I was invited to attend this presentation by Merrill Lynch mid-May.
First – The panels
Frist discussion had as penal memebers Paul Romer (Stanford Institute for Economic Policy Research), Kate Moore (Merrill Lynch Global Research), and Bennett Goodman (The Blackstone Group co-founder), as moderated by Ron Insana (CNBC). The second discussion had as penal memebers Ron with Kevin Kajiwara (Director of Global Markets, Eurasia Group).
Second – Messages
Here is what I want to pass along from those panels:
1. China is a key to any planning. The 9% per year GDP growth may not last forever, but it will continue and slowly ramp down. India is also important. Any investment decision has to factor in the impact China (and India) could have on that company, that market or even the politics and government surrounding that investment. China will rival the US in vying for resources as well as politically
2. Resources – materials for all goods will also be a key factor. Investing in materials makes sense, as so many countries have improving standards of living, requiring more for consumer goods as well as infrastructure. This purchase and use of materials will impact global investing, so you will want proper exposure.
3. Inflation – the panel members expect low inflation for some time. We bounce between low inflation and deflation as themes, but the consensus seems to be that inflation will remain low for now.
4. Euro – Greece and its debt is clearly a big problem for Europe now, not because the total amount is a big number but how because however it is handled could lead to a contagion for the next countries that teeter on the edge of default. Also, there are political issues, such as the German populace not wanting their hard earned resources supporting a country with subsidized early retirement and now potential to grow their way out of their debts. These are political issues that could impact investment strategies.
5. Middle East/North Africa (MENA) – the resources in this area are not so much the issue. For example, Saudi Arabia alone could replace the exports of petro resources from Libya. Nonetheless, again, the political outcomes could impact investing.
6. Opportunities – Brazil and Russia – your investments should include emerging markets. Within that sector, you will want exposure to companies within these countries
The panel was asked to detail what could derail any of this thinking:
a. Inflation – if it hits higher double digits instead of staying low.
b. Debt markets – if the problems like the debt of Greece are not remedied without substantial fallout, as noted in 4 above
c. Inability of key government bodies to make decisions and act – then the predictions get mired in political issues, and capital markets no longer move as they need to
Some clients to whom I sent my summary felt that Russia was too risky, so that you really had to rely on your investment advisor. Others felt that new opportunities would come in the CIVETS (C = Colombia, I = Indonesia, V = Vietnam, E = Egypt, T = Turkey, and S = South Africa). The idea is that these contries are all high-potential, medium size and have strong growth curves
What do you think? Let me know … and tell me if you have questions or concerns.
(Please also relate this to your thoughts on our investment post, Investing: Faults of the Individual Investor to Avoid (Reasons for Impartial Advice)