Zero-Day Options Boom Will Only Grow Even As Some Investors Fear Disaster

Stocks

Summary:

Two years after Wall Street's love affair with fast-twitch stock options began, Bloomberg's latest Markets Live Pulse survey suggests the unprecedented boom still has room to run — even as almost half of respondents fear an eventual blowup.

With the notional value of zero-days-to-expiration contracts tied to the S&P 500 hitting roughly $862 billion in April, almost 90% of 300 MLIV Pulse respondents said they expect the growth to continue. The twist? They're about evenly split on whether it will grow steadily or end in calamity.

Equity derivatives with less than 24 hours to expiration, known as 0DTE, have become one of Wall Street's most popular trades as investors big and small seek to navigate uncertainty over the economy and central bank policy. Trading in 0DTE made up 45% of the total options volume for the S&P 500 last year, about double the level from before the products became widely available in the second quarter of 2022.

“The exchanges are making money hand over fist by allowing daily options. As you've seen, the volume has gone up because more and more people have access to it,” said Phil Pecsok, chief investment officer of Anacapa Advisors. “They're only going to become more prevalent.”

The scale of the boom has stirred controversy. There are concerns the activity in ultra-short-dated options may be affecting stock volatility, while research has suggested that retail investors using them mostly lose money.

A majority of survey contributors showed awareness of the latter risk, with 56% expressing the view that it's too easy to lose money with the tools. But the concerns didn't extend to limiting retail access to 0DTE, with 76% of respondents — almost two thirds of whom are professional investors — saying it was only fair to keep them easily available.

Initially picked up by high-frequency traders to make wagers or hedge positions, zero-day options are gaining traction among sophisticated quant pros and small-fry investors alike. They have also found their way to the exchange-traded funds arena.

Both academic and Wall Street researchers have flagged potential dangers with this wave of trading, including that it may make the market more volatile on an intraday basis. JPMorgan Chase & Co. strategist Marko Kolanovic has warned their popularity risks reprising past disasters such as the 2018 Volmageddon episode, a famous blowup that shattered a lengthy calm in US stocks. The theory is that a big stock move could force options dealers, who take the other side of trades and must buy and sell shares to keep a market-neutral stance, to unwind a large amount of their own positions, accelerating any selloff.

The exchange at the center of the boom, Cboe Global Markets Inc., has argued that the wide range of use cases for 0DTE means the trades aren't creating the kind of crowded one-way bet that might make the market vulnerable to shocks. Cboe expanded expirations of S&P 500 options to every work day about two years ago and later also allowed zero-day options for the Russell 2000 Index.

In the latest expansion, Nasdaq Inc. said it plans more short-term options on commodities and Treasury ETFs.

Opinions about the impact of 0DTE on the underlying market were fairly evenly split in the MLIV survey. Only around a quarter of respondents said they worried a lot about it, with 34% not worried and 41% only a bit worried.

Asked how they would describe 0DTE, the MLIV Pulse contributors — who are predominantly in the US or Europe — were often scathing. “Gambling” was the most common phrase offered. A “slot machine in Vegas,” “atom bombs,” and “tools resulting in a wealth transfer from retail and unsophisticated institutions to exchanges and market makers,” were among the negative descriptions.

The positive contributors largely focused on their usefulness as a hedging tool. As one participant said: “It is a fairly inexpensive way for investors to take a position in the directional move of a stock without having to own the underlying shares.”

So far, 0DTE are available only for major indexes and exchange-traded funds. Their popularity has fueled speculation that zero-day contracts could be broadened to cover single stocks. Asked about that potential expansion, survey respondents were perfectly divided.

The MLIV Pulse survey is conducted among Bloomberg readers on the terminal and online by Bloomberg's Markets Live team, which also runs the MLIV blog. This week, the survey asks if Bitcoin or large cap US tech stocks offer a safe haven. Share your views here.

Source: Bloomberg

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Alex

Economic

Stocks

The domestic equity indices, Sensex and Nifty 50, are expected to open higher on Monday tracking a rally in global peers amid improved sentiment.

Asian markets traded higher, while the US stock market rallied last week after a softer-than-expected US jobs report raised expectations that the US Federal Reserve would not keep interest rates higher for longer and could start cutting rates soon.

Investors will watch out for key stock market triggers including the developments over ongoing Lok Sabha elections 2024, the Q4 results, domestic and global macroeconomic data, crude oil prices, and other global cues.

On Friday, the Indian stock market benchmark indices ended around a percent lower, dragged by profit booking across sectors as well as losses in heavyweight stocks.

