GROUND FLOOR/Sheila O'Flanagan: We have just entered the Year of the Monkey in the Chinese calendar which is symbolised by two elements, wood sitting on top of metal.
Apparently, metal will destroy wood (not an unreasonable hypothesis); therefore when wood is on top of metal, it symbolises disharmony and conflict.
Crikey, not another year of disharmony and conflict - I thought we'd had enough of that in the past few years no matter what farmyard animal watched over them. Anyway, for those of you who like to take every possible forecast into consideration when planning the business year ahead, the general consensus - Chinese style - is that the industries which should perform best are those which are related to earth and fire elements.
The earth industries cover property, insurance, mining and chemicals. Fire industries include energy, electricity and entertainment. Far be it from me to suggest you dust off those old African gold mines shares but you never know, and it would seem that there's no point in holding out for that long-awaited collapse in Irish property prices either! On the down side, industries related to the wood element are not expected to do well. This is particularly worrying for me since they include books as well as fashion and other consumer products.
As if things weren't bad enough! The Year of the Monkey continues to preside over the Year of the Dollar Decline and I am expecting some of my earnings to be in the fatally falling dollar in the next few weeks. When I signed my US contract, I did think about selling the greenback receipts forward but sadly the publishers weren't pushing out the million dollar plus contract so I decided it wasn't worth the effort. You'd imagine I'd have known better.
The currency has been on a continuous slide against the euro and nobody thinks that it's going to stop any time soon. On a poll taken last Friday, three quarters of the people questioned thought that the euro would outperform the dollar after it rebounded following a bout of profit taking. Most were of the view that US rates would stay low especially since the analysts are still in shock over those horrible employment numbers in December. Bond markets have reacted by pricing in any Fed move to tighten rates as happening later rather than sooner and the general feeling is that the prospect of an upward tug to rates is pretty remote right now.
There is also the question of election year in the States. Realistically, the Fed would want to have a pretty compelling case to tighten rates before the Americans vote on their next president. In any event, the Fed seems pretty sanguine about the currency's decline Whether they would be as laid back if the ECB were to cut rates is still open to question. But presumably they're of the view that Europe won't do anything very much in a hurry. It hasn't happened before so why should it happen now?
Speaking at the World Economic Forum in Davos, ECB President Jean-Claude Trichet did pay a certain amount of lip service to stability and excessive exchange rate moves. He also commented recently that export growth in Europe should continue to benefit from the expansion in the world economy. Anyway, since the ECB wasn't interventionist in the period after the launch of the euro when you couldn't give it away with a free toaster, the general feeling is that even if the bank was to do something, it would be tweaking at the edges rather than aggressive rate cuts or intervention.
Despite the verbal commitment to a strong dollar, the general view is that it suits the US to keep it weak because it helps exporters in the States to become competitive in international markets. On the basis that there's 10 months to go before the election, many traders are now looking towards a level of $1.40 as being a realistic long-term goal for the euro/dollar exchange rate. Meanwhile, even though interest rates in Japan are close to zero, nearly three quarters of those polled are now happy holders of the yen. There is a feeling that the Japanese economy is beginning to recover after a deep recession which lasted over a decade. Maybe they're optimistic that the Year of the Monkey will be their year.
Meanwhile, George Soros, the famed financier, has lashed out at George W's economic plan which he claims will cause a boom in 2004 but a bust in 2005. He's adding another $12.5 million to campaigns to get his namesake out of the White House and back to his ranch. I don't know whether or not he contributed to Dean's electoral campaign but he'll be feeling anxious if he did. (Dean's Iowa rant reminded me of that great video clip of Steve Ballmer rousing the troops at Microsoft. It was compelling but deeply, deeply disturbing.)
Boom and bust, though. How many times have we heard that in the past? For those of you who take your Chinese astrology seriously, it's worth keeping in mind that 2005 will be the Year of the Rooster. Unlike the lively, smart monkeys with their wood and metals, the roosters are hard-working and definite. Solid citizens in fact.
Maybe worth checking when some of those Democratic candidates were born.
