars) has been taken out in foreign currency.

Dollars and euros were almost impossible to buy in banks and exchange offices in Ukraine in November as people flocked to trade their hyrvnia for stronger currencies.

The growth in hryvnia-denominated bank deposits was replaced in October by an outflow amounting to 10 percent of investments.

The panic reached a peak earlier this month when a newspaper reported that all dollar bank savings could be converted into hryvnias, a rumour vehemently denied by the authorities.

“Savers can only feel that they have been duped and have reason to be scared of similar surprises in the future,” said the Dzerkalo Tyjnia weekly.

“Who is going to answer for for the devastation of entire layers of Ukrainian society?”

President Viktor Yuschchenko oversaw the currency`s introduction when he was working as head of the central bank in the 1990s.

Ukraine has been among the countries hardest hit by financial turmoil as the plunging price of steel, the country`s main export, has exacerbated a credit crunch and a sharp fall in stock prices.

Underlining the country`s difficulties, Ukrainian industrial production is in freefall, crashing 15.2 percent in November compared to the previous month and 28.6 percent compared to November 2007.

Metals output in November was 23.5 percent lower than in October and a whopping 48.8 percent lower than the same figure for November 2007.

Out of the three major economies of the former Soviet Union — Kazakhstan, Russia and Ukraine — Ukraine is to see the sharpest slowdown, analysts at UBS said in a bleak research note.

“Ukraine will see the sharpest slowdown among the three countries despite support from the IMF. Its currency will have to devalue given that it has the worst net international asset position,” the UBS analysts said.

But they added that with the conditions of the IMF loan there is a “good chance” that Ukraine might finally start implementing the reforms that it had put off for 10 years.

Technorati Tags: Odessa, Ukraine, hryvnia, www.unian.net, Anton Olff, dollars, euros, Ukrainian Government, economic crisis, European Union, consumers, National Bank of Ukraine, UAH, Kiev, devaluations, Icelandic krona, Egor Sobolev, Dzerkalo Tyjnia, Viktor Yuschenko, stell, credit crunch, industrial production, Soviet Union, Russia, Kazakhstan, IMF, reforms

The short term outlook for foreign investment in Ukraine is not positive. As this assessment by Oxford Analytica on www.forbes.com indicates, this is partially due to the continued slide of the hryvnia as well as the inability of the Ukrainian Government and Central Bank to intervene successfully on a consistent basis.

As this article hints, foreign currency controls may be imposed. This will almost crimp foreign investment and trade to an even greater extent.

Global Financial Crisis

Ukraine: Currency Slide Stalls Foreign Investment

Oxford Analytica, 12.11.08, 06:00 AM EST

Sporadic, counter-productive market interventions could reignite liquidity problems.

Newly elected parliamentary Speaker Volodymyr Lytvyn announced yesterday that Prime Minister Yulia Tymoshenko and President Viktor Yushchenko would reform their fractious governing coalition. Lytvyn’s selection as speaker will help break Ukraine’s legislative deadlock, but it remains uncertain whether Yushchenko and Tymoshenko can cobble together a functioning government.

One of the most critical challenges the authorities face is the severe devaluation of the hryvnia, which has fallen to all-time lows against major foreign currencies in the last two months. Furthermore, Ukraine’s domestic currency markets are now experiencing the worst deficit of foreign currency since the regional financial crisis of the late 1990s.

Questionable Policies?
Given the extent of the ongoing currency devaluation, it is hardly surprising that the wisdom of the central bank’s policies has been widely questioned.

–Sporadic market interventions.Rising devaluation pressures have prompted the National Bank of Ukraine to resume its active presence on the wholesale currency market. Earlier in the year–and especially in the aftermath of the most recent one-off currency revaluation in May–the bank clearly preferred to keep its presence at the minimum needed to ensure nominal currency stability. However, in the ensuing crisis, the NBU took its time in responding to the changing currency situation; it was not until early October that the first large-scale interventions were actually conducted.

Even then, such interventions proved surprisingly sporadic, and were only able to temporarily slow, not prevent, the devaluation. Moreover, after having spent as much as $6.6 billion in foreign reserves in October to support the hryvnia, the NBU sharply scaled back its spending in November to around 2.2 billion dollars.

Apart from obvious concern over the rapid depletion of foreign reserves, the drawdown apparently reflected the bank’s belief that it could still retreat to the very last “line of defense” for the currency. NBU chief adviser Valery Litvitski has suggested that it will now defend the current trading rate with all the resources at its disposal.

