Fareed Zakaria GPS – CNN 10-11-15

Salient to Investors:

Fareed Zakaria said:

  • We cannot solve Afghanistan without recognizing Pakistani army support for the Taliban. No counter-insurgency has ever succeeded where the rebels have a safe haven, so until this is dealt with, the Taliban will never be defeated. Pakistan pretends to help the US while supporting its most deadly foes.
  • Pakistan is a time bomb. It has one of the world’s largest armies, the fastest growing nuclear arsenal, and the most opaque. 5.5 million Pakistani children do not attend school. The US faces a strategic collapse as it withdraws forces from the region unless Pakistan’s military and its mindset are reformed.
  • Any US involvement in Syria has to be aimed at dislodging Assad from power, which would produce total chaos; viz. Iraq, Libya and Yemen.
  • Italy, France et al is the world’s greatest paradise: beautiful countries, amazingly rich, incredibly nice work rules, long vacations, ability to early retire. So why reform?
  • The Economist ranked the UK 1st out of 80 countries in the 2015 quality of death index, Taiwan 6th, the US 9th. Mongolia ranked 1st out of the low-income countries.
  • The US should abandon the outdated 9:00 to 5:00 work-week.
    • Henry Ford pioneered cutting back employees’ hours to make his workers happier and more productive.
    • One study found that people working 40 hours or less each week outperform on certain tasks those who work more than 55 hours per week.
    • A Stanford study found that the number of hours somebody works is not directly proportional to his output, while at 48 working hours, productivity falls.
    • Tony Schwartz says people work better in short bursts than long ones.
    • A 2014 Gallup survey found that American full-time workers averaged 47 hours per week, while almost 20% of Americans work 60 hours per week or more.
    • The OECD found that US workers worked more hours on average in 2014 than workers in many other countries, including the UK, Germany and Japan.
    • Alternet says white-collar knowledge workers have 6, not 8, hours of productive work in them each day.

Julia Ioffe at the Wall Street Journal said:

  • Putin is a tactician, not a strategist, but his economy is cratering and his military much weaker than the US military. Putin is moving into areas that the US has traditionally dominated; Iraq, Syria, Afghanistan.
  • Russian Muslims are all Sunni whereas Putin is aligning himself with an exclusively Shiite coalition and his Syrian move will inevitably blow up on him.
  • The US should take in many more refugees.

Bret Stephens at the Wall Street Journal said:

  • Putin is investing in Syria the way that Trump invests in real estate – with a very small investment for a potentially large payoff. His move into Syria helps distract the Russian people from its sinking economy.
  • Putin is a frog who jumps from lily pad to lily pad when he feels them sinking under his weight – from KGB agent to Leningrad technocrat to reformist president to patron of the Oligarchs.
  • Syria is a metastasizing cancer so the US has both a humanitarian and geopolitical interest. US no fly zones over northern Iraq in 1971 saved many Kurds and effectively helped create the Kurdish Autonomous Region – the single biggest American achievement in the Muslim world in the last 25 years.
  • Syria is many countries and just because we cannot solve it does not mean we cannot help its Kurdish areas become sustainable opposition.
  • The problem in Israel is the failure of leadership by Mahmoud Abbas, by Abu Mazen, in both tamping down and stoking violence.

Ian Bremmer at the Eurasia Group said:

  • Putin is in Syria to shore up Assad and not destroy ISIS. Taking casualties would be very unpopular in Russia.
  • Europe believes Syria is more important than Ukraine and that the only way to fix Syria is through Moscow, which could then ask Europe to back off sanctions. The cease-fire in Ukraine is working because Putin has got the paramilitaries there to back off their election. Europe and the US are moving farther apart every day.
  • Russia’s economy will contract by 4% to 4.5%, but its central bank has stabilized the rubble and during Putin’s tenure, per capita income has risen much.
  • 90% of Russians get their media primarily from state controlled TV with is pretty effective.
  • The problem with Syria is not Obama’s policy but that his rhetoric bears no reflection to his policy.
  • The Trans-Pacific pact is 40% of the world economy and a real pivot to Asia, the most important part of the world for the US – it is Obama’s most important successful foreign policy legacy. That TPP’s former architect Hillary Clinton is now opposed to it is astonishing.

