Financial Advisory: An unforgettable journey begins with one deal

It’s really hard to ask someone to trust you with his money as you’re aware that he doesn’t trust his wife or children with them; especially when this potential client is getting richer.

You’re aware that he’s not enjoying his breakfast as he used to be or not focused enough when he drives to work. His fear of losing his money or over-spending them on stuff that didn’t matter to him before is eating him up.

You’re aware that, for him, you’re giving him words wrapped with financial jargons and eventually the decisions and actions are his not yours. Your awareness that this potential client is facing a big decision, from his point of view, regarding the next investment decision in which this is putting him under immense gigantic pressure; especially when he’s making an investment in a field where he has a very limited idea about.

You’re aware that this potential client chooses you among all your competitors in the market as his choice wasn’t only based on your great financial qualifications or track-record but because he trusts you. You’re aware that this trust can disappear at any fraction of a second if you made the wrong call regarding his money.

You’re aware that the he’ll take the credit for your financial advisory and work if things work out. Regardless, you closed a deal and won a client as well as added a new achievement to your track-record.


The luckiest Arab on Earth: the drowned Syrian boy


This drowned Syrian boy is so lucky as he’s in heaven now! He won’t live our Arabian miserable life or study in our outdated backward educational system! He won’t queue in line (if there is one) to issue his identity to prove he’s an Arab citizen when a police officer stops him for minutes which might turn into hours if this police officer is in a bad mood.

This drowned Syrian boy is so lucky as he won’t memorize or recognize the names and biographies of the Arab Rulers or the Arab countries’ flags and geographies. He won’t praise any Arab Ruler and their regimes or sing our national anthems.

This drowned Syria boy is so lucky as he escaped all these miserable experiences that we live every day as Arabs. At least he had the courage to leave his country and didn’t die under any of the Arab Regimes.

May his soul rests in peace

The Consequences of Low Oil Prices on Oil-Producing Autocracies

It is going to be enormously difficult navigating what is going to be low oil prices for a long time for rich-oil countries; especially for Venezuela and Nigeria.

While Valenzuela is facing social unrest as there is a wide spread shortage in cash, Nigeria stands on the brink of bankruptcy and faces insurgency. Russia already plunged into Recession and its currency, the Ruble, went into free-fall to hit a new all-time low. And, Saudi Arabia is burning its Foreign Reserves and has to borrow billions.

The ones, who cannot cope with the new dynamics of the oil market and sharp reductions in oil revenues, are more likely to face political upheavals as the four ways of coping with this sharp reductions in oil revenues are already exhausted, which are the following:

  1. Foreign Reserves;
  2. More Borrowing;
  3. Cutting State Spending; and
  4. Cutting the Private Sector Spending.

The International Monetary Fund (IMF) is also saying that the biggest oil producer, Saudi Arabia, is heading towards a 20% budget deficit of its GDP. However, Saudi Arabia has a tremendous foreign reserves and massive debt capability in which it allows them to borrow both internally and externally. Moreover, Saudi Arabia has the capacity to cut spending on big projects, which might slow down the growth of the Saudi economy. In the same time, it is not going to cost them hugely when it comes to the local society. In short, the Saudi government should be careful in cutting its Public Expenditure where it won’t impact their population.

On the other hand, Saudi Arabia is fighting very expensive wars in both Yemen and Syria. It is worth noting that Saudi Arabia has a very young population in which if the Saudi government decides to cut too much, they might face more unrest on the home front. Nevertheless, Saudi Arabia is a low-cost oil producer, unlike Russia, where it can maintain and increase its market share.

Likewise, almost 60% of Russia’s revenue depend on Oil & Gas and 70% of its exports are Oil & Gas. In addition, the Ruble decreased in a disorderly fashion in which Russia is facing an economic trouble which can be considered dangerous. Furthermore, Russia doesn’t only have problems at home but also is going into foreign adventures in Ukraine and else where. This pressures Russia to squeeze greatly on its local economy as it is plunged into recession and burning foreign reserves as well as decreasing the value of its currency. The situation is incredibly worrying as the West might intensify sanctions.

The social contract of getting a high/good/fair living standard while not getting so much freedom is falling apart and breaking down as these commodity producing states don’t have the money to keep its people sweet or at least minimize the pressure on this social contract. The best historic case is Iraq, after becoming bankrupt becasue of its war with Iran, Iraq was tempted to go into a foreign adventure in Kuwait without calculating the risk of its action. Forced to leave Kuwait and living under 13 years of sanctions, Iraq lost its 2003 war in less than 40 days and its society is already heading to partition its country as such a social contract only works in good times where the state is making good revenues and disbursing it to its citizens. However, when the revenues get hit, the social contract is under enormous pressure and is eroding in front of our eyes, especially in the case of Valenzuela. The best two ways out for such countries are:

  1. Squeezing the government spending on major ways; and
  2. Squeezing the private sector not only by reducing subsides but also letting the exchange rates devalue their currencies very strongly.

These oil-producing autocracies have to get used to low oil prices and plan ahead on this assumption or fact.

When Central Banks Run Out of Ammunition, Start Re-pricing Lower!

The markets have to adjust to a new paradigm with less liquidity. In the recent years, markets have priced itself well-above the growth of the global economy and beyond fundamentals, while the difference/gap between the high market prices and the low growth global economy had been usually covered by cash injections of the Central Banks (Markets’ Best Friend) around the world or borrowing from somewhere else cheaply as interest rates were low.

However, it is time for the markets to reprice itself lower as central banks have already run out of ammunition to fuel the market with another round of cash injections to stimulate the economy. Even if central banks maintained or reduced interest rates, this won’t affect the state of economy that is either slowing down or plunging into Recession.

Now, most of the markets are overleverged and need to sell to raise cash; especially those who depend mainly on China and Emerging Markets.