Will Goldman’s new BRICwork stand up?
Jim O’Neill, the Goldman Sachs economist who coined the term BRICs back in 2001, is adding four new countries to the elite club of emerging market economies. But does his new edifice have the same solid foundations?
In future, the BRIC economies of Brazil, Russia, China and India will be merged with those of Mexico, Indonesia, Turkey and South Korea under the banner “growth markets,” O’Neill told the Financial Times.
Hmmm. Doesn’t quite grab you like BRICs, does it? The Guardian helpfully offers an amended branding banner of “Bric ‘n Mitsk” (geddit?). But which ever way you cut it, it’s hard to see a flood of investment conferences and funds floating off under the new moniker.
Ten years ago, Goldman had this field to itself. Now more and more acronyms are being bandied around by banks seeking to pique investors’ appetite for higher returns.
Goldman has already launched the N-11, or Next Eleven countries, and other contenders include the VISTA economies (Vietnam, Indonesia, South Africa, Turkey and Argentina), the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) and the EAGLES (Emerging and Growth-Leading Economies).
So far, none of them have really caught on. One thing you can bank on: the term BRIC will still score highly in any tally of the millions of words that will issue forth from Davos next week.
Italian CEO says retail banks need time to adapt
Yesterday I spoke to Antonio Vigni, CEO of Siena-based Banca Monte dei Paschi di Siena, the world’s oldest bank. Below are two video clips of Vigni answering questions on lending in Italy and the hot topic of regulation.
In this first clip, Vigni says bank lending is holding up in Italy and he sees improvement.
In the next clip, Vigni says that retail banks may need more time to adapt to the brave new regulatory world.
Banks to be disintermediated? or is that just replaced?
Is it actually distintermediation if the thing being disintermediated has ceased to function?
Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.
Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.
But, like Steve Schwarzman of Blackstone earlier in the week, he maintained that lower asset prices for deals originated now would help returns.
“You might be able to buy it with less leverage and you can still get the same returns because of the purchase price you are paying.”
I hope he means the same returns as old-fashioned vintage deals rather than the returns of 2006/07 originated ones.
Schwarzman earlier in the week on same subject:
Global Barter Stimulus for Global Economy
The world is experiencing an unprecedented global financial and economical crisis, which is threatening to lead many countries into a deep depression. All the major economical powers are seriously affected hence each country has earnestly rushed to devise an immediate stimulus program to pump her economy to avoid a depression. No doubt, any stimulus is better than no stimulus but the effectiveness of each stimulus program seems to be unpredictable due to the global scale of this current economical crisis and the complex interdependency of all the major economical powers, namely the major international trading partners. In this paper, the author thinking outside-of-a-box is proposing a global cooperative stimulus program to bring the global economy back to vitality. The central thesis of this program is to achieve the following two main objectives immediately and cost-effectively. The first one is to eliminate the credit problem now infested in global and domestic financial institutes, which is stifling all economical activities, most critical of all, the international and domestic trade and property financing. The second objective is to restore confidence quickly and globally to revitalize the international trades among major trading countries, which is the essential means to stimulate the economy of all trading partners, hence the global economy. The author calls this proposed program, The Global Barter Stimulus Program. (GBSP for short)
The GBSP proposes that the major international trading countries immediately convene to develop a stimulus program by simply pledging to barter goods and services from each other in a magnitude (dollar value) equal or more than 110% of the 2007 trading figures. This government-backed pledge has three goals:
1. Stimulate a growth economy for each participating country by mutual support,
2. Stabilize jobs in manufacturing and services by providing credit and liquidity to finance manufacturing and trades, and
3. Restore confidence in businesses, home buyers and consumers worldwide by engaging in a cooperative global economical stimulus program.
Like many international cooperative programs, there will be differences in opinions rooted in self-interest. However, this global economical crisis is so severe; hopefuly many countries would be more willing to participate to share the benefit of a rapid global recovery than to risk a long self-destructing economic scenario. In fact, this crisis may be an opportunity to bring countries together to soften the resistance of dealing with some of the global issues such as conservation of energy, global warming, product safety, work environment, epidemic disease control, etc. etc. United States being the biggest international trading partner is in a right position to initiate and lead this Global Barter Stimulus Program, which can be a more effective High Level Governmental Solution to the world’s economy than engagement in micro-managing various domestic stimulus packages.
The GBS program can be kicked off via a summit meeting of the top fifteen trading partners in the world.
( http://www.census.gov/foreign-trade/stat istics/highlights/top/top0811yr.html )
The organizing country prepares and sends an agenda and a proposed preliminary document of understanding on how to participate and administer the GBS program (GBSP Document) to all invited participants. Each participating partner may bring a delegate including other not invited country/partner as an observer.
Prior to the meeting each invited GBS partner/country is requested to prepare a Barter List (category, dollar amount, specific requirements and possible trading partners) which are essentially the goods and services each country pledges to barter with the goods and services from another country if certain specific conditions are met. The lists will be shared among all trading partners and made publicly accessible. During this meeting, first, invited partners review, discuss, revise and approve the GBSP Document, then, begin discussions and negotiations to barter until each country has bartered most of her listed barter categories with other countries. The end result of bartering and pledges guarantees a positive economical projection.
The GBS process should be made as transparent as possible as an effective stimulus program; press and observers are invited so the process may be televised globally for the benefit of the world. The GBS trade lists with government pledges are the essence of the Global Economical Stimulus. Each participating country will fulfill her pledge, hence will stimulate each partner’s domestic economy; collectively the GBS partners will stimulate the world economy. GBS can be sustained yearly to achieve long-term benefit.
Foot Note:
A physical venue may be selected for this program. For example, the $450M Bird’s Nest in Beijing may be an appropriate structure to house such a program so that a meaningful Global Bartering Stimulus will lead to a sustainable global economical growth and world development.
IFC
Overheard in Davos
One of the best things about Davos is the conversations you overhear. It’s like no place else.
Sitting minding my own business, typing away I became aware of a central banker from a medium sized emerging market sitting nearby. He was joined by a gentleman from a bank in his home country. After a few muffled preliminaries the central banks said:
“So, how much trouble are you in?”
The banker responded in what sounded like soothing tones but I couldn’t make out exactly what he was saying. The only other line that came through clearly was that after a long speech the banker said to the central banker, with an air of exasperation.:
“The prices are very low, but there are no buyers!”
That’s it, in a nutshell.
Bankers – Ever thought about working for Big Pharma?
Are you an out-of-work banker looking for a new job with some stability? Considered the drugs industry?
Daniel Vasella, chief executive of Swiss pharmaceuticals company Novartis, reckons his sector is a pretty good place to work when compared to “mercenary” banking.
“We are not in a banking industry, where they fire a thousand investment bankers and then a year after they hire a thousand investment bankers,” Vasella told Reuters.
“And these people (investment bankers) are like, not soldiers, but mercenaries. And they go and buy troops and it’s just money, and you feel that’s the only currency they know.”
If Novartis had to cut back as the downturn bites, Vasella said he would prefer creative solutions like reduced working time rather than making blue-collar workers — who might struggle to find a new position — redundant.
“We are not in the same industry (as banking), it’s very different,” he said.
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Resident Davos Expert
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