Global Investing

from Global Markets Forum Dashboard:

China economic reforms may result in $14.4 trillion GDP, growth at 6 percent – Asia Society report

Sweeping economic reform initiated by China President Xi Jinping in November 2013 marked a turning point for the world's second biggest economy. If implemented fully, China's potential GDP growth can be sustained at 6 percent through 2020. One risk: Falling short of that growth rate could result in growth at half that projection, or worse, leading to a new economic crisis, according to a new study.

Dan Rosen, founding partner, Rhodium Group

Dan Rosen, founding partner, Rhodium Group

Dan Rosen, author of a report for the Asia Society Policy Institute, argues that China's growth model is no longer working. The drivers that contributed to China's post-1978 growth are weakening, with existing investments showing diminished returns and overall total-factor productivity, or TFP, falling. TFP is an economic term that broadly measures efficiency using input factors such as labor and capital. "Demographic dividends propelled China through the 1980s, 1990s, and 2000s, but the labor force is now at its largest and is poised to shrink," he writes.

Yet Rosen said China has not exhausted its growth potential. He forecasts decades of solid growth if President Xi can pull off bold economic reform. No small task.

"We conclude that the overhaul is well conceived and showing movement, and that if fully implemented can sustain growth at 6% through 2020," Rosen told the Global Markets Forum. "Keeping GDP at or above 6% though 2020 delivers a $14.4 trillion Chinese GDP, which supports $10 trillion in two-way financial flows and a Chinese trade deficit thanks to greater imports. That's great for the region and great for the global outlook."

Rosen has been analyzing China's economy for about two decades, first at the Peterson Institute, then at the White House/National Security Council and most recently at the Rhodium Group, a research and advisory group he co-founded.

from Global Markets Forum Dashboard:

GMF @HedgeWorld West, World Bank/IMF and Financial & Risk Summit Toronto 2014

(Updates with guest photos and new links).

Join our special coverage Oct. 6-10 in the Global Markets Forum as we hit the road, from the West Coast to Washington to the Great White North.

GMF will be live next week from the HedgeWorld West conference in Half Moon Bay, California, where we’ll be blogging insight from speakers including Peter Thiel, former San Francisco 49ers great Steve Young and other panelists' viewpoints on the most important investment themes, allocation strategies, reputation risk management ideas and more.

 

 

Eric Burl, COO, Man Investments USA

Eric Burl, COO, Man Investments USA

Our LiveChat guests at HedgeWorld West include Jay Gould, founder of the California Hedge Fund Association, on Monday; Rachel Minard, CEO of Minard Capital on Tuesday; and Eric Burl, COO of Man Investments, on Wednesday discussing the evolving global investor. If you have questions for them, be sure to join us in the GMF to post your questions and comment.

Follow GMF’s conference coverage and post questions live via our twitter feed @ReutersGMF as well, where we’ll post comments from other HedgeWorld panelists. They include: 

from MacroScope:

Is that a bailout in your pocket?

There was an awkward moment of tension at the Milken Global Conference in Los Angeles, when a buysider on one panel asked a Wall Street banker whether he had pocketed taxpayers' bailout cash.

The tit-for-tat began when several panelists at the "Outlook for M&A" session began griping about the U.S. government's tax policy, which they said dissuades corporations from bringing overseas profits back home because of punitive taxes.

The panelists – including James Casey, co-head of global debt capital markets for JP Morgan, Anthony Armstrong, an investment banker at Credit Suisse, and Raymond McGuire, global head of corporate and investment banking at Citigroup – predicted that the M&A market might get a big boost if the U.S. were to offer a tax holiday of sorts for repatriated profits.

A scar on Bahrain’s financial marketplace

Bahrain’s civil unrest — which had a one-year anniversary this week — has taken a toll on the local economy and left a deep scar on the Gulf state’s aspiration to become an international financial hub.

A new paper from the Sovereign Wealth Fund Initiative, a research programme at Center for Emerging Market Enterprises (CEME) at the Fletcher School at Tufts University, examines how the political instability of 2011 is threatening Bahrain’s efforts in the past 30 years to diversify its economy and develop the financial centre.

Asim Ali from University of Western Ontario and Shatha Al-Aswad, assistant vice president at State Street, argue in the paper that even before the revolt, Bahrain lagged in building the foundations of a truly international hub in the face of competition from Dubai and Qatar.

Regulate Us? We’re Hurt.

Obama advisor Paul Volcker wants more regulation.

Obama advisor Paul Volcker wants more regulation.

The popular image of Wall Street institutions involve swagger: the ability to absorb the competition’s blows, taking no prisoners, raking in the money… until it seems like the government could force them to rein in their excesses. It’s at that point that Wall Street’s tough guys suddenly sound wounded.

In Tuesday’s Wall Street Journal, an article about the derivatives legislation being considered in Washington has this comment from Bank of America spokesman James Mahoney—the bank is “concerned that we won’t be able to provide our customers with financial products they need to manage risk and grow and that foreign banks will step in and take that business.”

