Fareed Zakaria GPS – CNN 01-25-15

Salient to Investors:

Fareed Zakaria said:

  • Radical Islam is the default ideology of anger, discontent and violent opposition for a small number of alienated young Muslim men around the world. Only Muslims and particularly Arabs can cure this cancer.
  • In the 12 years between 9/12/01 and 2013, only 42 Americans have died on US soil due to terrorism versus 32,351 who died because of firearms, 33,783 who died in-vehicle accidents in one year.
  • Little has changed in Saudi Arabia – women still cannot drive, there is still segregation by sexes, the religious establishment is still very powerful, and the country still adheres to a very puritanical version of Islam.

Tony Blair said:

  • King Abdullah was a genuine reformer and modernizer. Saudi Arabia is genuinely part of the solution, and in many ways the heart of Islam.
  • Islamist ideology is growing and is the biggest security issue we face – we are at risk of several Afghanistans.

Martin Wolf at The Financial Times said:

  • Saudi Arabia remains is the central oil producer, the biggest exporter, the cheapest producer, and the only swing producer. Saudi Arabia is stable enough so can outlast everybody else at current oil price levels.
  • The oil glut will last for quite a few years.

Oxfam said the 80 richest people had $1.9 trillion while the poorest half had just $1.8 trillion in 2014, versus $1.3 trillion and $2.6 trillion respectively in 2010. The wealthiest 1% owned 48% of the world’s wealth in 2014 versus 44% in 2010.

David Leonhardt at The New York Times said US wages and incomes have gone virtually nowhere in the last 15 years: not paralleled since perhaps the Great Depression.

The Center for American Progress found that the bottom 90% of earners in Canada averaged over 1% annual income growth in the 2000s versus 2.5% annual in Australia and a decline of 1% annual in the US.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1501/25/fzgps.01.html

IMF downgrades global growth forecast – BBC News 01-19-15

Salient to Investors:

The IMF said:

  • The global economy will grow 3.5% in 2015 and 3.7% in 2016.
  • The boost from the sharp fall in oil prices will be more than offset by negative factors, including weaker investment.
  • The euro area recovery will continue at only 1.2% growth in 2015 and 1.4% in 2016.
  • China will slow to 6.3% growth in 2016 – versus an average of 10% over the three decades up to 2010 – but an orderly slowdown, though will have important effects in other emerging economies in Asia.
  • Russia will contract by 3% in 2015 and 1% in 2016 due to the fall in oil prices and the crisis in Ukraine and Western sanctions.
  • Nigeria will grow 4.8% in 2015.
  • The US will grow 3.6% in 2015 and 3.3% in 2016.
  • The UK will grow 2.7% in 2015 and 2.4% in 2016.

Olivier Blanchard at IMF said:

  • Deflation in Europe is not the kiss of death and won’t derail the recovery.
  • Many countries have recovered from the global crisis, notably the US, but countries with very high debt will take a very long time to rectify, especially Japan.
  • Things are improving though not as quickly as we would dream.

Read the full article at http://www.bbc.com/news/business-30876954

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Fareed Zakaria GPS – CNN 01-18-15

Salient to Investors:

Fareed Zakaria said:

  • The theory that “we fight them there so we don’t have to fight them here” is still wrong and would commit the US to a fool’s errand for decades. Cherif Kouachi, one of the Paris terrorists, testified that it was American intervention in the Middle East that caused him to become a jihadi. Robert Pape and James Feldman found that the vast majority of the terrorists behind suicide bombings from 1980 to 2009 were acting in response to American intervention and involvement in the Middle East rather than out of a religious or ideological motivation – the two spectacular Western plots after 9/11, the Madrid and London bombings, were specifically inspired by the invasion of Iraq.
  • The chance of a global recession in 2015 is greater than people think.
  • US economic prospects look good – PricewaterhouseCoopers predicts over 3% growth in 2015, the fastest since 2005, led by continuing falls in unemployment.
  • India looks good thanks in part to reform minded Modi and a large population of consumers. PricewaterhouseCoopers predicts a growth rate in 2015 that could rival China.
  • Indonesia looks good and has a large population of consumers.
  • Europe will continue to lag without needed reforms.
  • Japan is still in a bind despite Abenomics.
  • The big oil producers, especially those with large populations like Venezuela, Iran, Nigeria and Russia, will be the big losers.
  • The big wild card is will the price of oil continue to stay low?
  • Twice as many Jews left France for Israel in 2014 than in 2013.