The Sensex dropped 732.96 points, or 0.98%, to close at 73,878.15, while the broader Nifty 50 settled 172.35 points, or 0.76%, lower at 22,475.85.

“Nifty 50 after marking a new high at 22,794 levels, witnessed profit booking and came under pressure. The index witnessed profit booking amid increasing volatility and nervousness at the higher zone. We expect the market to consolidate in a broader range and base to gradually shift higher," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

Here are key global market cues for Sensex today:

Asian Markets

Asian markets traded higher tracking a rally on Wall Street after US jobs data.

Japan and South Korea’s markets are shut for a public holiday. Hong Kong’s Hang Seng index futures indicated a higher opening. Meanwhile, Australia’s S&P/ASX 200 gained 0.46%.

Gift Nifty Today

Gift Nifty was trading around 22,690 level, a premium of nearly 115 points from the Nifty futures’ previous close, indicating a gap-up start for the Indian stock market indices.

Wall Street

The US stock market ended sharply higher on Friday as a softer-than-expected employment report bolstered the case for US Fed rate cuts.

The Dow Jones Industrial Average rallied 450.02 points, or 1.18%, to 38,675.68, while the S&P 500 surged 63.59 points, or 1.26%, to 5,127.79. The Nasdaq Composite ended 315.37 points, or 1.99%, higher at 16,156.33.

Among stocks, Apple shares spiked 6.0% after the company announced a record $110 billion share buyback program and beat quarterly expectations. Amgen shares jumped 11.8%, while Expedia share price plunged 15.3% after it cut its full-year revenue growth forecast.

US Nonfarm Payrolls

US nonfarm payrolls increased by 175,000 jobs last month, the fewest in six months, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing by 243,000. April’s employment gains were below the 242,000 monthly average for the past year.

Wages increased 3.9% in the 12 months through April, below expectations for a 4.0% gain after rising 4.1% in March. The unemployment rate rose to 3.9% from 3.8%, remaining below 4% for the 27th straight month.

US Federal Reserve Officials

US Fed Governor Michelle Bowman reiterated her willingness to hike rates if inflation progress reverses, and Chicago Fed President Austan Goolsbee said the employment report boosted confidence the economy is not overheating, Reuters reported.

Berkshire Hathaway AGM 2024

Berkshire Hathaway’s annual meeting in 2024, chaired by the Oracle of Omaha Warren Buffett, was full of insights into the company’s investment decisions, succession plans and an event celebrating the legacy created by Buffett and his long-time business partner and friend late Charlie Munger.

US Treasury Yields, Dollar

The US dollar steadied after plunging almost 5% against the yen last week, while the Treasury yields also fell after a US payrolls report was softer than anticipated. The dollar index, which measures the US currency against six rivals, was at 105.12, having touched a three week low of 104.52 on Friday.

The yield on benchmark US 10-year notes dropped 6.1 basis points to 4.51%, while the 2-year note yield fell 6.5 basis points to 4.8119% from 4.877%. The 10-year was down nearly 17 basis points on the week, its biggest weekly drop since mid-December while the 2-year was down about 19 basis points, its biggest weekly drop since early January.

Oil Prices

Crude oil prices steadied after the biggest weekly drop since February as Saudi Arabia hiked selling prices for grades to Asia for the third month in a row.

Brent crude rose 0.01% to $82.97 a barrel after a 7.3% drop last week, while West Texas Intermediate was flat at $78.11.

Source:reuters

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Thomas

Central Bank

Economic

Forex

The yen had clocked last week its strongest weekly gain in more than 17 months following two bouts of suspected Japanese government interventions to pull the currency away from 34-year low of 160.245 per dollar.

On Monday, the yen weakened 0.43% to 153.62 per dollar in early trading, having touched a three-week high of 151.86 on Friday, as the dollar lost additional ground after the jobs data.

Mainland China's markets were closed for three days last week. But the offshore yuan had risen on the back on the dollar's broad retreat after data showed a cooling U.S. jobs market, Fed Chair Jerome Powell confirmed the central bank's easing bias and Japan intervened to push the yen higher.

The offshore yuan was last at 7.1959 per dollar, and gained more than 1% last week.

Japan is closed for a holiday on Monday as is Britain, likely resulting in lower volumes. But with Japanese authorities choosing last week's quiet periods to intervene in the yen market, traders will be on high alert through the day.

The more than 9 trillion yen that the Bank of Japan is estimated to have spent to prop up the frail yen last week has only bought it some time, analysts say, as the market still views the currency as a sell.