There are several layers of bruised egos at work here – the assertion that America’s economic future is imperiled by the regulation of derivatives, and the boogeyman specter of a “foreign bank” that will take over. Add the obligatory reference to customers (which recalls the braying from various corners about how the threat to BP’s dividends are really an attack on “pensioners” and “retirees”), and there’s a lot of guilt being laid on in the statement.

Act now or forever hold your (b)-piece, Obama

It appears the penny has finally dropped in Washington. Bank bailout watchdog Elizabeth Warren, chair of the Congressional Oversight Panel, has unveiled a report that outlines the shocking state of the U.S. commercial mortgage sector, which left unaided could spark “economic damage that could touch the lives of nearly every American”. The Havard Law School Professor and her panel colleagues are talking the kind of apocalyptic language that may just shake the White House and its star policy advisers into facing problems we have now rather simply obsess about those we may or may not encounter in the future. The global banking system may well need some kind of Volcker-esque guidelines to curb the next generation of excessive risk-takers but Obama is putting the cart before the horse in his efforts to haul the economy back on track. Certainly, his and the previous administration has toiled long and hard to stabilise the U.S. housing market, propping up Fannie and Freddie and their dysfunctional offspring, but the subprime mess has distracted attentions from the toxic commercial market, where the clean-up task is no less important. Warren reckons there is about $1.4 trillion worth of outstanding commercial real estate loans in the U.S that will need to be refinanced before 2014, and about half of them are already “underwater,” an industry term that refers to loans larger than the property’s current value. But bank brains are wasting too much time figuring out how the so-called “Volcker rule” might affect their operations and future profitability, instead of getting their arms around underwater real estate loans that could break their institutions in two long before the anti-risk measures even take hold. Obama’s premature challenge to their investment autonomy, which he says cultivated the collapse of banks like Lehmans, is like suturing a papercut while your jugular gapes wide open. Maybe now, as Warren’s report hammers home the threat posed by unperforming commercial real estate debt, Obama will give Wall Street a chance to refocus on the “now” and worry about “tomorrow”, tomorrow.

It appears the penny has finally dropped in Washington.

Bank bailout watchdog Elizabeth Warren, chair of the Congressional Oversight Panel, has unveiled a report that outlines the perilous state of the U.S. commercial mortgage sector, which left unaided could spark “economic damage that could touch the lives of nearly every American”.

The Havard Law School Professor and her panel colleagues are talking the kind of apocalyptic language that may just shock the White House and its star policy advisers into facing problems banks have now rather simply obsess about those they may or may not encounter in the future.

Bosch Boss Bashes Bloated Bank Bonuses

Bosch CEO Franz Fehrenbach

Bosch CEO Franz Fehrenbach

Everyone complains about fat banker bonuses, but Bosch Chief Executive Franz Fehrenbach is taking the debate to a new level. The head of the world’s biggest car parts maker is going to review ties with its financiers and may break off business with those that pay excessive bonuses, he told reporters. “We find it irresponsible if some big banks more or less go back to business as usual before the crisis despite what we have gone through,” he said.  He cited HSBC and JP Morgan as positive examples of good corporate behaviour. Of course it’s easier to be picky when you are unlisted and generate huge cash flow.

from DealZone:

R.I.P. Salomon Brothers

It's official: Salomon Brothers has been completely picked apart.

Citigroup's agreement to sell Phibro, its profitable but controversial commodity trading business, to Occidental Petroleum today puts the finishing touches on a slow erosion of a once-dominant bond trading and investment banking firm.

When Sandy Weill (pictured left) staged his 1998 coup -- combining Citicorp and Travelers, Salomon Brothers was a strong albeit humbled investment banking and trading force. Yet little by little, a succession of financial crises, Wall Street fashion and regulatory intervention has whittled away at the once-dominant firm.

Not long after the Citigroup was formed, proprietary fixed income trading --  once the domain of John Meriwether, was shut down after the Asian debt crisis fueled losses that Weill could not stomach.

from Summit Notebook:

Tax evaders on the run

  By Neil Chatterjee
    The U.S. has promised it will hunt down tax evaders.
    And it seems tax evaders are on the run.
    DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
disappeared.  
    Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
    DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
    Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
    Is this the end of offshore private private banking?

from Summit Notebook:

Geneva is for wealth management

Even for an American who's not wealthy, Geneva has a reputation as a global centre for wealth management - the place the world's rich come to stash their money and (they hope) make it grow.

    But you don't necessarily expect it to be so aggressive -- after all, the rich tend to be demure when it comes to their banking.

    Imagine one reporter's surprise, then, on arriving in the airport in Geneva and seeing bank ads everywhere. Think of the casino adds in Las Vegas's McCarron Airport or the technology ads in San Jose's Mineta Airport: it's the exactly the same in Geneva, only with wealth managers.