GROUND FLOOR / Sheila O'Flanagan: If previous years have been those of the investor, 2002 was surely that of the consumer. Hardly a day went by without analysts telling us the consumer was the most important part of any potential economic recovery. In the US, it became your patriotic duty to engage in bouts of profligate spending while in Europe we were urged to get out there and do our bit too.
Europeans are less happy about being told to go out and spend than Americans, it's not part of our heritage and we're more likely to react to gloomy economic news with miserable satisfaction than by whipping out our credit cards and engaging in retail therapy. Nonetheless, each month analysts watched with trepidation consumer confidence figures in Europe and the US - any hint of nervousness sent the markets into a tailspin and the dealers into troughs of despondency. In Ireland most of us got on with things, buying when we needed to, perhaps re-assessing some of our more unnecessary purchases but, on the whole, thinking things had been a lot worse so what was the use in getting too worried? Being calm (or perhaps dealing with our worries more efficiently) was an issue on which I got a lot of mail this year. I wrote about attending a meditation class and next thing everyone I meet is trying to find their inner selves and a decent base chakra.
As I said then, I wasn't very good at the meditation stuff, finding it impossible to empty my mind completely but I did follow it up a few months later with yoga classes which managed to combine mental inactivity with physical exertion in an interesting way. Let's face it, when you're trying to balance on one foot in a swooping swallow type of position while simultaneously concentrating on a dot on the horizon and the sound of your breath, you don't have a heap left over for worrying about US fiscal policy. At the end of each class our instructor sent us all off with a few words of wisdom on "being nicer to each other". Which is why I haven't sent my fund manager hate-mail despite the dismal performance of the investment portfolio this year. I'm telling myself it wasn't his fault the fund was awash with Enron and WorldCom stock (or equally awful bits of paper), he was just investing like every other fund manager. I'm assuring myself - as I'm sure the analysts will also be assuring me - that 2003 will surely be better.
Will it be better for Paul O'Neill, erstwhile Treasury Secretary who was given the push this month? Maybe, if he spends his free time meditating and cleansing those chakras instead of worrying about the dollar.
The unsurprising reaction of the market to his exit was to push the euro to new highs against the US currency - although many people had expected the dollar to fall still further. Apparently Mr O'Neill's successor, John Snow, was a member of a committee that sent a letter to George W some years ago in which he was urged to abandon the strong dollar policy. The fact that the greenback hasn't taken the proverbial leap off the cliff is probably down to a belief that those making the policy are less relevant in the current administration. According to a report in the FT, "principle has been abandoned in favour of calculated pragmatism when it comes to economic policy" - another way of saying the president will do whatever he thinks might be a good idea so that when he goes to the country again he won't have to worry about hanging chads and disenfranchising a section of the population to get re-elected.
Anyway, the new Treasury Secretary may well be a pragmatic thinker too since his background is the railroads. And as manufacturers and transporters are all being squeezed by the dollar's strength, his instinct might be to allow it to slip further and restore some US competitive advantage. That being the case, the ECB will have to think about its currency strategy in the months ahead too. A stronger euro could be offset by further cuts in interest rates although, interestingly, the chairman of the German banking industry association, Mr Rolf Breuer, has said his bank can't pass on the most recent ECB cut to customers because it can't afford it. According to Mr Breuer, the banks will cut rates only if the ECB cuts again and the economic outlook improves. I think the ECB is cutting rates to reduce the cost of borrowing for manufacturers, not to bolster the banks' profitability, but maybe I'm still an idealist at heart.
And I'll stay an idealist although 2002 continued to engulf us with news of disgraceful corporate behaviour which has ended up seeing some high-profile executives taking the "perp-walk" from their offices as they faced criminal charges.
There was disgust last year too with the remuneration paid to high-flyers, with shareholders finally managing to have their views heard when some packages were adjusted to take account of their concerns. Finally, the bar was raised to something that chief executives had to hop over rather than step over to earn some of their excessive moolah but I don't hold out much hope that these more stringent measures will last. Once the good times roll in there'll be people ready to line their pockets at the investor's expense. I might be an idealist, but I'm not stupid.
