Fareed Zakaria GPS – CNN 11-02-14

Salient to Investors:

Fareed Zakaria said:

  • Tunisia is more developed, more urban, more literate, and more globalized than Egypt, and has a more diverse civil society, stronger labor unions, civic associations, professional groups.
  • Tunisia’s relative success suggests there is nothing inherent in Islam or Arab society that makes it impossible for democracy to take root there.
  • Islam has been compatible with peace and progress and is compatible with violence just like all religions.
  • The greatest problem with government regulations is not that they are good or bad, but that they are eternal – once in place, lobbies form to sustain them and so they are rarely modified or eliminated. The future has few lobbies for its cause.
  • Google says 92% of Turkey’s Internet users use social media versus over 40% of close to 50 countries.
  • Tehran is clean, bustling and everything works.

Tarek Masoud said Tunisia’s success and Egypt’s failure at democracy has less to do with the quality of its Islamists than with deep differences in their political environments.

Samuel Huntington said a country can only be said to be a consolidated democracy when there have been two peaceful transitions of power.

Sam Harris said:

  • 20% of Muslims worldwide have values relating to human rights and free speech that are really in zero sum contest with our own.
  • Jihad is not an invention of the 20th century. Islam has been spread by the sword for over 1,000 years.

Bernard-Henri Levy said:

  • The dispute between the Sunnis and the Shias in Iraq and Syria is not a dispute between Sunni and Shia but between democrats and non-democrats, between enlightenment and obscurantism, and a world battle, ideological battle.
  • Arabs and Muslims cannot continue to blame everything on America, which is not guilty of all the sins of the world.

Rashid Khalidi at Columbia University said:

  • The a Muslim or Middle Eastern problem will involve the US and other countries because it is partly due to Western intervention – the US invasion of Iraq created the situation.
  • The US destroyed the entire Iraqi the entire structure of government, more so than was done in Nazi Germany.
  • Iraq is a political problem in need of a political solution.
  • The US has to deal with Russia and Iran – Syria’s backers – in a rate politic, non-ideological fashion.

Larry Lessig at Harvard Law School said:

  • Candidates who wants to run for Congress have to raise an incredible amount of money – funded by a tiny fraction of America, say 0.05%. Akin to the two-stage process in Hong Kong. Candidates spend 30 to 70% percent of their time calling these funders, who are not the people, thus corrupting governance – Republicans and Democrats alike find it impossible to get what they want out of their government.
  • The problem is not the spending but the fundraising. Wall Street has taken the lead in funding candidates for Congress. Many funders are people who want special tax breaks or renewals of special tax breaks.
  • Simplifying the tax code or dealing with climate change or real health care reform is impossible until we change the way we fund elections.
  • Funding reform is seeing incredible progress, especially among Republicans who recognize the need to change to get back to a government that can actually work.

Anthony Bourdain said:

  • Iran was extraordinary, heartbreaking, confusing, inspiring, and very different from the Iran I expected.
  • Iranians were outgoing and welcoming to strangers to a degree matched in very few places, including Western Europe and allied nations.

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

at http://transcripts.cnn.com/TRANSCRIPTS/1411/02/fzgps.01.html

Dimensional Winning in Emerging Markets: Riskless Return – Bloomberg 07-08-14

Salient to Investors:

Karen Umland at the DFA Emerging Markets Small Cap Portfolio Fund is slightly overweight India, and had 15 percent of holdings in Taiwan, over 14 percent in South Korea, over 14 percent in China, and 9.2 percent in Brazil at the end of Q1. Umland dislikes Russia and Egypt because of lack of market transparency and trading volume. Umland and co-manager Joseph Chi say companies with very low profits and high relative prices are chronic underperformers.

Patricia Oey at Morningstar said limited variation in country and industry weightings can hold back a fund so the DFA fund may outperform at times, and underperform at other times.

Read the full article at http://www.bloomberg.com/news/2014-07-09/dimensional-winning-in-emerging-markets-riskless-return.html

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China Enters Nomura Danger Zone as Fed Tapers: Cutting Research – Bloomberg 07-04-13

Salient to Investors:

Nomura says:

  • China, Hong Kong and India are in a high-risk danger zone because their monetary policies have stayed too loose over the past 4 years.
  • The average ratio of domestic private debt to GDP across Asia had risen to 167 percent in 2012 and most of the region’s property markets are frothy. The debt ratio has increased by over 50 percent in Hong Kong and Singapore and between 30 and 40 percent in Malaysia, South Korea, China and Thailand.
  • Interest rates have been persistently below what economic models suggest, and even more so if the financial cycle is accounted for.
  • Indonesia is at the lower end of the high-risk zone, South Korea, Malaysia, Singapore and Thailand are in the middle, ahead of Japan. The Philippines and Taiwan seem the least prone to any economic crisis.
  • Investors will begin preferring sustainable expansion over fast growth once the Fed tapers.
  • Asian policy makers risk falling into the same trap as the US and Europe did prior to the global financial crisis and as Asia did in the 1990s: keeping policies too loose by focusing too much on the standard business cycle and low inflation and not enough on the financial cycle.

Charles Robertson et al at Renaissance Capital says Egypt has a 3 percent chance of losing democracy in any given year because its per capita GDP of $5,000 puts it in a similar position to Tunisia in 2003 or Turkey in 1975. A study of 150 countries with a population above 500,000 from 1950 to 2009 found that democracy is only immortal once income tops $10,000 per capita. Robertson said Egypt has energy to export but its high budget deficit and public debt ratios may worsen as newly elected governments may not feel comfortable reducing subsidies.

Zuzana Fungacova and Laura Solanko at the Bank of Finland and Laurent Weill at the University of Strasbourg found that from 2002 to 2010 bank market power has a significant impact on monetary policy effectiveness.

Adam Fremeth, Brian Kelleher Richter and Brandon Schaufele found that from 1991 to 2008 becoming the CEO a S&P 500 company increased their political contributions by 137 percent.

Julian Jessop at Capital Economics said the BOJ may replace the Fed as the world’s leading provider of liquidity as soon as Q1 2014. Jessop said the BOJ’s plans is yet another example of how global monetary conditions will remain loose even if the Fed tapers.

Jan Dehn at Ashmore Investment Mgmt said countries that have successfully transitioned to high income status have typically invested between 30 percent and 40 percent of GDP in infrastructure when their GDP per capita ranged from $2,000 to $15,000. Dehn said the average in emerging markets is currently 32 percent.

Silvia Del Prete and Maria Lucia Stefani at the Bank of Italy found that the number of women at the top is greater in banks belonging to major banking groups with larger and younger boards and in banks that are more cost-efficient – credit policies are more stringent when women are on the board, possibly due to their higher risk aversion.

Benn Steil and Dinah Walker at the Council on Foreign Relations say testing the law of one price, identical goods should trade for the same price in an efficient market – by The Economist magazine’s Big Mac Index is weak in that the absence of cross-border flows of burgers means prices won’t align internationally. They say that using the iPad mini is better because it is a global product that travels – they found no major violations of the law of one price in the global market.

Read the full article at  http://www.bloomberg.com/news/2013-07-04/china-enters-nomura-danger-zone-as-fed-tapers-cutting-research.html

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