Thursday, January 30, 2014

Bob Janjuah worries explained

Just to recap the underlying worries I have, they remain: Global Growth – mediocre at best, in both EM (China, Brazil, Turkey, Indonesia and India – call it 50% of the world – are too big to ignore and stalling hard. They cannot survive the deflation that the eurozone and Japan especially are exporting to them considering their mixed combinations of heavy indebtedness, deficits, uncompetitive labour markets and in particular in the case of China, an FX regime that is hugely deflationary too) and DM (I fully expect the US to disappoint – again, just look at the PCE indicator that is flashing US DEFLATION, and the eurozone is flat at best for growth, has unsustainable debt dynamics and is also a major DEFLATION hot-spot). 

Furthermore, the disparity in wealth and incomes in the West, where the policies of the last five years have only really enriched the top 1% at the expense of the rest is, in my opinion, one of the most unpleasant and unsustainable developments in our societies; Global Demographics – extremely poor everywhere except perhaps India and sub-Saharan Africa – and China, Europe and Japan in particular are major concerns over and above the end of the US baby-boom era; Global Speculation – I live in central London and I can only say what I see; and Global Hope – at a very macro level policymakers were way behind the curve in the period 2004/05 into 2007/08, hence the bubble and subsequent crash, they got ahead of the curve late in 2008/early 2009, hence the recovery in markets, but now again look way behind the curve, persisting with a set of policies that have merely built up speculative excesses again and which are reliant on policymakers continually adding more fuel to the already blazing inferno.