–Counter-productive refinancing. The NBU has also had to increase its financial aid to domestic commercial banks, many–if not all–of which have been suffering from the financial crisis. In November, the NBU provided just over 35 billion hryvnia in loans to commercial banks, up from approximately 30 billion in the previous month. By comparison, the cumulative volume of refinancing in the first nine months of 2008 amounted to 63 billion.

However, the NBU has either failed or neglected to properly control recipient banks’ use of such resources. As a result, rather than being subsequently lent to the real economy, most of the hryvnia-denominated resources obtained in the last three months have found their way to the currency market, only exacerbating devaluation pressures. It is mainly for this reason that Yushchenko has recently chosen to publicly criticize the NBU’s overall handling of the raging currency crisis.

Outlook 
Although the latest trading week saw the market rate essentially stalling at a ceiling of 7.5 hryvnia per dollar, this may well be a temporary point in the hryvnia’s downward slide. Decreasing foreign investment inflows, compressed external borrowing and falling export revenue mean any firm stabilization of the currency will come slowly.

Furthermore, additional short-term factors threaten to delay the stabilization–of particular concern is state holding company Naftohaz’s planned foreign currency purchases to repay debt owed for

In any case, the NBU is likely to face difficulties in fulfilling its freshly declared task of preserving the hryvnia. In terms of possible market interventions, the regulator is constrained by the International Monetary Fund’s requirement that it hold no less than $26.7 billion in net foreign reserves by the end of 2008–a condition attached to the $16.4 billion loan Ukraine recently received.

As of December, gross reserves stood at $32.7 billion. Should the NBU be forced to focus on reducing foreign currency demand by purely monetary methods, restrictions will almost certainly reignite liquidity problems. This could exacerbate the real economy’s deterioration.

Technorati Tags: Ukraine, foreign investment, Naftohaz, commercial banks, NBU, NBU, currency market, liquidity, Volodymyr Lytwyn, Yulia Tymoshenko, Viktor Yushenko, Oxford Analytica, www.forbes.com, Ukrainian Government, National Bank of Ukraine, Anton Olff, foreign currency, hyrvnia, currency controls, Global Financial Crisis,

Although this article in the Wall Street Journal (www.wsj.com)  is about a so-called “trend,” taking place in the United States due to the financial crisis, it is really old news for those who live and work in emerging markets.  Keeping money someplace other than a bank is normal in Ukraine, as well as Russia.  

China-which has seen the biggest growth of any economy in the last 30 years and has a more developed banking system, insurance (private…and nothing like the Federal Deposit Insurance Corporation in the USA), annuities, as well as brokerage accounts- money is literally stored in the mattress…or nearby… by a majority of people.

Mistrust of government and financial institutions particularly, is deeply ingrained in Chinese as well as other Asian cultures. Numerous financial panics throughout Chinese history may have something to do with it. The Chinese are big savers as a result.

By some estimates, the average Chinese person saves almost 40% of their income. This is true whether they reside in mainland China, Hong Kong or Taiwan or have migrated elsewhere. This thrift is also a contributing factor to the huge amount of foreign currency reserves that the Chinese Government can draw upon. “Mattress savers” make bank deposits too…at least in China.

Actually, for Americans…what is “new”, is also old. Our parents and grandparents were savers. They did not have credit cards, overdraft protection for their checking accounts, and were frugal due to memories-real or indirect-of the Great Depression. Interesting that my generation is re-learning what we used to dismiss as quaint stories from a bygone era.

By MARK PENN

With E. Kinney Zalesne

As the financial crisis swept across the nation these past few months, one of the first microtrend groups to emerge is the New Mattress Stuffers — people who have lost their trust in the financial world, and are preparing for the next meltdown.

Just as 9/11 created a vast industry in building security, so the recession could create a big industry in personal financial security — a new kind of survival kit. New Mattress Stuffers don’t care about the 10% interest rate on GE preferred stock that Warren Buffett snapped up; they care about making it through if hard times get even worse. As a result, firms which can offer ironclad guarantees of safety will appeal to this new group. These are people who have lost their faith in the housing market, the stock market, their bank, their big corporate employer, their auto company, and their last president. What is left but themselves? 

Forget about huge, sweeping megaforces. The biggest trends today are micro: small, under-the-radar patterns of behavior which take on real power when propelled by modern communications and an increasingly independent-minded population. In the U.S., one percent of the nation, or three million people, can create new markets for a business, spark a social movement, or produce political change. This column is about identifying these important new niches, and acting on that knowledge.

