The question I would want to know, were I a Euromoney reader, is: what is really going on out there? Is the world healing? Has it healed? Or indeed, has the world healed so completely that we are now about to suffer another bout of illness?
I have been thinking hard about these and related questions and talking to as many experts as I can find. As I have mentioned before, valuation discrepancies abound. The word bubble has re-entered the pundits lexicon. Indeed in mid-January the Financial Times ran a large article under the banner headline: Valuations. Is this nuts? Investors appear to have taken leave of their senses, pumping cash into projects regardless of profitability. The article talked about the gravity-defying prices being paid for companies such as Twitter, Square, Ocado and Asos.
Havent we seen this movie before? In 2000, werent we being told that this time is different: jettison traditional pricing ratios in favour of eyeball metrics? In 2007, werent we assured that US house prices could never go down? Thus, a foolproof way to make money was to buy apartments off-plan in Miami or Las Vegas and flip them to the next sucker. Come to think of it, that didnt work out so well either.
Well, in 2014 its all about two letters: Q and E. I dont think many of us had heard of QE before 2008 and yet now it shapes so many aspects of our everyday life. I give you three recent anecdotes from the Abigail with attitude social intercourse.
Anecdote one: a girlfriend, who is a property developer in Londons fashionably eclectic Notting Hill Gate, bought a one-bedroom flat in a higgledy-piggledy house in a run-down street that prostitutes and drug dealers frequent after dark. She bought it for £650,000 (with borrowed money of course), spent £35,000 on it and sold it for a million pounds within three months.
Anecdote two: I met another friend of mine, a wealthy Turkish businessman, for tea on a dreary January afternoon and found him despondent about the situation in Turkey. Presidents Erdogans difficulties cant all be laid at QEs door but the rush for the exit on the part of foreign investors is surely related to taper talk.
Anecdote three: bored with continual rain in London, I tried to book a flight to the Maldives in February and found there wasnt much space.
The past five years have ushered in nirvana for rich people. If you owned stocks, you did well. If you owned property, you did well. If you owned art, you did well, and if you owned a large business, you did well.
Cheap money has given us a period of "wild abandon", Andrew Lapthorne of Société Générale claims. The Abigail with attitude column warned about this in December, when I wrote: "I am a worried woman. I am starting to see bubbles everywhere, and its not easy to work out how to protect oneself."
Maybe we are now witnessing a reflation trade without the inflation. Indeed, I have decided the way the world develops in the next five years will come down to which of the genies emerge from the bottle: inflation or deflation? Commodity stocks were one of the few assets that didnt rise last year. But if the world is normalizing, there will be growth, and growth means more demand for commodities. This should mean higher inflation. So I am in the inflation camp. But others point to excess capacity and the exporting of deflation by such countries as Japan, which have weakened their currencies and so made their goods cheaper to import.