The Commodity Futures Trading Commission's weekly commitments of traders report showed that non-commercial traders, a category that includes speculative trades and hedge funds, reduced their yen short positions to 168,388 futures contracts in the week ended April 30, still close to their largest bearish positions since 2007.

While Japan clearly has capacity to intervene more, the broader macro environment remains quite negative for the yen, according to Goldman Sachs strategists, noting intervention "success" can only go so far.

"But, buying time is still valuable, as it reduces the potential for economic disruptions from the exchange rate adjustment and could stabilize the currency until the economic backdrop becomes more supportive for JPY," they said in a note.

FED PATH

Data on Friday showed U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years, as signs of labour market cooling raised optimism that the U.S. central bank could engineer a "soft landing" for the economy.

Markets are now pricing in 45 basis points of cuts this year, with a rate cut in November fully priced in.

The Fed held interest rates steady at the conclusion of its two-day monetary policy meeting, as expected, but signalled it was still leaning towards eventual rate cuts, even if they may take longer to come than initially expected.

"While inflation is likely to remain closer to 3% than 2% this year, we project just enough cooling in inflation to meet the Fed’s bar for a summer rate cut," Citi strategists said in a note.

"The case for cuts will be much stronger if we are correct that softer April jobs are a sign of further weakening to come."

The dollar index, which measures the U.S. currency against six rivals, was at 105.12, having touched a three week low of 104.52 on Friday.

The euro was up 0.07% at $1.0765, while the sterling was last at $1.2547, up 0.02% on the day.

Source: Reuters

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Samantha Luan

Economic

Stocks

Forex

Shares will likely play catch-up to gains seen offshore when mainland markets were shut from Wednesday to Friday to celebrate Labor Day. The Nasdaq Golden Dragon China Index jumped 8.5% during that period, while a Hang Seng gauge of Chinese stocks rallied more than 4% since Hong Kong reopened on Thursday.

On the currency side, the onshore yuan may track the advance seen in the offshore unit, which had its best week this year as the dollar retreated.

Battered Chinese assets are getting a second look as a combination of earnings recovery, policy support and cheap valuations lure investors. The latest catalyst came from the Politburo meeting just before the trading break, when China's top leaders vowed to explore new measures to tackle a protracted housing crisis and hinted at possible rate cuts ahead.

“The important meeting held before the holidays clarified the goal of continuing to deepen reforms and expand opening up, which will help drive the onshore equity market higher in the near term,” said Shen Meng, director at Chanson & Co. “The travel and consumption trend during the holidays also raise expectations for the consumption recovery.”

Read: Worst of China Stocks ‘Should Be Behind Us' for 2024, BofA Says

Foreign funds are also returning to Chinese and Hong Kong stocks, though whether this is a tactical rebound or a more sustainable re-rating remains under debate. Bank of America Securities said the worst in terms of fund outflows has passed, while UBS Group AG strategists said earnings for mainland-listed stocks have likely bottomed in the first quarter.

Overseas funds boosted holdings of mainland shares for the third straight month in April, the longest buying streak in a year. A rally in Hong Kong shares during the Labor Day holiday — when Chinese investors were out of action — suggests strong appetite from global money.

For the rebound to extend, investors will be looking for firm evidence of consumption recovery in the holiday data. Citigroup Inc. expects the travel industry's Labor Day holiday revenue to “improve decently” compared to the pre-pandemic levels of 2019, driven by traveler traffic increase and a recovery in per capita spending.

Chinese stocks related to travel and consumption surged in Hong Kong trading, reflecting the optimism. Casino operator MGM China Holdings Ltd jumped more than 12% in the two post-holiday sessions, while travel platform Trip.com Group Ltd added over 4% and hotel business H World Group Ltd rose nearly 5%. This also suggests that a disappointing set of data can quickly lead to a reversal of the gains.

“We need the May holiday consumption data to meet expectations to sustain the rally,” said Zhikai Chen, head of Asian and global emerging market equities at BNP Paribas Asset Management Asia Ltd. “Otherwise, it will lead to another round of questions on whether consumers are pulling back and if they are getting more cautious.”

Monday trading will be the first session for mainland equities to respond to the Politburo's statement, which was released after markets closed on Tuesday. Analysts have largely offered a positive take, with Chinese property stocks in Hong Kong rallying as authorities said it will look for ways to deal with unsold properties. They also called for faster issuance of special sovereign and local government special bonds — a major source of funding for infrastructure projects.