Andrew Bacevich said that before Syria, the US launched interventions in 13 countries in the Islamic world since 1980.

Leon Panetta at the Panetta Institute said:

  • We are entering a more threatening and more dangerous period in the war on terrorism.
  • Paris was a French intelligence failure because they had these individuals on watch lists.
  • Europe is less aggressiveness than the US at going after these individuals when they return.
  • The presidency is not just about policy and substance, but also about the optics of leadership.

Ruchir Sharma at Morgan Stanley said:

  • The world was perilously close to recession in 2014 – only 2.6% growth versus the recession benchmark of under 2% growth.
  • Global recessions happen regularly – in the early 80s, two in the 90s, in the early 2000s, and the one that began in 2007.
  • We are due a global recession. The catalyst could be China, which contributed 38% of global growth in 2014, versus 20% from the US, and 13% from the EU. In 1994, the proportions were 8%, 33% and 26% respectively.
  • Persistent low oil prices can signal weak demand and could be a leading indicator of the next global recession.

Doug Saunders at The Globe and Mail said:

  • Muslim minorities in European countries have grown during the last 20 years to between 1%-5%. In places like France for over 50 years, to almost 8% percent of the population.
  • Muslims could peak around 10% in a couple of countries in Europe within the next 20 or 30 years, so there is no chance of a Muslim population takeover.
  • Immigrants are extremely loyal to the countries they live in and their institutions, even Muslim populations that are not integrating well in terms of their beliefs.  The Pakistanis of northern England have done very poor economically yet are by some measures more loyal to Britain and its institutions, including the military, than the Anglican population of Britain. The percentage of Muslims who value their religion above their country is about the same as for Christians in those countries.
  • Muslim communities in Europe, despite being marginalized economically and educationally, tend to be among the most contented with their lives of any minority group, often more so than the general population.
  • No-go zones are a fiction. I have never seen a prayer mat in any of the hundreds of hotels in Europe that I have stayed at.

Malcolm Gladwell said the cause of the dramatic long time reduction in NYC crime is more complicated than simply an attention to visible signs of disorder: one very successful policy is based on police establishing real ties with their communities, to win the trust of families.

Bernard Harcourt  at Columbia Law School said the huge drop in NYC crime is due to reversion to the mean – what goes up a lot goes down a lot. San Diego had a very different policing approach yet exhibited similar drops in crime rates. Harcourt said Times Square has changed not because of broken windows policing, but because of real estate redevelopment that was planned in the 1970s.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1501/18/fzgps.01.html

Zakaria: 2015 the year of America? – CNN 01-05-15

Salient to Investors:

Fareed Zakaria writes:

  • Hong Kong is far richer than the rest of China and a window into the country’s future.
  • The rise in US oil and gas production along with the slowing Chinese growth and appetite – a 0% increase in oil demand in 2014 versus 7% annual over the past decade – are the major reasons for the collapse in oil prices in 2014.
  • The drop in oil prices will shape the next chapter of Russia.
  • Producing countries like Russia and Venezuela will suffer from falling oil prices, while consuming countries like China, India and Indonesia will benefit – with one exception, the US, because it is both the largest producer and consumer of oil.
  • The trends look positive for America:
    • Lower oil prices could make combative countries more cautious.
    • The recovery looks sustainable and increasingly robust.
    • American tech companies continue to dominate the industries of the future.
    • American society remains vibrant, fueled by immigration.
    • American government has performed extremely well relative to Japan and Europe.

Read the full article at http://edition.cnn.com/2015/01/05/opinion/zakaria-year-america/index.html

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Euro Forecasters See Pain After Worst Year Since 2005 – Bloomberg 01-02-15

Salient to Investors:

  • Strategists expect the euro to decline to $1.18 by the end of 2015. Over 90% of respondents surveyed in December predict the ECB will expand the supply of euros by purchasing sovereign bonds in 2015, versus 57% in November. 44 of 59 analysts expect the euro to fall against the dollar – the median projection sees a 2.5% decline by the end of 2015. Options premiums on the euro are the most bearish since October 2013.
  • Kit Juckes at Societe General said the best thing the ECB can do is to try to engineer a weaker euro and predicts it to drop to $1.14 by end of 2015.
  • Michael Sneyd at BNP Paribas expects the euro to decline to $1.15 by end of 2015.
  • Jane Foley at Rabobank Intl want to see how this plays out, certainly through January, before drawing strong conclusions, and predicts the euro will end 2015 at $1.20 – so much is already in the euro price so it cannot fall much further.
  • Simon Derrick at Bank of New York Mellon said the euro will fall in 2015 to reflect the economy and monetary policy.

