Digital media only represented around four per cent of regional advertising spend at $160 million last year. But it is the fastest growing sector of the local advertising market and forecast to top $200 million in 2012.

Flip Media was founded by Martin Diessner and Dinesh Lalvani in 2003 with the encouragement of AME Info, then the largest business information website. It grew rapidly as Internet advertising gained traction and received private equity investment from HSBC after the latter concluded the $24 million sale of AME Info in July 2006.

Why sell?

Why sell out now? It is a good question. Digital media is the growth area in a pretty moribund local media industry this year. Arabic TV news is the only other hot spot.

New digital player Adzouk has created a regional Google-clone in the past six months and now handles advertising for over three hundred websites, including ArabianMoney, making it the largest platform for web advertising ahead of Gulf News or AME Info.

Flip says it sees the benefit of being a part of a larger group to take the company to the next level. Presumably somebody also wanted to take their money out of the business.

Like AME Info the Flip story is one of enterprise and leveraging the Dubai digital media opportunity, latterly with the help of HSBC Middle East Private Equity. Their forte is taking small companies through the corporate governance and accounting strictures necessary for a sale to a large multinational and often negotiating the deal.

It is certainly a far more creative and practical role than some hedge funds who invest speculatively in such start-ups and never actually contribute anything more than their money.

High ROI

However, the returns for investors in the early stages of these companies can be formidable. But they literally start from nothing and can also end up being worth nothing. The trick is backing the right people in the right sector at the right time, although patience can be a substitute for correct timing.

Patience for private equity investors is not so much a virtue as a necessity. Even great businesses can fall foul of a global economic slump, for example, and start-ups are often very vulnerable to such force majeure events. Still for Flip Media the pay day has come.

Will there be more Flips and AME Infos? It is inevitable really as the large groups are not always the greatest innovators and often prefer to buy successful start-ups rather than try to do it themselves.

Nothing is actually decided at the World Economic Forum, rather like summits of European leaders. But Davos is always a good gauge of global opinion and business confidence about the future. Last year there was some optimism about the economic recovery.

Gloomy prognosis

2012 is a more gloomy prospect. The eurozone crisis is close to a denouement on the Greek debt mountain with unknown consequences. World Bank economists have warned this could be worse than Lehman in late 2008 in its contagion impact on the global banking system.

Then there is the mounting geopolitical issue of Iran and the new EU embargos on oil and other business activity. Lehman was not the only issue in 2008. Remember it was $147-a-barrel oil in July that year that pushed events over the edge.

US business executives we are told are feeling more upbeat about 2012 than their European counterparts or the Japanese for that matter whose economy is also close to a major implosion.

Where will the economic growth come from in 2012? Certainly not from the UK, Europe or Japan. China is also slowing down, although a hard landing is not widely forecast at present.

From the Gulf States? Not very likely with the military might of the world flexing its muscles for a possible conflict with Iran over the Strait of Hormuz.
Higher oil prices will help but not fully compensate.

Splendid isolation?

Indeed with large parts of the global economy either in recession or close to it the Americans are going to have to organize their own pre-election party. Can the USA grow in splendid isolation?

The danger of contagion is surely obvious. The USA is financier to the world and will suffer immediately from a blow-up in the eurozone banking system through loan guarantees, quite apart from the impact on earnings from its largest export market.

Besides the US national debt and deficits are still overpowering and growing, higher in fact than the eurozone. The temporary US mood of subdued optimism rests on very shaky foundations that are about to be shaken very hard.

Even the bad financial statements from Citibank and Morgan Stanley could be dismissed as expected while new star bank Wells Fargo benefited from some new mortgage business in the still falling US housing market.

Eurozone resolution?

We even had the FT’s normally sensible Gillian Tett saying that it was good news that the eurozone crisis would be sorted out this year, however badly that turned out! Talk about seeing things through rose coloured spectacles.

The reality is that we face a large number of probable negative news events but do not know the contagion and consequences. It is possible to get too gloomy about the prognosis. But it is also possible to become weary of being pessmistic and jump in the other direction.

Then when the storm finally hits – despite having seen it coming – you really get hurt. Battening down the hatches and looking for safe havens is still the name of the game at this point.

Bottom buying

You want to emerge to pick up the best of the bits that remain after a storm has past, not before it arrives! And even after a financial storm has past it can be some considerable time before it becomes apparent what is safe to buy.

Better to miss a few of the best deals of a lifetime than to regret deals that looked irresistable at the time and later went sour. Of course the most important thing is to be there to invest after the event.

Jumping in before a storm seldom works in favour of investors who should be careful not to marry in haste and repent at leisure.