In the old days, Mattress Stuffers literally hid all their assets in their homes — construction crews today are still discovering tin cans of cash in walls hidden 75 years ago by people who died without having told anyone about their nest eggs. The New Mattress Stuffers aren’t crotchety misers, though — they’re active Baby Boomers who, until just a few months ago, were heading happily into their 60s with inflated assets, unlimited second-job opportunities, and IRAs crammed full of stocks.

Now, the shocks they are feeling are taking them into strange and uncharted territory. Most Americans are so far removed from holding physical assets that their first reaction is to stuff their money into Treasury Bills instead of into a tin can. But there are other ways they can calm themselves.

The price of gold is down as hedge funds unwind their positions, but the sale of gold coins is up — because New Mattress Stuffers are stockpiling them for themselves and their children. And this was happening even before the crisis hit in full force. Between May and September of this year alone, sales of U.S. Mint gold coins grew by more than 600 percent. Over one million coins have been sold so far this year.

While almost every company in America is seeing a downturn, sales of home safes and vaults are surging. Sales of guns this year are up 8 to 10 percent.

And cash is the new plastic. Our own just-completed Holiday Spending Survey shows that most Americans are going to use more cash and charge less on their credit cards than in the past. Although most of us have lived in a plastic world so long we can barely remember people like my dad who carried around wads of bills, Americans are now seeing the first real dip in credit card sales in decades. Fear of credit and credit cards is a renewed emotion.

To take advantage of these trends, some of the dying post offices might want to open spots for safe deposit boxes instead of P.O. boxes. Investment advisers may start talking about return of your money instead of return on your money. And jewelers may start to tell you to “don’t forget to stash away a diamond or two.”

If the post-war economic expansion brought us the baby boom, this crisis may bring us a baby squeeze — a sharp reduction in births nine months from now, as refraining from having kids is the ultimate consumer pull-back. And instead of staying home, the evidence shows that more couples are going to the movies, with attendance up for this relatively low-cost evening.

People don’t talk much about their mattress-stuffing behavior. It kind of defeats the purpose if you tell people where your stash is. But there’s a hunger out there for security hedges — a gun, some cash, a little gold, a small safe in the bedroom — in case all the ATMs suddenly shut down. The TV shopping channels could be hawking that “Safe Haven” combination right now, a complete home solution.

Technorati Tags: Wall Street Journal, ATMs, TV shopping channels, baby squeeze, movies, safe deposit boxes, jewelers, diamonds, home safes, vaults, guns, U.S. Mint Gold Coins, Americans, Treasury Bills, 9/11, cash, construction crews, Baby Boomers, IRAs, stocks, job opportunities, homes, building secruity, survival kit, GE preferred stock, stock market, corporate employer, Warren Buffet, Anton Olff, Mark Penn, mattress stuffers, frugality, credit cards, overdraft protection, the Great Depression, savings, thrift, China, Hong kong, Taiwan, foreign currrency reserves, financial institutions, Asian culture, Chinese history, Federal Deposit Insurance Corporation, insurance, annuities, brokerage accounts, mattress, www.wsj.com, United States, financial crisis, emerging markets, trend, Ukraine, Russia, China, banking system,

Some of my associates have asked me why I have not posted any news about the recent reformation of the Orange Coalition within the Ukrainian Government.  Well…to be honest, I did read the news with some delight. It is not that I am a supporter of any political faction. On the contrary, my focus is business…and business craves stability and predictabilty.  The financial crisis has forced political rivals to set aside their differences and come together and address the problems facing Ukraine. MAYBE.

I hate to sound like Machiavelli here, but is there anyone out there who believes that this grand alliance will be nothing more than temporary? There are “no permanent allies, only permanent interests” to paraphrase the Renaissance philosopher.  Human nature being what it is-and it is a spectacle to behold-is not about to change because a few politicians have sheathed their metaphoric swords and embraced each other.

Ultimately, Ukraine will be stabilize when its politicians realize that they can benefit more from that stability, even if it means that they have to temper their personal ambitions to the greater good. This could come as a result of crisis, or it could come when Ukraine grows-and it will continue to do that-to the point when its politics have evolved. So far…and to its credit…Ukraine has not devolved to a command and control economy, nor has the democratic political trajectory been altered.

The bottom line for many of us who live, work and invest in Ukraine is that things will improve over the long term. Ukraine is in fact, more advanced than many of her critics want to admit-including some Western Europeans who recently used this to deny a road map to NATO.