Peter Beinart at the Atlantic said:

  • Putin’s move in Syria will increase terrorism against Russia by positioning it opposite the entire Sunni world and so cannot end well.
  • Obama is right not to get involved in Syria, and should not have done so in Yemen.
  • The rise in terrorism in Israel is a product of the fact that the two-state vision is weakening on both sides.

George Soros said the euro crisis has converted the EU from a voluntary association of free and legal nations, devoted to principles of democracy and human rights and willing to sacrifice some sovereignty for the common good, into an unequal relationship between creditors and debtors, who have difficulty meeting their obligations.

President Bill Clinton said:

  • The immigration/refugee problem in Europe can be turned into an opportunity: e.g. Syrians are overwhelmingly literate, productive, and historically secular, not super religious, and particularly not politically violent.
  • Ireland is the only European country that is younger than America and was growing like crazy, before its banking bubble, because it had many immigrants from Central and Eastern Europe, which made it even younger.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1510/11/fzgps.01.html

Fareed Zakaria GPS – CNN 03-08-15

Salient to Investors:

Fareed Zakaria said:

  • Netanyahu’s alternative to the Iran nuclear deal is divorced from reality – his predictions about Iran’s nuclear threat have been wrong for 25 years.
  • Without a nuclear deal, Iran in 10 years will have 50,000 centrifuges, massive stocks of highly enriched uranium, new facilities, thousands of scientists and technicians, and a heavy water reactor that can produce plutonium.
  • Graham Allison at Harvard said the West’s maximal demands and rejection of potential agreements in negotiations with Iran in 2003 to 2005 led to Iran going from being 10 years away from producing a bomb to only months away today.
  • Expect more trouble in oil-rich countries, like crackdowns, repression and chaos, a la Venezuela.
  • Barclays says Venezuela’s debt is even riskier than Greek debt due to the nationalization of private industries and its inefficient exchange rate policy. IMF predicts that Venezuela’s economy will drop 7% in 2015.
  • In the most developed continent in the world, Europe, nationalism, conflict and even preparations for war are back in play.

Moises Naim at Carnegie Endowment for International Peace says:

  • Venezuela’s elections are rigged, its judiciary run by the government, and its national assembly operates with no checks or balances.
  • Parliamentary elections won’t happen in 2015 unless the ruling party knows it will win, so expect potential riots over food shortages.

Mark Falcoff at American Enterprise Institute predicts a civil war in Venezuela because the government is polarizing and is not embarrassed to use violence.

Anne-Marie Slaughter at New America said:

  • No Iran nuclear deal would be the worst outcome because it will be seen as having been blocked by the US at the behest of Israel and the coalition to keep sanctions on Iran will fall apart as other nations will lift their sanctions, the US will be stuck with its, and Iran will progress towards a nuclear weapon.
  • The Nemtsov demonstration shows that Putin is again facing significant demonstrations at home.

Joseph Nye at Harvard said:

  • The Middle East is going through the equivalent of Europe’s 30-year war, with religious divisions, state divisions, and non-state groups all battling: it takes 2 or 3 decades for these things to work themselves out. We cannot manage this situation any more than we could have managed the French Revolution after 1789.
  • Russia is in serious decline. It is a one-crop economy, with the terrible demographic problem of fewer and fewer Russians – the average Russian male dies at age 64. Russia has rampant corruption so any attempt to reform it is blocked.
  • Declining societies are often more dangerous than rising ones – Russia is more dangerous than China. Austria and Hungary were the only major powers that really wanted WW1 because they were both in decline.

