Fareed Zakaria GPS – CNN 01-03-16

Fareed Zakaria said:

Trade accounts for 23% of the US economy vs. 71% in Germany.

The big trend in 2016 will be continued weak oil and commodity prices: the last dramatic decline of oil resulted in the collapse ofdemothe Soviet Union.

The stock market under Obama has compounded at nearly 14% a year but this cannot continue because we are overdue a recession, China is in a recession, Europe is going nowhere, and the oil-producing emerging markets have fallen off a cliff. At the end of the day the US always muddles through and looks better than everybody else.

In Rwanda, women comprise 64% of the parliament, 50% of the Supreme Court, 50% of the Cabinet.

Angus Deaton and Anne Case found that over the past 15 years, middle-aged US whites died in increasing numbers; caused primarily by suicide, alcoholism, and drug overdoses, partly because doctors and drug companies were far too eager to prescribe drugs. The case is worse for those with a high school diploma or less. Jeff Guo at the Washington Post said this cohort is largely responsible for Trump’s lead among Republican candidates.

Carolyn Rouse at Princeton said that non-white US groups might have lower income, standard of living, and social status expectations, while blacks cope with disappointment through family, art, protest speech, and religion.

WHO says 663 million people still have no access to safe, clean drinking water. UNICEF says water-borne illnesses kill nearly 1,000 children every single day.

Ian Bremmer at the Eurasia Group said:

At the end of 2016 the trajectory of US-Iranian relations will be better than US-Saudi relations.

To resolve Syria requires leadership, people who actually care, and the ability to coordinate, all of which are lacking, so we will be much farther away from a federated Syria in 2016 than we are in 2015.

Weak oil prices puts Middle East countries under much internal pressure, and they will more likely play nationalism which does bodes ill for peace in the region.

It’s either Cruz or Rubio for the Republican nomination. 2015 was the year of Trump, but 2016 will not be. Middle class anger is insufficient to get Trump the nomination: he is going after the losers, who historically in the US do not vote.  Hillary has no serious challenger for the Democrats. Who wins is a coin flip right now.

Expect many geo-political fat tails to impact the stock market, and we are due a recession. China is the big mover: the most volatile, the most uncertain, and the country with by far the most tools to kick the can down the road – and they want to.

Richard Haass at the Council on Foreign Relations said:

Weak oil prices will last through 2016 – excepting major instability involving Saudi Arabia – hurting oil producers, Africa, and Latin America, but a boon to India though not China, which has internal economic problems adjusting its economic model. Weak oil prices will be a mixed blessing for the US but a major blanket on world economic growth, feeding political uncertainty.

Saudi Arabia is the most underrated global risk because of weak oil prices. Yemen is the Saudis’ Vietnam, there are simmering rivalries inside the Saudi royal family, and the beheading of Sheikh Nimr has poisoned the already terrible relationship with Iran while exacerbating the Saudi position in Bahrain.

We are seeing elements of a “Thirty Years War” in Syria. ISIS will be rolled back a little in Iraq but not Syria, and it sees Saudi Arabia as an extremely ripe target.

On the Democratic side, Hillary will prevail but not easily.

In 2016, we have a good chance of passing the Transpacific Trade Partnership with the benefit of Speaker Ryan’s ability to get a budget deal. 2015 ended positively with the US showing the world it can function sometimes.

Anne-Marie Slaughter at New America said:

Expect a settlement of the Syrian civil war in 2016 resulting in a ‘federated Syria’ where the Kurds, Sunnis and others effectively have their own regions, but for Turkey this presents a huge problem. Russia will play nice because of both oil prices and its inability to handle rising casualties in Syria. Europe is completely focused on a settlement because of the refugee crisis, and everybody knows we have to solve Syria to be able to fight ISIS.

It will be a Clinton beating Cruz presidential election because the worse the world becomes, the more people want a President who knows the leaders and who projects competence. A Cruz-Clinton election is good for America in the world because it is between a woman and a Hispanic man.

The Transpacific Trade Partnership will happen in 2016 because it will be seen in more a security context than an economic context, thanks to ISIS and China’s maneuvers in the South China Sea.

The US dollar will rise and rise due to China’s instability, the euro, and the eurozone crisis.

Mariana Mazzucato at the University of Sussex said:

The narrative about Steve Jobs and Apple misses the fact that every technology that basically makes an iPhone smart was publicly funded, including the Internet, GPS, touch screen display, and Siri.

In industry after industry, key basic innovations were publicly funded, not indirectly like with tax incentives, but with basic research, applied research, and early stage, long-term financing. Most venture capitalists want to exit in 3 or 5 years versus the Death Valley phase for many innovative companies that can last 10 to 15 years. There is plenty of finance available, but not the right kind of finance for innovation.

