Autumn to remember

Last four weeks have been tough.

In September it looked as the financial crises in the West will only brush off Ukraine. Instead of brush off Ukraine found itself in a bigger crises than one in 1998 or in 2004. And I fear we are only at the beginning. Unexpected drop of steel prices put Eastern Ukraine almost at halt. Steel is major export and as steel stock remains high steel companies are reducing production by more than 50% and aggressively reducing workforce. Steel needs a lot of energy - one of sources being coal. As steel production is significantly reduced - coal mines are closed. There are entire villages and small cities in Eastern Ukraine depending on coal mining or steel. Closure of a mine or a steel factory has a dramatic effect on a village or a city. Construction is also halted. There is actually no industry which is not affected.

The government remains dysfunctional. I am truly amazed it took the government three weeks to sign the IMF package. I am not fan of IMF. Each country supported by IMF found itself in even larger mess few years after in received IMF package. But the fact is Ukraine desperately need external funding these days. However for about three weeks it looked like personal turfing between the President and the PM was more important than the country's survival. It looked like personal scoring had a priority over receiving USD 16,5 bn package. There were days it looked very likely that the President will refuse to sign the package as one of IMF conditions was to postpone the early election which was triggered by the President. The President finally signed it last week.
To recap - we had a banking crises first week of October. The second week in October we received a very strange Central Bank of Ukraine instruction #319 on Oct 10th. The instruction #319 requested banks not to lend i.e a bank was forbidden to provide a new financing. Although this instruction was short lived and not registered at Ministry of Justice (thus legaly not enforacble) - it caused a lot of havoc. The Central Bank of Ukraine revoked the instruction on Oct 14th. Than hrivnya (local currency) started to rapidly devalue. The state spend billions to support it but still the currency devalued 30%. The last instruction from Nov 4th basically halts forex market. Depressing events.

In the office my collgaues are mostly very young people who in 1998 were in collage. They have no idea how to read signs of crises and even less how to adjust working habits. Clients display similar attitude. Most of the companies here know only good times of aboundant liquidity and most of them have owners who still live in a bubble. One client told me that company which these days struggles heavily with liquidity remains basically healthy as in June he had an offer to sell the company for USD 500 mio. Well - since June so many things happened. I am sure he will regret not selling the company in June. But for him in June USD 500 mio was not enough.

Unsurprisngly all these events and situations create an intense atmosphere at work. Stress I can manage. It comes and goes. But continuous intensity of problems wears me down. Two weeks ago I thought it cannot get worse. Last week each day was worse than a day before. I see two clients a day. We do not share good news in these meetings.

But there must be some correlation between dire conditions Ukraine economy finds itself and wonderful autumn weather we had so far. Until last week it was sunny and mellow. Than it cooled down significantly but sun is shining brightly and skies are crystal blue. I spent weekend walking Igor and taking photos of autumn leaves.
The only bad think today was that we were chased by 12 stray dogs. We survived but it was not pleasant especially as there were no people around.
Pics from this weekend are at http://picasaweb.google.nl/gordie26/AutumnLeaves#