Fareed Zakaria GPS – CNN 10-18-15

Salient to Investors:

Fareed Zakaria said:

  • In the late 70s and 80s, Russia invaded Afghanistan and intervened elsewhere amid praise that it was winning the Cold War. Like then, it remains a mistake to believe that activity is achievement, that every crisis can be solved by a major power. If Russia and Iran win in Syria they will inherit a sinking hotspot led by a minority regime.
  • A peak of 170,000 US soldiers in Iraq and nearly $2 trillion produced a humanitarian catastrophe in Iraq: 4 four million displaced civilians and 150,000+ dead. Libya is called a ‘battled-worn wasteland’, and Yemen’s civil war is tearing it apart. Be glad that Obama has chosen Eisenhower’s path to global power and not Putin’s.
  • Opportunities are more available to women in America because of the idea that anyone can succeed here.
  • The IMF predicts a 246% debt to GDP ratio for Japan in 2015, versus 105% for the US.

Anne-Marie Slaughter at New America said:

  • With 60%+ of women working, the American workplace no longer makes room for care giving.
  • Since the 1990s, only 20% of women are in senior management because they get shut out when they have kids and are the lead parent. While women’s roles have changed radically since the 1950s, men’s have not.

Andy Moravcsik at Princeton said:

  • Sweden and Denmark are better at giving parental leave for care giving than the US.
  • Opportunities are more available to women in America because of the belief that anyone can succeed here.
  • Americans believe that a man who becomes the lead parent has the same legitimate standing in society that a woman does. Men are trapped in a role where they have to work and not also be caregivers.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1510/18/fzgps.01.html

Fareed Zakaria GPS – CNN 08-30-15

Salient to Investors:

Fareed Zakaria said:

  • The US economy has recovered nicely.
  • A 2014 UCLA study found that many black and Latino students face almost total isolation from white and Asian students and middle-class peers.
  • Much more Saudi oil wealth has gone into pernicious causes over the last 30 years than Iranian oil wealth.
  • Tharman Shanmugaratnam says half of the Muslim population in Britain lives in the bottom 10% of its neighborhoods by income.
  • The UN estimates the average woman needs to have 2.1 children to maintain the population of a developed country. Every EU country is below that level, though France has one of the best rates in Europe. Demographers say that it is difficult to get people to have children using just financial incentives.
  • Pew predicts that by 2050, populations in Greece, Portugal and Germany will have dropped by double-digit percentages. The UN predicts over-65s in Europe will increase to more than 25% of the population by 2050, Japan’s will increase to more than 33%.
  • The US will be demographically vibrant and growing for decades. Pew predicts that America’s population will grow by 27% from 2010 to 2050 due to immigration and a relatively younger population. The CDC says the US fertility rate hit a record low in 2013.
  • The World Wildlife Fund says half of the earth’s wildlife has been lost in the past 40 years.

Elliott Abrams at the Council on Foreign Relations said:

  • Obama is turning away from America’s responsibilities around the world. Poland, Czechoslovakia, the Balkans, feel less safe facing Russia; Australia, Vietnam, South Korea, Japan feel less safe facing China; Israel, the Gulf Arabs feel less safe facing Iran.
  • The US is asking for nothing and getting nothing on human rights in the Iran and Cuba deals.

Peter Beinart at Haaretz, New America and CNN said:

  • The polls show Obama is much more popular around the world than George W. Bush, while America is more popular than it was.
  • The Iran nuclear deal is a major accomplishment akin to Nixon and China.

Meghan O’Sullivan at Harvard said:

  • Strategic restraint might make sense in a world where the US does not have much at stake, or US allies are active in promoting US interests, or where world order is self-perpetuating; but we don’t live in that world. International order is not in good shape and the Middle East is significantly worse off than 7 years ago.
  • The Iran nuclear deal has very real flaws; including the fact that Iranians get all their benefits up front in exchange for a promise to stick to the deal for a decade or longer.