The government has financed many winners, including biotechnology where the NIH has spent $900 billion since the 1930s on the basic technology. Private companies basically surfed this wave, which is today missing in the green tech industry.

Venture capitalists know that for every success there are 8 or 9 failures. Unlike public investors, private venture capital gets to reap the winners to cover the losers. Tesla received approximately the same public funding as Solyndra, yet gained massively for private capital, whereas the latter was written off by taxpayers. Israeli government investments take royalties through their public venture capital fund. In the US we see this as socialism.

Google, whose algorithm was funded by the National Science Foundation, Apple, Amazon, et al, pay little tax, despite tax rates that have fallen dramatically. NASA, founded when the top marginal rate was 93 percent, is not allowed to make money, yet SpaceX and Galaxy make use of its publicly funded infrastructure for free.

 

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ , listen at http://podcast.cnn.com/fareed-zakaria-gps/episode/all/TkwD3eujmTzNlz/fzgps-2015-12-20.html or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1601/03/fzgps.01.html

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The Social-Media Bubble Is Quietly Deflating – Bloomberg Businessweek -7-16-13

Salient to Investors:

CB Insights said social-media companies drew only 2 percent of the venture capital headed to Internet-based enterprises last quarter, versus 6 percent each quarter in the 2-year stretch that ended in mid-2012. Anand Sanwal at CB Insights said big data and cloud companies are grabbing the attention of venture capitalists, while boring companies that make tech products to sell to businesses seem to be in ascendance.

Venture capitalists invested $3.625 billion in Internet companies last quarter, near to what was invested in Q3 2011, and much higher than before then.

Read the full article at  http://www.businessweek.com/articles/2013-07-16/the-social-media-bubble-is-quietly-deflating#r=rss

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How Halsey Minor Blew Tech Fortune on Way to Bankruptcy – Bloomberg 05-31-13

Salient to Investors:

Halsey Minor sold  CNET Networks for $1.8 billion in 2008 and 5 years later has filed for personal bankruptcy thanks to bad bets on real estate, horse farms, start-up investing, and other ventures that took him out of his technology comfort zone.

Read the full article at http://www.bloomberg.com/news/2013-05-30/cnet-founder-minor-files-for-bankruptcy-after-selling-art.html

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Private Equity Flees Clean Energy as Investment Falls – Bloomberg 01-15-13

Salient to Investors:

Private equity companies and venture capitalists reduced renewable-energy investment to the lowest since 2006.

Vinod Khosla at Khosla Ventures said all the fashionable VCs have exited, and the number of new businesses is smaller. Ethan Zindler at New Energy Finance said venture investors in early stages do not have the same access to capital they did 5 years ago.

Alan Salzman at VantagePoint Capital Partners said the level of activity by corporations has kept growing at a very significant rate. Salzman said it all starts with the IPO market and the M&A market, and markets have been discouraged by the poor performance of biofuel IPOs and the solar wars with China.

Warren Buffett’s MidAmerican Energy Holdings will build two large solar farms in California, and formed a unit in 2012 dedicated to its wind and solar holdings.

Ravi Viswanathan at New Enterprise Associates said investors are shifting away from solar manufacturers into other sectors of the industry, away from pure energy generation and manufacturing-intensive businesses to sub-industries like software, networking, monitoring, and financial services.

Wal Van Lierop at Chrysalix Energy Venture Capital says we are going through a repositioning of cleantech, with the big sectors including solar, wind and LEDs being consolidated.

 Read the full article at http://www.bloomberg.com/news/2013-01-15/private-equity-flees-clean-energy-as-investment-falls-energy.html.

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European Investors Put Adventure Back in Venture Capital – Bloomberg 11-08-12

Salient to Investors:

The European Private Equity & Venture Capital Assn said European venture firms raised 50 percent more venture capital than in 2010.

Lars Hinrichs at HackFwd  said there are more angel investors than startups in London and Berlin – we have too much money in seed and late-stage investing.”

Carlos Eduardo Espinal at Seedcamp said eastern European entrepreneurs come from a legacy of highly technical academic institutions and the quality of engineering talent is extremely high.

Goldman Sachs said Turkey will grow by 5.5 percent in 2013.

Giuseppe Zocco at Index Ventures said bargains will disappear as venture firms fan out to discover obscure companies – there aren’t a lot of secrets.

Jason Mitura, CEO of Viewdle when Google bought it, said it would be very difficult in the US to find the caliber of talent in Kiev, at any price point.

Read the full article at http://www.bloomberg.com/news/2012-11-08/european-investors-put-adventure-back-in-venture-capital.html