‘We have a more dangerous situation now than in 2008,’ Mr Soros was quoted as saying in Bangalore, India.’The crisis in Europe is more serious than the crash of 2008.’

Leaders meet

His comments came just before German chancellor Angela Merkel and French President Nicolas Sarkozy met for the first time this year to try to establish a clear agenda for another summit of European leaders on January 30th.

Mr Soros is worried about the collapse of European Banks with concern that Greece will finally default on its debts top of a long list of potential disasters looming for the banks this year. Even if Greece does not formally default the so-called ‘haircuts’ on bonds being proposed will smash another hole in the balance sheets of the already enfeebled European banks with the big French banks most exposed.

The collapse of the share price of UniCredit, Italy’s biggest bank in the wake of its $10 billion rights issue has also effectively closed this route to capital raising for the European banks. In addition, up to 5,000 job losses when RBS finally announces the closure of its investment banking division this week will send shock waves through the sector.

Clear warning

Mr Soros may be a very old man but his wisdom and ability to earn money in financial markets is unmatched, if sometimes misleading and misunderstood. But the warning issued about the eurozone crisis is direct and straightforward.

Indeed, you can understand why the old guard of Wall Street like Soros and Pimco are now so defensive and the young day-traders with charts instead of brains are leading the bulls.

George Soros bet against the Bank of England and won in 1992, netting a billion dollars then a lot of money. You have to wonder where his own assets are positioned right now.

We hope this is more a matter of judgment than luck but you always need a little of that too in forecasting the future.

Empirical approach

We try to take a very empirical approach and note that what has happened in the past does tend to be repeated and the chance of anything ever being different this time is rather small.

As the great investor Sir John Templeton once commented ‘This Time is Different’ are the four most expensive words in the English language for investors.

From the study of history then we can learn a lot about the likely future course of financial markets because given similar circumstances and events they will behave in a pattern seen before.

This approach to fundamental analysis is not the same as following financial charts or technical analysis. But if the technical analysis supports the deeper fundamental trend then we would consider it useful, otherwise it is most likely wrong as right.

Historical parallels

However, this sort of fundamental analysis is very much an art and not a science. The interpretation of history in real time to project future trends is always going to be tricky to say the least.

You need a wide and not a narrow reading of the subject, or it can be terribly misleading and for investors very expensive in terms of mistakes.

So for asset allocation in 2012 we need to come up with analysis of where we are and what historical parallels apply in this context…

(This article is available only to newsletter subscribers. It contains actionable investment ideas. Why not subscribe as your first investment of 2012 and do so before rates rise on January 9th? click here).

Brave souls who bought then and stuck with the rally did brilliantly well. It will probably not be very much different this time, although many will panic and think that it is different this time.

Perfect storm

The reason for this prediction is the perfect storm alluded to in another article today (click here). Financial markets always tend to over-react to the downside and then some.

For investors the tricky point is not just having the courage to act when others are fearful but to buy the instruments likely to show the biggest upside in the recovery.

Both demand a confidence in your analysis of the future, although simply buying cheap is always a good idea in any business deal and comes with its own margin of safety.

ArabianMoney thinks central banks will eventually inflate the debt problem away and that will start with a massive response to the next crisis. Central bankers of course would like to do this now but only in a crisis would they be able to get away with such a drastic policy action without incurring the wrath of the liquidationists.

These folk argue that debts can be repaid by good housekeeping and austerity packages. That rather goes out of the window in extreme circumstances. Money printing is always an alternative and less painful, particularly for democratic politicians.

Inflation, inflation

However, the unintended consequence of central bank money printing is inflation that gets out-of-control, undermining the value of pensions and bank deposits, making millions poor in the process of bailing out the debtors whose assets inflate in value while their debts remain unchanged.

Fixed assets like commodities are therefore a good place to be invested in an inflationary storm. Gold, silver, oil, these are the places the ArabianMoney newsletter will be searching for the best possible investment vehicles when things look bleakest in financial markets (subscribe here).

The worst of years in financial markets could still throw up the best opportunities for the most astute investors. But we would cash out now if you are still invested or risk losing a very great deal of money.

It is not really within our resources to provide a full 24-hour news service so our webmasters at Indivirtual came up with something different, a news service selecting articles from the best sources we could find.

We hope you will enjoy this constantly changing news magazine compiling articles from multiple sources into one convenient location. We have broken this down into two broad categories: Arabian Financial News and Global Financial News.

Full text

You have the summary of the story on the page and can click to access the full text in its original source website. Our focus is still mainly on news commentary and analysis rather than headline news in keeping with the editorial policy of ArabianMoney.net.

It does not look an easy year ahead in 2012 and ArabianMoney will be doing its best to keep you up-to-date with this new service. Our regular analysis and comment columns will continue unchanged.