Technorati Tags: Ukraine, Ukrainian Government, command and control economy, democracy, NATO, Western Europe, Anton Olff, politicians, Machiavelli, human nature, Orange Coalition, business, stability, predictability, political faction,

Technorati Tags: Richard Hainsworth, short-term funding, Russian economy, CIS countries, tax year, irrational exuberance, irrational pessimism, traders, corporate defaults, Russian banks, liquidity, Anton Olff, emerging markets, foreign competition, RusRating/Global Rating, Russia, www.businessneweurope.eu, economic crisis, Russian government,

OK…here is a bit of gratuitous sex from the bloggers at MBS. Of course, we could tell you that our interest in the subject is strictly from a business standpoint and how prostitution is affected by the global financial crisis, blah, blah, blah.

Anyway, there are no photos (disappointed?) in this article from the International Herald Tribune (www.iht.com). Hey…isn’t the Tribune owned by the verging on bankruptcy  New York Times? Maybe if their columnists would write more articles like this one they would be doing better……..

World’s oldest profession, too, feels crisis

By Dan Bilefsky

Monday, December 8, 2008

PRAGUE: On a recent night at Big Sister, which calls itself the world’s biggest Internet brothel, a middle-aged man selected a prostitute from an electronic menu on a flat-screen television, pressing his index finger against it to review the age, hair color, weight and languages spoken by the women on offer.

Once he had chosen an 18-year-old brunette, he put on a mandatory burgundy terry cloth robe and proceeded to one of the brothel’s luridly-lit theme rooms, an Alpine suite decorated with foam rubber mountains covered with fake snow.

Nearby, in the brothel’s cramped control room, two young technicians used joysticks to control the dozens of hidden cameras that would film his performance and stream it, live, on Big Sister’s Internet site.

Sex is free at Big Sister, but that is not cheap enough for some men. Customers get the cut rate in return for signing a release form that allows the brothel to film their sexual exploits.

Even with this financial incentive, Big Sister’s marketing manager, Carl Borowitz, 26, a Moravian computer engineer, lamented that the global financial crisis had diminished the number of sex tourists in Prague.

“Sex is a steady demand, because everyone needs it, and it used to be taboo, which made a service like ours all the more attractive,” said Borowitz, who looks more like Harry Potter than a Czech Larry Flynt. “But the problem today is that there is too much competition, too many free pornography sites and people are thinking twice before making impulse purchases, including paying for sex.”

Big Sister is not the only brothel suffering the effects of a battered global economy. While the world’s oldest profession may also be one of its most recession-proof businesses, brothel owners in Europe and the United States say belt-tightening caused by the global financial crisis is undermining a once-lucrative industry.

Egbert Krumeich, manager of Artemis, the largest brothel in Berlin, said that the recession had helped dent revenue by 20 percent in November, which is usually peak season for the sex trade. Meanwhile, in Reno, Nevada, the multimillion-dollar Mustang Ranch recently laid off 30 percent of its staff, citing a decline in high-spending clients.

Big Sister is not struggling as much as some of its more traditional rivals; its revenue is largely derived from the €30, or $40 monthly fee each of the company’s 10,000 clients pay to gain access to its Web site.

But Borowitz said Big Sister hoped to offset a 15 percent drop in revenue over the past quarter by expanding into the United States. Big Sister also produces cable TV shows that air on Sky Italia and Television X in Britain, as well as DVDs like “World Cup Love Truck” and “Extremely Perverted.”

Ester, an 18-year-old prostitute at Big Sister who declined to give her last name, said that big-spending clients had diminished, but noted that she was still earning nearly €3,000 a month, enough to pay rent and to pay for her favorite Louis Vuitton purses.

“The reason I do this is for the money,” she said, after gyrating half-naked around a pole. Being filmed, she added, made her feel more like an actress than a sex object.

In the Czech Republic, where prostitution operates in a gray zone but is largely tolerated, the sex industry is big business, generating nearly €400 million in annual revenues, 60 percent of which is derived from foreign visitors, according to Mag Consulting, a tourism research company in Prague that also studies the sex industry.

Since the fall of Communism in 1989, the Czech Republic has become a major transit and destination country for women and girls trafficked from countries farther east, including Ukraine, Russia, Belarus and Moldova, the police say. Czechs and those transiting the country are most often sent to Western Europe or the United States.

