The Great Convergence And What It Means To Investors – Seeking Alpha 01-18-13

Salient to Investors:

Nicholas Pardini at Nomadic Capital Partners writes:

  • US and European stocks are no longer the safest bets. Investors should expect subpar real returns from the US economy and positive long run returns from emerging markets.
  • The biggest economic trend of the 21st century is the global convergence of living standards, with a growing global emerging market middle class. Currency debasement, mismanaged government fiscal issues, increased corruption, high consumer debt, cultural malaise has caused a decline in wealth in Western nations.
  • Emerging East Asia consumers have more money to buy basic luxuries so expect high growth for decades to come – cf the US between 1865-1929.
  • Commodity exporters such as Canada, Australia, New Zealand and Chile will benefit from the demand on raw materials coming from resource poor countries such as China and India.
  • With large reserves of natural resources such as copper and oil, emerging Latin American nations have a strong possibility of performing on par with their Asian competitors.
  • Western consumers, choked by high debt, have lost their discretionary incomes, aggravated by the Fed’s continuous debasement of the US dollar. Real wages will continue to fall.
  • Growth in emerging markets is sustainable because it is based on savings and capital investment, but growth in the West is untenable due to its basis on debt and government spending.

Read the full article at http://seekingalpha.com/article/1120241-the-great-convergence-and-what-it-means-to-investors?source=email_macro_view&ifp=0.

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Stocks Are the New Bonds: Goldman Sachs – CNBC.com 12-13-12

Salient to Investors:

Peter Oppenheimer at Goldman Sachs said:

  • Quantitative easings have left little value in the credit markets, so investors should look for returns in European equities over bonds.
  • The STOXX Europe 600 could see annual returns of more than 7 percent despite stagnation in the euro area.
  • Because of a net absence of net flows into the equity market, particularly in Europe, equities have become almost an orphan asset class. As more central bank liquidity comes into the global economy, and because there is little value left in fixed-income markets, equities will benefit by default.
  • The current rally in European stock markets will continue strongly in 2013 because valuations are attractive and profits will grow through 2013 – the STOXX 600 outperformed U.S. markets in 2012 despite poor earnings due to their attractive valuations.
  • Look for companies with high-yields and strong balance sheets. Likes growth stories, which are scarce. Luxury goods, autos, insurance, and media will outperform in 2013.
  • The global economy will grow 3.3 percent in 2013 – Europe’s corporations are well-levered and will see top-line growth and overall profit growth of 9 percent.
  • Top pick for 2013 is the Japanese TOPIX index, with returns of 20 percent front loaded in half1,dependent on further easing by the BoJ.
  • Latin America will be relatively weak and will underperform in 2013.
  • The U.S. will do quite well as it’s more fully valued than other equity markets.

 Read the full article at http://www.cnbc.com/id/100309858