Gideon Rose at Foreign Affairs said:

  • The international order is not fraying. The US is the world’s strongest power by leap years, with a defense budget equal to the next 7 nations combined. The US and its allies account for 75% of global defense spending. Core allegiances and alliances in the major industrial and economic centers are intact and thriving.
  • Much of the Middle East is no longer a core American strategic interest and US direct involvement there is not necessarily improving things.
  • The Iran nuclear deal is not great but is dramatically better than all the realistic alternatives.

General Stanley McChrystal said:

  • In combat, soldiers are much more frightened of the enemy than their sergeant.
  • You want personnel confident enough in their relationships and in what they do to be able to operate effectively.
  • Personnel must have confidence in the competence of their leaders, and more importantly their values.
  • The confidence of personnel is undermined when they see a difference between what senior management says it will do and what it actually does, or if they believe senior leadership is uninformed.
  • Key to being a leader is personal discipline and empathy.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://www.cnn.com/TRANSCRIPTS/1508/30/fzgps.01.html

Can Kickers United – Why It’s Getting Downright Hazardous Out There – David Stockman’s Contra Corner 08-22-15

Salient to Investors:

David Stockman writes:

The real danger comes from the official institutions who have lapsed into empty ritualism and contrivance while the global economy and financial system becomes more unstable by the day. No sane person would inject $95 billion of new debt into busted Greece, or consider another round of fiscal stimulus in Japan to add to their one quadrillion yen of debt, or fix China’s bankrupt local governments by swapping trillions of bank loans for equivalent mountains of new municipal bonds.

The Fed is still manning the emergency fire hoses despite the US economic ‘recovery’ being 74 months old and much longer than the post-war average. The real reason the Fed doesn’t raise rates is that it fears that its first increase in nearly a decade will upset Wall Street.

ZIRP is the mother’s milk of Wall Street speculators, who know that the Fed would never allow the money market to become illiquid or allow a temporary surge in the overnight rate to clear their speculation. No businessman with productive inventories would be foolish enough to fund his working capital in the overnight markets.

The FOMC telegraphs to traders exactly what it intends to do for months in advance, thereby removing risk entirely from the oldest sin of finance, borrowing short and investing long, creating an endless inflation of financial asset prices, and depriving the real economy of true risk capital.

The ratio of the market cap of the Wilshire 5000 to GDP is now 133%, higher than the 112% in the dotcom bubble and the 104% in the housing blow-off.

US households reached peak leverage in 2008, and are still at 180%, which is way above historically proven healthy levels. ZIRP merely subsidized the most imprudent of household borrowers and transferred income and wealth to borrowers and gamblers at the expense of savers and producers.

There is no evidence that real output and wealth increase faster at 2.0% inflation than they do at any inflation rate. The BLS has been under-measuring housing inflation since switching methodologies in the early 1980s in order to save money on indexed government transfer programs. Market rent has risen at a compound annual growth rate of 3.7% over the last 15 years versus 2.5% calculated by BLS.

Stephen D. Williamson at The FRB of St. Louis said:

  • Zero interest rates since 2008, designed to spark good inflation, have only produced the opposite.
  • The Fed’s “forward guidance” has been a muddle of broken vows that has only confused investors.
  • QE have at best a tenuous link to actual economic improvement, while there is no proven link between QE and inflation and real economic activity – QE has been ineffective in increasing inflation.