Since 1989, tens of thousands of sex tourists have streamed into Prague, the pristinely beautiful Czech capital, drawn by inexpensive erotic services, an atmosphere of anonymity for customers and a liberal population tolerant of adultery.

Mag Consulting said 14 percent of Czech men admit to having had sex with prostitutes, compared with an EU-wide average of 10 percent.

Dozens of cheap flights to Prague have also ensured a steady flow of bachelor parties from across Europe. In 2005, an average of 30 flights arrived in Prague every day from Britain alone, a figure that analysts said has dropped by a third.

Jaromir Beranek, the director of Mag, said that when Germany and Britain - the two countries that send the most tourists to Prague - began to stagnate, sexual tourism suffered too.

The strength of the Czech crown against the euro, lower spending power and competition from even lower-cost sex capitals like Riga, Latvia, and Krakow, Poland, were threatening one of the country’s most thriving sectors, he said. “If you ski and there is no snow, you stay home. The same applies to sex.”

Many Czechs are more than happy to see Prague shrug off its reputation as one of the world’s top-20 sex destinations, but some in the hotel industry are so alarmed by the drop in tourists that they are lobbying the government to legalize the trade, in hope that it will help lure more clients.

Jiri Gajdosik, the manager of Le Palais, one of Prague’s top hotels, argues that regulating prostitution would help attract business by making prostitution safer. “We must ensure that the city loses its bad reputation of a city where foreigners are afraid that they will be robbed,” he said in an interview with Hospodarske noviny, a Czech financial daily.

While some critics have warned that legalization would effectively transform the Czech state into the country’s biggest pimp, the government is considering whether to emulate the Netherlands and Germany by regulating prostitution, just as it would any other industry. It is considering passing legislation by the end of this year that would require the Czech Republic’s estimated 10,000 prostitutes to register with the local authorities.

Dzamila Stehlikova, the Green Party minister for minorities and human rights who is shepherding the bill through Parliament, said that forcing the business out into the open would make it harder for human traffickers to thrive, while also helping to assure mandatory health check-ups for prostitutes. Other advocates argue that legalization would generate millions of euros in tax revenue from an industry that now largely operates underground.

Not everyone is enthusiastic, including the prostitutes themselves, who warn that being issued prostitution identification cards would further stigmatize them.

Hana Malinova, director of Bliss Without Risk, a prostitution outreach group, said she feared the current credit crunch was pushing more poor women into prostitution, since they could make more money selling their bodies - about €120 for a half-hour session at some upmarket sex clubs in Prague - than flipping burgers at McDonalds.

Even with the economic downturn, she added, prostitution was far more resilient than other industries, though the downturn was discouraging adultery.

“An Austrian farmer from a remote area who is not married will still cross the border to the Czech Republic looking for sex,” Malinova said. “On the other hand, the recession is helping to keep husbands at home who might otherwise be cheating on their wives.”

Near the border with Germany, in towns in northern Bohemia that were long blighted by a daily influx of sex tourists seeking cheap thrills, many are rejoicing in the decline.

Only a few years ago, the town of Dubi was so overrun by prostitution that a nearby orphanage was opened to provide refuge for dozens of unwanted babies of prostitutes and their German clients. Sex could be purchased for as little as €5 - the price of a hamburger in nearby Dresden - drawing a daily influx of more than 1,000 sex tourists.

The more than three dozen brothels that once operated in Dubi have been winnowed down to four, with several of the former brothels having transformed into goulash restaurants or golf clubs.

Petr Pipal, the conservative mayor of Dubi whose zero-tolerance policy is largely responsible for the change, said that installing surveillance cameras and police officers at the entrance of brothels had deterred sex tourists by depriving them of their anonymity. Rising prices for sexual services and the global financial crisis, he added, were also helping to tame demand.

“Two or three years ago, we would get 1,000 men coming here for sex on a Friday night, which is a lot for a town of 8,000 people,” Pipal said from police headquarters, where members of the anti-prostitution squad sat in a surveillance room, controlling outdoor cameras filming 13 now mostly deserted streets.

“The one good thing about the economic crisis is that it is helping to keep sex tourists away.”

Even brothels in areas of the Czech capital most popular with tourists complain that they are suffering from economic hardship. On a recent night near Wenceslas Square in Prague, dozens of young men outside a row of neon-lit sex clubs beckoned tourists with offers of complimentary alcohol and racy strip shows.

Inside Darling, a giant multifloor cabaret famous for cancan shows modeled on the Moulin Rouge in Paris, scantily clad young women stripped on a stage surrounded by leopard skin couches, flashing disco balls and French impressionist paintings of naked women.

