Lebanese investors must stay alert to opportunities

Ignore the biased narratives

Gajus | Getty

In today’s Lebanon there are two biases. Let us call them the phoenix bias and the shithole bias. The first is the narrative of an indestructible culture, a country and haven of wealth that has never defaulted on its financial obligations and where no depositor of wealth has to fear the disappearance of a single dinar, taler, rand, dirham, lira, euro, dollar, or even golden Croeseid from his account.

Tending to the opposite extreme is the massively propagated shithole bias. For its followers, Lebanon was the essence of a shithole before a US president ever tweeted so vulgar a term. No country is as bad as this, we have the worst corruption, the worst electricity supply, the worst financial ratings (recent addition to the bias), the maddest government, the baddest currency outlook, the poorest economic data, and the lowest competitiveness. Even the weather averages are not as good as they could be in July and August when compared to a median consolidated (and 100 percent fictitious) temperature of Monaco, Dubai, Kuwait, Novaya Zemlya, and Punta Arenas.

Construction of narratives is great fun and sometimes all there is to do to avoid descending into depression in the face of unpleasant experiences and personal failures when trying to pursue some level of sanity in this country. But to be practical, and be so in connection with the issue of wealth preservation in Lebanon during the current phase of scarcity, it is preferable to seek the most viable angles for dealing with wealth and scarcity.

To start with a few behavioral considerations, and also to be clear from the beginning of this discussion, Executive editors see no inherent incompatibility of wealth and scarcity—meaning there are no valid historical arguments for expropriation of wealthy people or the owning class in order of solving the problems of scarcity—nor do we see a lifestyle contradiction between wealth and austerity. While there is a time for generosity (and Dickens’ Scrooge has given stinginess during such moments the bad name that it deserves), there are many positive examples for fortuitous correlations of being rich and practicing personal austerity. The virtues of self-discipline and responsible/sustainable use of resources are not only fully compatible with owning wealth, but self-chosen commitments to austerity have historically often been to the advantage of wealth owners. This seems worth repeating as the country’s zeitgeist needs to align itself with the need for austerity.

On the economic level of the discussion, scarcity of economic resources is furthermore not so much a contradiction to owning wealth as much as a challenge and mandate to invest this wealth in ways that improve the wellbeing of society. Bankers tell us today that they need to be able to deploy their wealth by lending to ventures that can be classified as good risks; they have a point, as it is their business and expertise to channel deposits into viable lending opportunities.

But from a wealth management perspective, the most recommendable methodology for the rich in this society appears to start with assessing their own needs and collating them with society’s needs. A next step will be to prudently examine, while taking the current economic scarcity into careful consideration, the platforms, markets, structured vehicles, contrarian narratives, and unconventional investment methodologies that exist in Lebanon.

The information and views that Executive obtained in the course of this issue’s inquiries about asset classes that can meet the requirements for sane returns and economic benefits encourage editors to call upon our wealthy families and individuals with two specific requests. First, resist any temptations of the shithole bias, and second, stay alert (or remind your local wealth managers, private bankers, and investment advisers to keep you highly tuned) to all investment opportunities that are opening in the local markets and classical asset classes, especially equities on the electronic trading platform under construction.   

Finally, we want to note that the personalized environmental, social, and governance (ESG) standards radars of Executive’s editors have last month been blinking in positive frenzy. Two laudable developments arrived last month from the US, namely a pivot in perceiving the purpose of the corporation from pure shareholder commitment to one that entails “a fundamental commitment to all of our stakeholders” and the inclusion of “ESG relevance scores” in the ratings report issued by Fitch on August 23. We regard these as positive signals that suggest that more ESG affirmations are called for in Lebanon. Investors should look at impact investing and investing into startup entrepreneurship on levels of funds and individual companies. Investors should not be fools who hate knowledge.     

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