The offshore yuan rose to the strongest against the greenback since mid-March on Friday, supported also by a more favorable global backdrop. The dollar has come off a recent high after the Federal Reserve's latest decision was seen as less hawkish than feared.

The Chinese top leaders' meeting “raised hopes that they will come up with more comprehensive long-term reforms and policies to address” some of the economy's structural challenges, said Ken Cheung, chief Asian FX strategist at Mizuho Bank. The yuan's rally may extend in the short term alongside the dollar's retreat and as foreign investors are less bearish on Chinese assets, he said.

Source: Bloomberg

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Glendon

Economic

Bit Digital (BTBT), a company engaged in bitcoin mining and blockchain technology, is set to report its first-quarter 2024 earnings today, after the market closes. As investors eagerly await the results, several key questions loom: Will BTBT live up to analyst expectations and continue its impressive earnings surprise history? Or will the report reveal challenges that could dampen investor sentiment?

Diving into BTBT's Q1 Performance Expectations

Analysts have set the bar high for BTBT. The Zacks Consensus Estimate for the company's first-quarter 2024 earnings per share (EPS) sits at $0.01, a significant improvement compared to a loss of $0.03 per share in the same quarter last year. Revenue estimates are even more bullish, with the consensus pegged at $27.7 million, reflecting a substantial 235.71% year-over-year growth.

This optimism stems from several factors. Firstly, the overall price of Bitcoin has risen considerably in 2024 compared to the prior year. Since miners are rewarded with Bitcoin for successfully adding blocks to the blockchain, a higher Bitcoin price translates to potentially greater profitability for BTBT. Secondly, the company has been expanding its mining operations, aiming to increase its production capacity.

However, there are also potential headwinds to consider. The cryptocurrency market is notoriously volatile, and any sudden dips in Bitcoin's price could negatively impact BTBT's earnings. Additionally, the increasing difficulty of Bitcoin mining, a natural consequence of the network's security design, could put pressure on BTBT's margins.

A Look Back: BTBT's Earnings Surprise History

Adding another layer of intrigue is BTBT's past performance. The company boasts an impressive average earnings surprise of 80.7%, exceeding analyst expectations by a significant margin on multiple occasions. This track record suggests that BTBT may once again outperform market predictions. However, past performance is not always indicative of future results, and investors should be cautious about relying solely on historical data.

Beyond the Headlines: Key Metrics to Watch

For a more comprehensive picture of BTBT's financial health, investors should look beyond just the headline EPS and revenue figures. Here are some additional metrics to consider:

Hash Rate: This metric represents BTBT's computing power dedicated to bitcoin mining. A higher hash rate indicates a greater potential to earn bitcoin rewards.

Operating Expenses: Investors should monitor BTBT's operating expenses to understand how efficiently the company is managing its costs.

Bitcoin Inventory: The amount of bitcoin held by BTBT can provide insights into the company's future liquidity and potential for selling these holdings to generate additional revenue.

The Verdict: Tuning into BTBT's Earnings Call

The upcoming earnings report is a crucial event for BTBT investors. The company's performance will likely have a significant impact on its stock price. Investors are advised to listen attentively to the earnings call, which will likely be held shortly after the results are released. During the call, management will provide additional details about BTBT's financial performance, future plans, and any challenges they anticipate.

By carefully analyzing the earnings report, along with the additional metrics and insights from the call, investors can make a more informed decision about whether BTBT remains a compelling investment opportunity.

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Thomas

Bond

Economic

Since the onset of the Covid-19 pandemic, the developing world has faced growing public-sector debt vulnerabilities. Interest-rate hikes and limited access to international capital markets have only exacerbated the problem — so much so that even solvent countries are now grappling with liquidity challenges. Furthermore, the International Monetary Fund (IMF) predicts that in the coming years, the debt levels of developing countries will remain higher than in 2019. It seems clear that many low- and middle-income countries will continue to experience debt stress, even if they are not at risk of default.

Yet, the severity of the crisis is not reflected in the agenda for global cooperation. Last year's G20 Summit in New Delhi, for example, advanced important proposals for development finance but made little progress on addressing the over-indebtedness of low- and middle-income countries. Most crucially, the world still lacks a comprehensive debt-restructuring mechanism to deal with this widespread and recurrent problem.

