Wednesday, February 25, 2009

Starless and Bible black

It's bad to feel that each sporadic new post on this humble bloglet requires an apology for the yawning gap since the last. But I fortunately have a good excuse, having been stranded in Africa for the past week. I write this from a net cafe in Freetown - please send money, and also the PIN to your bank account and credit cards if possible. 

Sadly, this is not true. I have been absorbed in start-up activities - investor presentations, brainstorming with my wonderful colleagues, work on the pipeline, meetings with external partners, and generally absorbing the astonishingly black newsflow which overwhelms us all (thus the pretentious title of this post - King Crimson, yes, but I had in mind the description of night in the opening line of the original source, Under Milk Wood). Pretentious it may be, but I think it fits, as we are in an economic night both starless (as in no star to steer by), and Bible black, because there are none more black.

If you can detach yourself from the fear and anxiety permeating the world at the moment, it's actually quite exhilarating to think that we, the human race, are in totally uncharted economic waters, though the climate change campaigners would yawn and rightly say that we've been there for years - it's only when there's an abstraction like money at stake that people sit up and take notice. 

For anyone born in the West after 1945, up to now, no matter how bad things were at home, the truly bad stuff always happened elsewhere. Globalization, however, is one hell of a leveller. How we handle the current crisis will define how we see ourselves as a civilization for decades to come, and indeed whether there actually are decades to come as a civilization. 

So far, I'm not encouraged. Seeing Ben Bernanke yesterday being interrogated by a group of Senators whom I would describe collectively as relatively ill-informed and inarticulate at best (one stumbled several times over the word "chaos", which he apparently encountered unprepared in the statement written by his aides, which he was obviously reading for the first time during the hearing) really drove home how little policy-makers seem to grasp the mechanics of the capital markets and banking world - yet they seem all-too-eager to prescribe remedies and feel-good soundbites. 

I also had the dubious pleasure yesterday of reading a note from Bob Janjuah of RBS, who is glumly entertaining to read. Cutting to the chase, he's talking about a 4% contraction in G7 GDP in 2009, followed by 0% in 2010, S&P 500 at 550 (vs. 765, where it closed today), multiple credit rating downgrades for "solid" investment grade credits, etc. I would add that the market still doesn't seem as worried at present as it should be about company pension blackholes, nor does anyone really know where a huge amount of senior corporate debt on the balance sheets of banks is actually marked - my guess is unrealistically high. 

And I had a fascinating meeting today with someone in the restructuring space, who made the interesting observation that the severity of the current downturn may eradicate the relatively rational, consensual niceties which surrounded restructurings in the previous downturn, in favor of more aggressive, irrational behavior and litigation. Good news for bankruptcy lawyers, but I'm not entirely sure what existing investors or other stakeholders can make of all this.    

So what does this mean to the average geek? Apple-obsession, gadget-porn, Google-worship/bashing, et al, are nice pastimes, but sadly they don't count for much in the very difficult meatspace we all occupy now. I have written previously about the defensiveness of telecom and the potential for meaningful reinvention arising from the current nightmare, but reading it again today, nearly six months on, it seems a bit contentious. I also produced a piece a few months ago, which was fundamentally satire, but underpinned by a genuine concern that this problem could end up being much more serious than anyone was willing to admit at the time. 

Between the two pieces, given the evidence to date, I would now have to clearly fall on the side of the latter. In other words, while I firmly would like to believe that mobile and broadband are fundamentally services which should easily displace other forms of discretionary spending under "normal" conditions of duress, what remains highly uncertain is the denominator - i.e., how much consumers will have to spend in the first place. Or, indeed, how many "consumers" there actually will be out there a year from now, and how they are captured and retained. Over to you telecom - good night and good luck.

1 comment:

Paul Sweeney said...

"Meatspace", lovely. Nice name for a niteclub too. A point good sir. The market for telecom/ google-esque end run, over the top, round the side strategies that deliver basic no frills telecoms at a tenth of the cost, could break through the noise of major carrier advertising. People are now somehow ready to talk about actually saving money, and not "Blackberry, now in pink, really....."...

Value destruction for some, collapsing of old market value for some, but for others, opportunity.