Bret Stephens at the Wall Street Journal said:

  • There is no zero hour in diplomacy, so if the current Iran nuclear deal falls through, people will regroup and rethink and with oil at half of what it was when negotiations began, more economic pressure on Iran will make them rethink.
  • The Sunset provision telling the Iranians that in 10 years they are free and clear to build a nuclear weapon is a tremendous defect and shows that the West continues to move towards the Iranian position.
  • The nuclearization side of Iran’s program only stopped in 2003 because it found itself having to choose between a nuclear program and keeping its regime.
  • Iran is economically vulnerable but is winning everywhere it looks, throughout the Middle East, helped by an absence of American will to defend US interests in Syria, Yemen, and Iraq.
  • Many of Putin’s political opponents have met untimely deaths. When Russians start paying attention they will realize that their enemy is not in the West but in the Kremlin.

Peter Beinart at City University of New York said:

  • Whether oil prices stay low or stay strong, it would be impossible to return to the current sanctions’ coalition, build a much stronger one, or retard the progress Iran will make in the interim.
  • Iran has a very nasty, brutal, malevolent regime but it is not ISIS and is a country with the capacity to become a stable democracy – 20,000 Jews now live in Iran with 11 functioning synagogues. Most Americans believe that Iran and ISIS are dissimilar threats to the US.
  • Russia is a brutal regime.

Hans Rosling at Karolinska Institute said:

  • In the last 20 years, the percentage of people living in extreme poverty in the US and Sweden halved.
  • 80% of the world’s 1-yr-old kids have got measles vaccines.
  • The most important change in the world is the size of families, and follows child survival, education for girls, getting out of poverty.
  • Europe’s family size has gone from 6 in 1800 to below replacement level today and its population is now decreasing even despite immigration. Asia and America’s family sizes have fallen to 2, and half of India has 2 children or less. Africa is down to 4.5.
  • The UN predicts that by 2050, Europe’s population we be the same, America’s almost the same, and both Asia and Africa will increase 1 billion.
  • By 2100, the populations in America and Europe will be the same, there will no more increase in Asia, and two more in Africa. There will be twice as many people in Africa as in the Americas and Europe combined, and 80 percent of the world population will live in Asia and Africa.

Peter Diamandis and Steven Kotler said:

  • 1,000 years ago you had to be the king or the queen to affect a country or region, 100 years ago you had to be the industrialist or rubber baron, and today anyone can.
  • The 1.8 billion people online in 2010 will increase to potentially 7 billion in the next 5 years.
  • Twitter and apps democratize the power for anybody to make a living
  • $15 billion in 2015 in crowd funding will increase to $100 billion.
  • What matters in successful entrepreneurship is how big is the idea, because everything else is basically the same.
  • To become a billionaire, help a billion people.

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

at http://transcripts.cnn.com/TRANSCRIPTS/1503/08/fzgps.01.html

Japan’s Recession Is Worse Than We Thought—but Abe Will Still Win Big – BloombergBusinessweek 12-08-14

Salient to Investors:

  • Taro Saito at NLI Research Institute said the latest economic report reflects a pretty bleak picture of Japan’s economy.
  • Jeff Kingston at Temple University Japan said Abe is fortunate enough to be up against a politician who is extremely uninspiring and who represents a party not ready for prime time. Kingston said every one of Abe’s signature policies is overwhelmingly opposed by the Japanese, but he is likely to cruise to victory anyway because there is no viable alternative.
  • Viktor Shvets at Macquarie Securities said the opposition is completely unpopular and almost any policy and almost any politician would be able to win.

Read the full article at http://www.businessweek.com/articles/2014-12-08/japans-unpopular-premier-seeks-a-popular-mandate#r=lr-sr

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Goldman Sees Global LNG Projects at Risk as Demand Growth Slows – Bloomberg 10-01-14

Salient to Investors:

Mark Wiseman et al at Goldman Sachs said:

  • LNG projects in Africa, Canada and Australia face delays or cancellations as global demand slows, US output increases, nuclear reactors restart in Japan, China’s success in shale-gas E&P, and economic conditions in ASEAN.
  • Global demand will compound at 5% annual by 2020, and 4% annual by 2025.
  • The window for US LNG is limited and the US will not be spared from the pull-back.
  • Papua New Guinea has the lowest risks as it expands LNG production.
  • Overseas, Papua New Guinea and East Africa may be the best placed regions to compete on cost competitiveness, while the industry has renewed its focus on capital discipline.
  • Expect strong demand growth in Asia led by China and ASEAN nations – due to strong economic growth, urbanization, and declining local gas supplies – with modest growth from India, South Korea and Japan.
  • China is driving increased gas use, especially in residential and industrial consumption, and transportation. However, gas-fired power generation capacity is not a high priority in China given the lack of competitively priced supply compared with other feedstock.
  • LNG demand in Thailand, Singapore, Philippines, Indonesia, and Vietnam will continue to grow.
  • Read the full article at http://www.bloomberg.com/news/2014-10-02/goldman-sees-global-lng-projects-at-risk-as-demand-growth-slows.html

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Apple Looks to Status-Hungry Vietnam for Growth: Southeast Asia – Bloomberg 07-16-14

Salient to Investors:

  • Tim Bajarin at Creative Strategies said one of Apple’s biggest moves is in Southeast Asia, given Android has passed Apple in smartphones and has made huge strides in tablets in 2014.
  • Gartner said Android smartphones comprised 78 percent of the global market in 2013 versus 66 percent in 2012, while iPhone was down to 16 percent from 19 percent the year before. Apple’s share of the global tablet market fell to 36 percent in 2013 from 53 percent in 2012 while Samsung’s rose to 19 percent from 7 percent the year before.
  • Lam Nguyen at International Data predicts Vietnam smartphone sales will increase 56 percent in 2014, and iPhones are a relatively affordable status symbol.
  • Matthew Crabbe at Mintel said increasingly, the battle for brand loyalty is shifting to Southeast Asia’s growing consumer economy, whereas China, though a big market, is also a competitive and maturing market.

Read the full article at http://www.bloomberg.com/news/2014-07-15/apple-looks-to-status-hungry-vietnam-for-growth-southeast-asia.html

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Pimco Says External Growth May Lift ‘Not Stellar’ Asia – Bloomberg 12-17-13

Salient to Investors:

Ramin Toloui at Pimco said:

  • Asian growth is stabilizing but not stellar but may receive a boost in 2014 as developed markets accelerate.
  • Asia’s trajectory will continue to be shaped critically by the growth path in the U.S. and Europe
  • China’s growth in the next decade requires a rebalancing of the economy toward household demand, but near term, its performance will be dominated by the dialing back and forth of the credit conditions by policymakers.

Robert Mead at Pimco said limited evidence of any non-mining investment, except in housing, means Australia’s growth outlook is weak, and recently announced cuts in manufacturing will also hurt growth in the next few years. Mead expects the Australian dollar to depreciate further.

Economists forecast 4 of Asia’s 5 largest economies outside Japan are slowing as regional expansion stalls at 6.23 percent for a second year.

Read the full article at http://www.bloomberg.com/news/2013-12-17/pimco-says-external-growth-may-lift-not-stellar-asia.html

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Irrational Exuberance Overtakes Asia – Bloomberg 12-12-13

Salient to Investors:

William Pesek is  writes:

The “Greenspan put” that flooded markets with cash whenever things got dicey has become the default position in Washington, while in Asia there is an even more dangerous escalation of this policy in papering over cracks in economies that desperately need tougher, structural reforms.

Indian stocks have hit record highs, everyone is talking about India turning the corner, despite nothing really changing from 3 months ago when the rupee was plunging to record lows, politicians fumbled at every turn, talk abounded it would become the first BRIC to have its credit rating cut to junk. India’s current-account deficit is still a danger, just temporarily disguised by a charismatic new central banker. India remains politically corrupt, and the odds are that the BJP is no more a force for change than it was in 2004.

In Japan, the Nikkei 225 Stock Average is up 47 percent despite not one of Abe’s restructuring pledges being fulfilled. Japan is just as heavily regulated, uncompetitive and devoid of innovation as it was the day before Abe came to office. All that is new is a stronger punch recipe. Japan has an overpriced, unproductive and shrinking workforce, not to mention an economic structure geared for success in the 1970s.