The oldest existing debt-restructuring mechanism, the Paris Club, covers only sovereign debt owed to its 22 members — mainly Organisation for Economic Co-operation and Development (OECD) countries. On occasion, multilateral lenders and foreign governments have adopted ad hoc responses to sovereign-debt crises. For example, the US-backed Brady Plan, implemented after the Latin American crisis of the 1980s, helped reduce some countries' debts and catalysed the development of a sovereign-bond market for developing countries. In 1996, the IMF and the World Bank launched the Heavily Indebted Poor Countries Initiative to provide a much-needed reprieve for low-income countries; this was supplemented in 2005 with the Multilateral Debt Relief Initiative, which cancelled eligible countries' debts to multilateral creditors.

Other reactive measures have aimed to improve the restructuring process. Following the Mexican crisis of 1994, the OECD's G10 proposed introducing collective action clauses (CACs) in bond contracts, enabling a qualified majority of bondholders to modify the terms and conditions, if necessary. Moreover, in 2013, after the Greek debt crisis, the European Union mandated the inclusion of aggregation clauses for CACs in its members' bond contracts, facilitating joint renegotiation of several issues. But despite these reforms, creditors can still build blocking majorities, owing partly to the lack of expanded CACs in roughly half of sovereign bonds issued by emerging and developing countries, and partly to the incompatibility between bond agreements and other debt contracts.

The IMF attempted, but failed, to create an institutional framework for sovereign-debt restructuring in 2001 to 2003. The proposed mechanism would have allowed unsustainable external debts to be restructured through a rapid, orderly and predictable process while protecting creditors' rights. Moreover, the overseeing body would have been independent of the IMF's executive board and board of governors. Ultimately, the US rejected the initiative, as did some developing countries (notably Brazil and Mexico), fearing that the mechanism would restrict their access to capital markets.

During the pandemic, when public-debt levels soared, the G20 and the Paris Club created the Debt Service Suspension Initiative (DSSI) for low-income countries, which stopped debt payments for 48 of 73 eligible countries from May 2020 to December 2021. Then, at the end of 2020, they endorsed the Common Framework for Debt Treatment to coordinate and provide debt relief to DSSI-eligible countries. But, so far, only three countries — Ghana, Zambia, and Chad — have reached an agreement under the framework, while only one other — Ethiopia — has applied. Fears of credit-rating downgrades have reportedly deterred several other potential beneficiaries from participating.

There is obviously a need for a permanent solution: an institutional mechanism for sovereign-debt restructuring, preferably under the aegis of the United Nations. The IMF could also house such a mechanism, but only if the dispute-settlement body remains independent of the fund's executive board and board of governors, as proposed in 2003. The renegotiation framework should call for a three-stage process of voluntary renegotiation, mediation and arbitration, each with a fixed deadline.

But even if agreed, a statutory mechanism would require long and complex negotiations. Thus, an ad hoc instrument is an essential complement. To that end, the UN and other entities have proposed a revised Common Framework, which should set a clear and shorter time frame for restructuring, suspend debt payments during negotiations, establish clear procedures and rules, guarantee the participation of private creditors, and expand eligibility to middle-income countries. To ensure post-restructuring stability, any agreement should include not only revised maturities and interest rates, but also debt reduction if necessary.

As I have previously suggested, an alternative could be a mechanism supported by the IMF, the World Bank, or regional multilateral development banks (MDBs). In addition to providing the renegotiation framework, the presiding institution would be able to facilitate financing, address the macroeconomic imbalances of the countries involved, and support the restructuring process. If new bonds are issued, they should have a guarantee attached, similar to the Brady bonds.

There is also the question of whether debts owed to MDBs and the IMF should be included in the restructuring processes, as was done for low-income countries in 2005. Given that these institutions are responsible for a significant share of the debt owed by highly indebted low-income countries, especially in Sub-Saharan Africa, it may be necessary to include them. If so, it would be essential to ensure a steady flow of development aid to cover their losses.

Moreover, the traditional separation between official and private creditors has been complicated by new official lenders, notably China, and the rise of various debt contracts, including guarantees to private investors, that are separate from bonds. Future "aggregations" must encompass all obligations. Therefore, establishing a global debt registry covering all liabilities with private and official creditors is required to ensure equitable creditor treatment and enhance transparency.

Lastly, to mitigate future debt crises, the World Bank and others have suggested the widespread adoption of state-contingent bonds that adjust returns based on economic conditions or commodity prices. This would alleviate pressure on sovereign balance sheets during downturns.

Over-indebted developing countries will never get the relief they need if the international community does not push the issue at the centre of its agenda. Debt restructuring should be a top policy priority at this year's G20 summit in Rio de Janeiro and the Fourth International Conference on Financing for Development, which will be held in Spain in 2025.