Read the full article at http://davidstockmanscontracorner.com/can-kickers-united-why-its-getting-downright-hazardous-out-there/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Saturday+9+AM

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Don’t Worry About the Bull Market; Worry About the Dollar: Richard Bernstein – ThinkAdvisor 06-22-15

Salient to Investors:

Richard Bernstein at Richard Bernstein Advisors writes:

  • The bull market is intact. Markets rise after the Fed starts raising as earnings trump rising rates, and there is no end of cycle behavior, like excessive leverage or a big buildup in inventories except for energy.
  • The MSCI European stock index is up 11% year-to-date, but only 5% in dollar terms.
  • Currency is the most important issue when investing globally: between 2002 and 2008 the decline in the dollar accounted for 80% of the gain in the Euro Stoxx 50 index for US investors.
  • The dollar rise since 2011 will continue so US investors should hedge this risk.
  • Bullish on South Korea, which is where Japan was 2 years ago. South Korea has terrible corporate profits and is slipping into deflation so has no choice but to depreciate the won.
  • China is at a competitive disadvantage because their currency is somewhat pegged to the dollar and their companies have a lot of dollar-denominated debt, so they are unable to depreciate and will lose market share.
  • India is unable to depreciate because of high inflation so will lose market share to Japan and South Korea.

FactSet predicts S&P 500 earnings will fall 4.7% in Q2, rise 2% excluding energy: for all of 2015 rise 1.6%, 8.2% excluding energy.

Bank of America Merrill Lynch says fund investors remain bullish on European stocks.

Read the full article at http://www.thinkadvisor.com/2015/06/22/dont-worry-about-the-bull-market-worry-about-the-d?eNL=55886aae150ba045336e3852&utm_source=earlywire062315&utm_medium=enewsletter&utm_campaign=earlywire&_LID=179068825

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Fareed Zakaria GPS – CNN 06-14-15

Salient to Investors:

Fareed Zakaria said:

  • The cold war between Russia and the West over Ukraine is worsening.
  • Saudi Arabia will not build a nuclear weapon whatever happens with Iran’s nuclear program because it cannot – oil is 44 % and manufacturing less than 10% of GDP. Saudi Arabia could not openly buy a nuclear bomb due to Western retaliation and interception. Pakistan is unlikely to sell nuclear bombs to Saudi Arabia for fear of jeopardizing its own future.
  • Saudi Arabia’s education system is backward and dysfunctional: ranks 73rd in math and science education v. Iran at 44th. Karen Elliott House says 1 of every 3 people in Saudi Arabia is a foreigner, 2 of 3 has a decent job, and 9 of 10 with private sector jobs are non-Saudi.
  • Saudi Arabia is no danger of collapse due to strong finances and smart use of patronage, politics, religion and repression.
  • The lesson of the last 10 years in Iraq and Afghanistan is that fixing the military side but not the political side is a mistake – the minute the US leaves or relaxes, the whole thing crumbles.
  • The UN estimates that the average woman needs 2.1 children to maintain the population of a developed country. Every EU country is below the 2.1 level.
  • Europe’s over-65s will increase to more than 25% and Japan’s to more than 33% of the population by 2050. Pew predicts double-digit percentage population drops for Greece, Portugal and Germany by 2050. France’s fertility rate is one of the best in Europe.
  • Pew predicts America’s population will grow by 27 percent from 2010 to 2050 due to immigrants, who tend to have more children than native-born Americans.
  • Japan expects to lose over 2 million people in the next 5 years, lose 20% of its population by 2050, and decline to 43 million people by 2110.
  • The US will be demographically vibrant and growing for decades.
  • Magna Carta was nullified in less than 3 months by  Pope Innocent III  at the request of King John.

David Rothkopf at Foreign Policy and Foreignpolicy.com said:

  • The latest addition of US troops to Iraq is the illusion of action, and a mistake – insufficient because it does not call for trainers to go out into the field with troops, which works best.
  • The emergence of Kurdistan as an entity will continue and ultimately be a good thing.  Iran have seized a big chunk of Iraq, which it will not return, and which the US won’t get back.

Richard Haass at the Council on Foreign Relations said:

  • Agree that the lesson of the last 10 years in Iraq and Afghanistan is that if you fix the military problem without fixing the politics behind it, then the minute the US leaves or relaxes the whole thing crumbles.
  • The Middle East conflict will worsen. The move to send additional troops to Iraq won’t succeed because it does not change any of the politics of either Iraq or Syria. It is a baby step and a consensus decision from people who know the policy is not working but reject doing anything dramatic or decisive. Incremental adjustments tend not to work and will be overwhelmed by events beyond our control.
  • IS will never be content until it has power over Saudi Arabia because it controls the two holiest cities of Islam.