Read the full article at http://www.bloomberg.com/news/2015-01-02/euro-forecasters-see-pain-after-worst-year-since-2005.html

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Why The Stock Market Casino Is Dangerous: The Case Of Looney Tunes In the Sand Dunes – David Stockman’s Contra Corner 01-02-15

Salient to Investors: 

David Stockman writes:

  • Emerge Energy Services’s parabolic rise from its IPO and absurd valuation demonstrates the momo play by robots, day traders and flavor-of-the-month hedge funds in a stock market that has been destroyed by the Fed. Emerge is a poster boy for the irrational exuberance that has become institutionalized throughout the Wall Street casino, and a template for the deluge to come.
  • Fed policy has massively subsidized momo speculators firstly because they mostly operate either through the options markets or use heavy, short-term position leverage, and secondly because day traders need to take out downside insurance against their momo bets by buying puts on the S&P 500 – at dirt cheap premiums thanks to the Fed’s drastic financial repression and market manipulation.
  • The absurd doctrine of “wealth effects” and the implicit Greenspan/Bernanke/Yellen “put” has generated a toxic deformation in the risk asset markets – buying-the-dips has purged volatility from the broad market index almost entirely. Nearly 6 straight years of continuous vertical rise would never ordinarily happen in an environment of virtually no GDP growth in the US and Europe since 2007 pre-crisis levels, and earnings that face massive headwinds from global cooling, deflation and the heavy anchor of “peak debt”.
  • No financial market can be healthy and balanced without an abundance of well-capitalized short-sellers, now destroyed by financial repression and conversion to longs.
  • Credit bubble oil prices attracted enormous supplies of cheap debt and capital into high cost energy production, especially the US shale patch where sand dunes became the equivalent of gold mines.
  • At $50 per barrel, the 1600 rigs in the petroleum patch will drop to under 1,000 as contracts run off, and then fall further. Fracking demand is driven by new drilling and not current production so its fall-off in demand will be as severe.

Read the full article at http://davidstockmanscontracorner.com/why-the-stock-market-casino-is-dangerous-the-case-of-looney-tunes-in-the-sand-dunes/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Mid+Day+Friday

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Fareed Zakaria: American innovation is in trouble – The Washington Post 01-01-15

Salient to Investors:

Fareed Zakaria writes:

  • New studies suggest that American innovation is in trouble and that the glittering examples of Facebook et al are deceptive. We are eating the seed corn and not laying the groundwork for the next great tech revolutions.
  • Silicon Valley’s roots are deeply tied to government support – most of the legendary start-ups that fueled the computer revolution got off the ground largely because the military and NASA. GPS powers the information revolution and was originally developed for the military.
  • Federal funding for basic research and technology as a percentage of GDP is at the lowest level in four decades, while real start-up cultures are emerging in Sweden, Israel, India and China, which is on track to surpass the US in R&D spending.

Robert Litan writes:

  • The rate of start-up formation in the US has dropped from almost 15% of all US companies in 1978 to 8% in 2011, while business deaths have exceeded business births for the first time in three decades.
  • Tech is now dominated by older companies. The proportion of US companies at least 16 years old rose to 34% in 2011 from 23% in 1992. Historically, older firms are more risk-averse, rigid and incrementally innovative than younger firms.
  • The US should let in more talented immigrants – who are disproportionately more likely to start new firms – reduce regulations for starting a company, increase the ease of rasing money over the Internet, and maintain near-universal health care to allow people to risk leaving established companies.

Peter Thiel at Founders Fund says we do not live in innovative times – we have Twitter instead of flying cars.

Ajay Piramal says one of the reasons the US is so successful is that it constantly criticizes itself.

Read the full article at http://www.washingtonpost.com/opinions/fareed-zakaria-the-need-to-renew-american-innovation/2015/01/01/b0f0d864-913b-11e4-a900-9960214d4cd7_story.html