Suzana Brezinova, the club’s marketing director, said sex tourism to Prague had been hit because prices had risen nearly to the levels of Rome. But she added that some high-spending businessmen still came to Darling to shrug off the economic doldrums, thinking nothing of splurging €1200 for a night of sexual pleasure and escapism.

“People have less money,” she said. “But hard times also mean that people want to be cheered up.”

Jan Krcmar contributed reporting from Prague and Victor Homola from Berlin.

Technorati Tags: gratuitous sex, MBS, Ltd., Jan Krcmar, Victor Homola, Suzana Brezinova, Rome, Darling, Moulin Rouge, Paris, French, Petr Pipal, Dubi, Dresden, Austrian, Bohemia, Hana Malinova, Bliss Without Risk, McDonalds, Dzamila Stehlikova, Green Party, human rights, Netherlands, Jiri Gajdosik, Le Palais, Hospodarske noviny, Riga, Latvia, Krakow, Poland, Jaromir Beranek, Germany, Britain, euro, Czech crown, Communism, Ukraine, Russian, Belarus, Moldova, Czech Republic, Mag Consulting, tourism, Louis Vuitton, United States, cable TV, Sky Italia, Television X, Britain, DVDs, Egbert Krumeich, Artemis, Berlin, Reno, Nevada, Mustang Ranch, brothel, Europe, Carl Borowitz, Prague, Harry Potter, Larry Flynt, Big Sister, internet brothel, Dan Bilefsky, Anton Olff, prostitution, global financial crisis, International Herald Tribune, www.iht.com, The New York Times, bankruptcy,

Incredible deal on Wizz Air!! Cheaper than a cup of coffee.

Ukraine is the next market for discount airlines. At some point, we suspect that Ryanair, Easyjet will have also have flights from the U.K to Ukraine.

From www.unian.net:

Wizz Air Ukraine proposes tickets to London at less than 1 euro

 Wizz Air Ukraine, the first Ukrainian low fare - low cost airline, announced on Tuesday that it would proposes its passengers to buy one-way tickets to domestic and international flights at only 9 hryvnias [to compare, 1 euro makes 9.6 hryvnias, $1 – 7.5 hryvnias].

The company’s press-service disclosed this to UNIAN.

According to the information of the press-service, during January 12 – March 29 of the year 2009, the company will put for sale 10 thousand one-way tickets at this price on flights from Kyiv to Lviv, Symferopol, Dortmund, and London Luton.

The tickets for these flights may be booked during December 15-21 of the year 2008.

Technorati Tags: Wizz Air Ukraine, low fare, Kyiv, Lvov, Symferopol, Dortmund, London Luton, Ukraine, London, U.K., Anton Olff, www.unian.net,

As with many emerging markets, Russia should continue to grow despite the Global Economic situation. The direct link between oil price levels and economic growth is key.

This from  www.themoscowtimes.ru:

GDP Posts Weakest Growth in 3 Years

10 December 2008By Maria Levina / Special to The Moscow Times

Economic growth fell to its slowest rate in three years in the third quarter, at 6.2 percent, the State Statistics Service reported Tuesday, and economists say even lower growth is in store for 2009.

Actual GDP growth in the quarter missed the Economic Development Ministry’s forecast of 7.1 percent, driven by significantly slower growth in the construction, retail, transport and communications sectors.

The decline continued a slide from 8.5 percent GDP growth in the first quarter and 7.5 percent in the second, and if the trend continues the final number for the year could be in the 6 percent range.

“Next year’s GDP growth could range from negative 5 percent to plus 5 percent, depending on what happens to oil prices and the steps taken by the Russian government,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog. “If it continues to throw away currency reserves to defend the ruble, Russia may face a fiscal deficit and zero economic growth.”

He said allowing the ruble to depreciate is one step that could be taken to prop up growth numbers. 

“In the past, the Russian economy grew even with oil prices of $30, $40 and $50 per barrel but at a different exchange rate,” he said. “In the current environment, Russia’s goal should be to achieve positive economic growth and avoid a fiscal deficit.”

In year-on-year terms, growth in the fourth quarter could end up at zero, partly as a result of slower production growth and partly because the number was strong in the final quarter of last year, said Yekaterina Malofeyeva, chief economist at Renaissance Capital.

She said she expects growth this year to finish above the 6 percent mark — at 6.2 percent — and that next year’s figure could range from zero to 3 percent.