PBC Governor Zhou Xiaochuan is deluded in believing China that can grow close to 8 percent a year, no matter what Communist Party leaders do or don’t do. President Xi Jinping’s vague pledges to let markets play a bigger role in the economy has made him seem like a Chinese Margaret Thatcher. Yet as China ends a crackdown on fraud and clears the way for over 700 companies to sell shares, the coming boom in IPOs will benefit from a kind of reform halo effect.

The policies of central bankers in China, India and Japan is no replacement for real reforms, like curbing corruption, lowering trade barriers, creating jobs, encouraging entrepreneurship, building social safety nets, promoting sustainable development and reducing their own role in the economy. Monetary policy can cushion the process of fixing flaws in economies, but it is no substitute.

America’s Greenspanization unfolded at a time in the 1990s of relative stability in a very mature economy. Asia’s Greenspanization is happening far too early in the development cycle, and much too broadly. Evidence of governments letting central bankers do their jobs can be found in Indonesia, Malaysia, the Philippines, South Korea, Thailand and Vietnam.

Read the full article at http://www.bloomberg.com/news/2013-12-12/irrational-exuberance-overtakes-asia.html

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Gen Re’s Gilbert Says Fed Sets Up Stocks for a Decline – Bloomberg 12-03-13

Salient to Investors:

John Gilbert  at General Re-New England Asset Mgmt, a unit of Berkshire Hathaway, said:

  • Fed policy has lifted stocks but has created systemic risk in the world financial system for which they take little responsibility, because what happens outside the US is not their assignment. A slowdown in Asia contributed to Russia’s default in 1998 and triggered the Long Term Capital Management meltdown, which in turn disrupted stock markets.
  • Twitter is an example of euphoria as it is valued at over $20 billion without having reported a profit and gravity wins in time. (The average estimate of Twitter underwriters Goldman Sachs, Deutsche Bank, JPMorgan Chase and Bank of America predicts Twitter will trade around $43 a year from now. )
  • Low interest rates have led companies in emerging-markets to borrow in dollars – leverage at Asia ex-Japan corporations is at the highest level since the late 1990s financial crisis there. Weakening currencies in Russia, Brazil and other nations this year may be a sign of trouble ahead.

Laurence D. Fink at BlackRock said in November that the Fed’s bond-buying program could be creating a bubble. David Einhorn said the Fed stimulus is like eating too many jelly doughnuts.

Read the full article at http://www.bloomberg.com/news/2013-12-03/gen-re-s-gilbert-says-fed-sets-up-stocks-for-a-decline.html

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Xi Jinping Overreaches in the East China Sea – Bloomberg 11-28-13

Salient to Investors:

William Pesek writes:

  • China’s declaration of a vast air defense identification zone belies all the talk of its peaceful, magnanimous rise as a world power. A tiny accident or miscalculation in the skies above the disputed islands could easily spiral out of control, dragging Washington into a clash that would shake the global economy.
  • Xi may be especially willing to risk a confrontation with Japan in order to distract opponents of his proposed reforms, as well as ordinary Chinese who are growing restless over pollution, income inequality and official corruption.
  • Abe is an unapologetic revisionist who remains intent on whitewashing Japan’s WWII aggression, including the government’s role in keeping military sex slaves; flexing Japan’s muscles in Asia; and perhaps revising its pacifist constitution.
  • In addition to Japan and Korea, China’s air zone is sure to worry Brunei, Indonesia, Malaysia, the Philippines and Taiwan, all of which are embroiled in territorial disputes with Beijing.
  • China took a big hit abroad for its initial $100,000 aid offering to the typhoon-devastated Philippines, so its inflammatory new policy will only further alienate neighbors in a region it’s seeking to woo away from the US.

Read the full article at http://www.bloomberg.com/news/2013-11-28/xi-jinping-overreaches-in-the-east-china-sea.html

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