really interesting session to start off the week. Below are notes taken during the session…..
Nouriel Roubini – very interesting and intelligent. look up his writing.
David Rubenstein – very pragmatic and intelligent. look up his writing.
employment issue remains a global problem, not enough jobs were created. issue of near term inflation is very real. also a problem with fiscal responsibility of sovereign funds of all nations. there will be a risk of withdrawing funds, but they must.
belief that the professional investors have survived a ‘heart attack’. lots of bargain hunting. lots of opportunities in the US. emerging markets will remain robust; far more robust than the developed nations who will have a continued slow growth rate. energy, both green and black, will remain robust. healthcare will also be a great place to invest based on the boomer investment. financial services were most likely also be attractive. the US government will not shrink its size and is investing in certain areas. the current congress has not figured out if it is going to work to beat up bug business or to go more centrist. in summary, a good time to invest and the risk of systemic failure is now gone.
one has to differentiate between optimism and realism. we shall see a few more shocks to the global financial system and we will see more bankruptcies in this year….big ones. emerging markets are a great place to be right now. this is because there is so much to do there. the past perception of risk there has been rally internal. in MENASA half the population is under the age of 25. this is huge. the world cannot do without oil. 60% of the reserves sit in the GCC. 30% of annual production comes from the GCC. the GCC share will continue to rise. there is a new feeling of attention to
this year Shanghi production will surpass HK for first time. there will be a robust recovery in the entire region of Asia. most will have 10% growth recovery. the Chinese GDP is really pushing much of this. there is also a large-scale fiscal expansion. four groups in the region. the emerging markets. the second group are those who can leverage the first. ie Korea. the third is country like Australia who have growth targets thru population growth. the fourth category……[not sure what he was on about]. he then went onto deflation. Japan has been suffering from deflation for the past 15 years.
move from a time of great fiscal uncertainty to one of political uncertainty. we could see an increased move to poplularism and protectionism. there will be a huge growth in India. it is a young population with a huge need for improvement across the board. that said, the jobs needs to be created thru better infrastructure. India need to convert the large number of rural jobs to other kinds of jobs.
The BRIC nations are an interesting case. Brazil still needs structural reform even though the country is doing quite well. Russia has big problems due to is single sided economy and the health issues as well as falling birth rates. India is doing well as is China.
There is an issue of overreaction that cannot be understated. We need to remember that economists cannot really predict anything beyond a few months.
How has the intellectual climate changed over the past year?
There seems to allot of fear for market forces. In the UK, the case of Iceland is a good case. There is a feeling that there is a ‘monster’ that needs to be moderated. In the US it is more about outrage at the excess of the financial sector. There is also an increasing feeling of the irrelevance of the financial sector….they are not lending or helping out, so curb or eliminate it. One big problem is that the emerging markets will take a lead from the developed markets and this could curb their growth.
So, fear is driving policy in the US, outrage in the US. Populist headline making seems to be the driver for fiscal policy in most of the rest. The concern is that these actions will not really deal with the fundamental problems. It is far more complicated than just compensation….it is really about transparency.
The US has a huge problem. the 3Ds: Debt, Deficit, Dollar. 230,000 deficit per person. The Dollar will sink unless there are actions. This is an even larger problem then the other things that the US Congress is concerned with.
Populism is being addressed, not sentiment. For example in the US the companies are doing well, but people are not. The bid question is who is THE consumer that is of the most important.
Tough years change behavior. No economist model can account for sentiment or emotion. And we have seen a few tough years.
Politicians do not understand finance.
asset bubbles are not dealt with by governments and regulation.
in all of this talk, one forgets the shareholders. many bankers are now saying that ‘we did not feel enough pain’ because the shareholders are not holding the leaders accountable. there is a need for regaining this accountability.
the US will certainly inflate the currency so that the debt can be dealt with. [this is an important issue...we can anticipate that this will begin this year].
the digital and tech economy is doing really really well. there is a dearth of high tech employees. jobs are being designed out of this economy. there is a HUGE difference between innovation and employment. there is a fundamental imbalance between the new economy, the green economy, and the challenge of employment. [[[[I wonder if this is not just another way of saying that the REAL problem is overpopulation]]]]
big crisis tend to be around time so big technology change. there is always a period of turmoil until the technology integrates into the society.
this is all fine, but we cannot forget, nor ignore, the emotive part of this. there is a fear to invest, but a need to invest.
the last three bubbles have been from real estate. not technology.