“If oil prices average $70 a barrel next year and the ruble is allowed to depreciate, GDP growth could reach 3 percent,” Malofeyeva said. “Otherwise, it could be flat.”

Although the Economic Development Ministry has yet to release an official forecast, in recent informal comments it has put the number at 3 percent to 3.5 percent if oil prices average $50 per barrel for the year.

But economists say conditions have been shifting so rapidly that providing anything resembling an accurate forecast for 2009 would be difficult until all the numbers for the final quarter of this year have been released.

The Economic Development Ministry said Monday that it was revising its forecast for manufacturing growth for the year downward, from 5.2 percent to 2.9 percent. The figure for the first 10 months of this year was 4.9 percent, so the ministry’s forecast suggests that it is expecting disastrous results in November and December, with production dropping by over 10 percent. 

Gavrilenkov said he believed that a 2.9 percent production forecast was overly pessimistic but, if accurate, would mean that the country is entering a severe depression.

He added that losses on the manufacturing side could be balanced somewhat by growth in the service sector, as consumer spending has remained relatively strong. As such, he said he expected GDP growth of 6.8 percent to 6.9 percent this year.

Natalya Orlova, chief economist at Alfa Bank, said she was surprised by how low the production numbers were.

“Given that the October numbers showed there was essentially no growth (0.6 percent), we originally assumed a drop in production of 2 to 3 percent in November and December, which would still imply a growth rate of around 5 percent for the year,” Orlova said. “But if we are to believe the numbers from [Economic Development Minister] Nabiullina, with a drop of more than 10 percent in November and December, then the situation seems more serious.”

Technorati Tags: emerging markets, Russia, Natalya Orlova, Alfa Bank, Moscow, Yekaterina Malofeyeva, Renaissance Capital, exchange rate, Russian Government, oil prices, ruble, devaluation, Yevgeny Gavrilenkov, Troika Dialog, State Statistics Service, Economic Development Ministry, construction, retail, transport, communications, Anton Olff, GDP, Maria Levina, www.themoscowtimes.ru, economic growth,

If only I had the crystal ball the World Bank seems to have for telling us the obvious. Once again, the Financial Times (www.ft.com) delivers the timely news to those of us watching and waiting to decide where to put our hard earned kopecks.

Looks like commodities will not be the ticket to riches that I had supposed….if I follow the World Bank.  Of course, this won’t be good news for our Russian friends, but I wouldn’t sell the Bentley just yet. I have a feeling that some of Wall Street gurus like Jim Rogers…who lives in Asia now…may be right about this being a dip before commodities resume their rise to the sky. Just think of all those governments and central banks…including mine in the United States…that will need to inflate to pay for all that stimulus, debt, bailouts and universal health care. 

The bottom line is that commodities-like equities and real estate- experienced a boom due to real demand as well as unreal interest rates, cheap money, and lots of speculation. The flip side is that hard assets will make a comeback-though maybe not to the stratosphere-but will post solid gains in the inflationary environment that we could see within the next several years.

Global demand for oil to plummet

By Javier Blas in London and Krishna Guha in Washington

Published: December 9 2008 20:09 | Last updated: December 9 2008 20:09

Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.

The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.

The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.

“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.

Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.

The World Bank’s analysis of the commodities boom contrasts with the prevalent view among natural resources companies – and most Wall Street analysts – that the ongoing price drop is a correction within an upward trend.

Although it ruled out a return to the torrid high prices of this summer, it said commodities prices would not fall back to the depressed levels of the 1990s.

Oil would return to about $75 a barrel within the next three years, it said, while food would trade 60 per cent higher than in 2003, but about half below this year’s record.

“Over the longer run, the price of extracted commodities should fall,” the bank said, adding that because of slower population and income growth, world demand for raw materials will ease.

Andrew Burns, the leading author of the report, dismissed the idea – widely supported among the industry and international bodies such as the International Energy Agency – that the credit crunch could result in higher prices when the economy recovers as companies cancel supply expansion projects.

The bank forecast that world trade – an engine of growth for many developing countries – would contract for the first time since 1982.

Justin Lin, the World Bank’s chief economist, said the current downturn was likely to see simultaneous recessions in most of the industrialised world, and that these recessions were likely to last longer than in the early 1980s, and the decline in growth would be more universal than in past episodes in recent decades.