Michael Porter at Harvard Business School said:

  • The US has become by far the lowest energy cost nation – oil and natural gas add at least $430 billion to the economy every year, or the equivalent of a large state. Low energy costs are revitalizing the US petrochemical and plastics industries – in an advanced industrial country, energy plays a large part, labor not so much.
  • US industrial electricity prices are half those of our major trading partners, gas prices a third.
  • The oil industry is in denial about the earthquake and water problems, which are significant, but is getting more able to control most of the problems, and at low-cost.

Michael Specter at The New Yorker said:

  • Luanda, Angola is the world’s most expensive city for expats because of oil – Angola is the second biggest center of oil in Africa after Nigeria. Angola oligarchs make Russian oligarchs look like pikers. Angola is a beautiful country with rich agricultural possibilities, an incredible coastline, but with very bad roads and infrastructure. The Chinese are building everything.
  • Every major city in the developing world and our part of the world has a huge discrepancy between very rich and very poor people.

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

at http://transcripts.cnn.com/TRANSCRIPTS/1506/14/fzgps.01.html

Zanny Minton Beddoes – Charlie Rose 02-10-15

Salient to Investors:

Zanny Minton Beddoes at The Economist said:

  • The economy’s fundamental drivers, particularly rapid technological change, means that the rewards disproportionately go to the top.
  • The latest IMF research suggests that you get stronger and more lasting economic growth in societies that are more equal.
  • The last time we had this huge a technological change – the Industrial Revolution – we also had huge changes in public policy.
  • The world has incredibly low interest rates and a big need for more spending on infrastructure so it is a no-brainer to do that.
  • India is the shining example of a country with remarkable economic growth and devotion to classic liberalism and to free markets.
  • A lot of China’s growth came from liberalization but more recently from debt-fueled investment binge. China is naturally slowing because it is richer and aging fast.
  • The US economy has accelerated in the last 6 months. Inequality and an aging population are challenges so rapid growth is going to be lower than it was 30-40 years ago.
  • Europe is still a mess. Japan shot itself in the foot with its consumption tax. The emerging world, including Brazil, is slowing.
  • The difference to the last time the Saudis let oil prices stay down for a while is that this time the shale investment time is much shorter than for traditional oil drilling. The oil market economics has shifted from one of OPEC domination to one that is supply and market driven.
  • Putin’s paranoia is under-appreciated as is the depth of his desire to remain popular.
  • Venezuela is headed for default quite soon.
  • The disproportionate losers from lower oil prices are also the tricky regimes, like Nigeria, Russia, Iran.
  • The short-term risk to the global economy is too much reliance on one engine, the US, an echo of the 1990s. Longer term, the risk is political economy fueled by stagnant living standards for the majority.
  • We are nearer the beginning than the end of this huge technology revolution.

Watch the video at http://www.charlierose.com/watch/60514294

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

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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Christine Lagarde downbeat on global economy – BBC News 10-02-14

Salient to Investors:

Christine Lagarde at the IMF said:

  • The global economic outlook is less positive than in April but is still in recovery, and improved from a year ago.
  • IMF growth forecasts for Hong Kong have not changed.
  • The financial crisis left more major scars and legacies that the economies have been able to deal and so the potential for growth is lower even for the medium term
  • The world risks long-term new mediocre, particularly in advanced economies with legacies of high debt and high unemployment and clouds in Ukraine and the Middle East.
  • The prospects for women integration in Japan and Korea are positive. The education of girls is critical for economic development.
  • The US has sufficient energy and confidence in the private sector to move the US economy forward. The US economy falls deeply but comes back more quickly than other economies.

Watch the video at http://www.bbc.com/news/world-us-canada-29469185

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