After the dot-com crash in the spring of 2000 His Highness stepped boldly into the still crashing market to buy a $50 million stake in online ticketing concern Priceline.com that promptly fell to under $10 million. He also acquired $400 million in WorldCom stock just as the tech bubble burst and kept his holdings in Xerox and Kodak, also lousy investments though they did not go bankrupt like WorldCom.

Still he probably fared better investing $50 million in both Amazon.com and Ebay.com. So where will Twitter stand?

Social media bubble?

We don’t know the size of the stake of course but you do not need to be a genius to spot the bubble in current social media and dot-com valuations. The poor reception to the Zynga gaming website IPO last week suggests this bubble is already in danger of bursting.

With Twitter this is presumably a pre-IPO investment with the aim of realizing an ample return in the fullness of time. That might mean a window of opportunity for an IPO in a bouyant stock market in an election year. But will that be forthcoming? ArabianMoney is hugely skeptical about anything except bad news for equites next year.

Besides although Twitter has a unique market niche, rather like Amazon and Ebay, it lacks anything like the same cashflow or potential cashflow. We are indeed back to the dot-com days of a company with an impressive product but not much revenue let alone profit.

Can the dementented ravings of tens of millions of Tweets really be worth billions of dollars? We wonder really. Right we had better get on and tweet this…

Money printing is less and less effective at stimulating demand. This probably adds up to a severe deflationary shock next year with the British PM David Cameron warning his MPs that 2012 is likely to be the toughest year since the 1980s.

We wonder if he should not look further back to 1974 and the financial crisis after the 1973 oil shock. Then the financial markets dropped like a stone. That was the deflation. Then countries had no alternative but to print money and inflation soared. That was only brought under control by the Volcker Fed’s recession of the early 80s when the British PM was still a schoolboy.

1974 crash

The 1974 financial crash was still being discussed a decade later. It ruined many individuals and financial companies particularly in London and New York. The stagflation of the late 70s made few people rich in the West though in the Oil States times were seldom better.

Yet remarkably there are still a few bulls on Wall Street, though very few in London which is closer to the epicenter of the eurozone crisis. Viewed in splendid isolation the prospects in the US do not look too bad for the myopic who always fail to see the bigger picture.

The eurozone is teetering on the brink of disaster early in the New Year. It gets a step closer every day and the measures to prevent it are widely acknowledged as inadequate. That is why the British PM voted against it.

China is also not far behind. The great wall of debt that has powered the Chinese economy since the global economic crisis of three years ago is starting to crack up. House prices have begun to fall triggering a debt meltdown and US observers ought to know what that means next.

Bigger picture

This will certainly help to keep US bond yields low and bring down the cost of commodities for a while. But the wider disruption to financial markets and depression of foreign earnings for US multinationals will make this a far from painless experience.

ArabianMoney is just putting the finishing touches to our January newsletter with a more detailed consideration of the year ahead and what this scenario means for the Middle East. We think this will entail something like a repeat of the first half of 2009 (subscribe here).

How to protect your finances in this awful economic environment is clearly a matter of some urgency and subscribers only will get the full picture.

The endless eurozone crisis is the cause of this heightened uncertainty and for good reason. It has the seeds of a major recession or depression in business activity, and the euorozone statistics show that has already started.

Screaming Old Lady

You don’t often get apolcalytic warnings form the Bank of England. She is normally a voice of calm in a storm. But that is what we have been getting this week.

Only a massive globally coordinated injection of dollars into the financial system by central banks this week saved it from collapse. But how long will this sugar rush last?

Nothing has been done to alter the fundamentals and as the Bank of England’s alarm bells suggest there is nothing much that can be done, short of replacing the bonds of bankrupt Greece with eurobonds, an entirely new asset class for which no institutional structure exists.

Rather like the giant armies of Europe in the summer of 1914 lining up for war this all has a horrible sense of inevitability about it. Yet even two months before World War One stocks on Wall Street pointed optimistically to a solution with war unthinkable, and then the unthinkable happened.

Some readers of ArabianMoney are still in that camp. Europhobic Britons are already dancing on the grave of the euro and by extension the European Union.

No exit plan

That explains the wild swings in global stock markets between optimism about some kind of recovery next year and a major global economic crisis. The problem is that there is no viable exit plan.

The US wants the eurozone to spend its way out of trouble. And yet the current trouble is the direct consequence of the panic spending that the US initiated, and largely paid for after the 2008 crisis. That has not worked because we have only created an even bigger crisis down the road, the one we now face.

Can the eurozone leaders somehow square this circle and come up with a solution that actually works? Once you realize it is a mission impossible then you understand the warnings from the Bank of England to prepare for the worst.