Source: The Edge Malaysia

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Cohen

Economic

The global debate on what policies are most supportive of economic growth is a fierce and persistently unresolved one. Economists have the opportunity to make a valuable contribution to the public discourse, yet too often many of them in the Middle East, including in the Gulf, tend to be silent bystanders. For the GCC countries to fulfil their economic potential, their homegrown scholars need to play a more decisive role in their respective journeys.

Throughout history, countries experiencing a period of economic growth produce scholars famed for analysing and sharing that experience globally. The UK's 18th-century industrialisation inspired the Scottish economist Adam Smith, followed by the English economist Alfred Marshall, who witnessed the 19th-century British-led explosion in global trade. The US's economic success in the 20th century yielded luminaries such as Robert Solow and Merton Miller, while Abhijit Banerjee and Jagdish Bhagwati are both closely associated with India's economic rise.

Notably, societies benefit from having their homegrown scholars produce high-quality analysis in real time. Periods of accelerated growth are frequently associated with policy innovation, meaning that policymakers are experimenting with new development paradigms rather than simply adhering to a linear recipe. Local minds support the process of refining these policies by using their expertise, especially if they have sound knowledge of the history of economic growth elsewhere in the world.

This process also confers diplomatic benefits as other countries look to gain from the successful experience of the growing one. The rapid improvement in living standards experienced by countries such as Japan and South Korea made them models for others to emulate, and their local economists were instrumental in sharing their ideas with the rest of the world, helping their nations acquire soft power.

The Gulf countries have yet to benefit fully from this phenomenon. The growth that the six countries have experienced since the 1970s is remarkable, resulting in some of the world's highest living standards. However, their economists' contribution to the global discourse on the drivers of economic growth has so far been inadequate, both qualitatively and quantitatively.

Many of these scholars, including those advising or working inside the government, have either shown little motivation to write about their countries' economic stories, or struggled to provide rigorous analysis. Some of this is down to inadequate academic training and lack of knowledge.

Quantitative evidence takes the form of the modest number of academic papers these economists produce, the low rank of the journals they publish in, and the limited number of citations their papers accrue. Moreover, foreign, externally based economists writing about the Gulf economies produce a higher volume of research than do the homegrown economists, and they publish it in more well-known journals while gaining higher citations.

For example, the top five academic journals in economics, including the flagship American Economic Review, have occasional papers on issues relating to the Gulf economy, but they are almost always written by western scholars. Naturally, there are exceptions; I personally know a number of good Gulf economists who make sound contributions. However, the general trends cannot be denied.

This deficiency represents a real foregone opportunity for the Gulf countries: domestically, the process of formulating and improving economic policies is impaired, while globally, they squander the chance to acquire soft power by exporting their intellectual resources. This can be seen in the widespread belief that the Gulf countries' economic success is exclusively caused by their resource wealth, despite the existence of many resource-rich nations that have failed to translate their natural resources into high living standards.

Accordingly, it is important for their societies to understand the causes of this stunted contribution to the global public discourse.

Underlying the aforementioned weak training and sometimes professional indifference is a distorted career path for proficient homegrown economists. The prevailing culture is one where aspiring scholars dream of getting appointed to senior government positions, whereupon some will intellectually ossify, replacing the ability to write an insightful 30-page academic paper that advances human knowledge with the ability to write a two-page non-technical brief that is designed to support policy decisions.

The lack of motivation could be due in part to the fact that they get generous remuneration as civil servants; I have hardly heard of American university professors going to the public sector for financial gain. Meanwhile, people confer social status upon those who reach government's upper echelons, while being a public intellectual is rarely considered prestigious. This reflects a latent under-appreciation of intellectual endeavours that also breeds a reluctance among scholars to provide dispassionate analysis of their home economies.

Some Gulf economists would probably retort that the international public sphere has a racial bias, whereby their meritorious intellectual contributions are unjustly marginalised because they are penned by people who are either not from the West or lack the credentials that western academics are armed with. There is probably some truth to this, but it is little more than a partial explanation, and it would be unwise to use it as an excuse to switch one's efforts from producing good-quality scientific contributions to loudly complaining about discrimination and demanding some sort of intellectual affirmative action.

Regardless of the Gulf economies' ultimate success, their growth experience merits expositional academic research conducted by homegrown scholars operating on the front line. The region's economists must challenge themselves to do more than they currently are, even if many of their fellow citizens may not show enough appreciation, or of it means missing out on a top government job.