Technorati Tags: World Bank, Anton Olff, Justin Lin, Andrew Burns, International Energy Agency, credit crunch, recession, the Great Depression, U.S. Energy Department, cheap money, interest rates, speculation, inflation, hard assets, Financial Times, central banks, global demand, Javier Blas, Krishna Guha, London, Washington, , debt, stimulus, bailouts, universal health care, www.ft.com, commodities, Bentley, Russia, Jim Rogers, Wall Street,

This is the kind of news….that is not really news…at least to someone who does business in emerging markets. Nonetheless, it is good to keep tabs on where bribes need to be paid to get business.

It an ironic way, the authors of this report-Transparency International-have raised the bar not only in emerging markets like Russia, China and Ukraine, but also in the developed economies like the United States. This would apply not only to the financing of political campaigns or the “sale” of Senatorial offices, but specifically to the types of financial instruments that may have been the catalyst for the Global Economic meltdown.

What is needed is greater transparency in the financial services industry. Many investors had been blinded or lulled into a false sense of security by the advice of institutions that have a direct financial stake in keeping information private. Indirectly, these companies were being “bribed” by their clients to give favorable ratings and analysis. As I was reminded during my short time on Wall Street, “when was the last time you heard of an investment bank urging their clients to sell?”

In some ways, emerging markets are more “honest,” as it is assumed that corruption is part of the normal process of doing business. While this doesn’t negate the need for reform, or diminish the fact that corruption is a huge obstacle preventing development in emerging market economies, it also means those with higher standings in the “least corrupt” category need to look at their own institutions more carefully as well.

 From www.ft.com:

Emerging powers’ companies bribe ‘routinely’

By Michael Peel in London

Published: December 9 2008 15:57 | Last updated: December 9 2008 15:57

Chinese, Indian and Russian companies bribe routinely to win overseas contracts, a global survey of executives claimed on Tuesday, highlighting fears that leading emerging economies are undermining international efforts to tackle corruption.

The bribe-payers’ index published by Transparency International, the anti-corruption group, ranks the three nations and Brazil in the bottom five of 22 countries surveyed.

The research highlights how intensifying global competition for natural resources and infrastructure projects threatens a “race to the bottom” between established western multinationals and leading companies from the new financial powers.

Huguette Labelle, Transparency International chair, called on all big exporting countries to join the landmark OECD anti-bribery treaty, which so far has been signed by 38 mainly rich nations.

Ms Labelle said Transparency International’s research “provides evidence that a number of companies from major exporting countries still use bribery to win business abroad, despite awareness of its damaging impact on corporate reputations and ordinary communities.”

The Transparency International index ranked Russia in last place with a score of 5.9 out of 10, with India and China also both scoring below 7.

Belgium and Canada topped the rankings jointly with a score of 8.8, while all the other members of the Group of Seven leading industrialised nations except Italy scored more than 8.

The countries ranked in the index account for about three-quarters of world foreign direct investment outflows and exports of goods and services. The survey – carried out by Gallup International, the polling organisation – is based on the perceptions of 2,742 business executives from 26 countries, including six in Africa, four in Central and South America, and eight in Asia.

The research says the most corrupt sectors among 19 surveyed are construction, real estate, energy, heavy manufacturing and mining, while the cleanest are information technology, fisheries and banking.

Many anti-corruption activists warn that the expansion of companies from emerging economic powers into resource-rich but often poorly governed countries in Africa and elsewhere could prolong and extend a tradition of bribery already established by western multinationals.

The OECD has launched a partnership with the African Development Bank to fight bribery on the continent, while Chinese officials will attend a meeting of the OECD’s anti-bribery working group this week .

Another TI index published in September accused the world’s wealthiest countries of failing to live up to their commitments to fight corruption, highlighting fears that only the US and a few other nations were serious about tackling graft by their businesses.

TI’s surveys are widely seen as useful yardsticks on corruption, although their basis on business executives’ perceptions rather than more objective measures means they are susceptible to individual prejudices.

Funders of the latest index include the German and Norwegian development agencies and Ernst & Young, the international accounting firm.

Technorati Tags: emerging markets, Asia, Germany, Norway, Ernst & Young, OECD, African Development Bank, construction, real estate, energy, heavy manufacturing, mining, information technology, fisheries, banking, Gallup International, Africa, Central America, South America, business executives, Belgium, Canada, Group of Seven, Italy, Brazil, exporting countries, financial powers, Huguette Labelle, multinationalsinfrastructure projects, corruption, www.ft.com, Michael Peel, London, India, global survey, bribery, Wall Street, investment bank, Global Economy, Transparency International, Russia, China, Ukraine, United States, Anton Olff,