Summit Notebook

Exclusive outtakes from industry leaders

from Global Investing:

BRIC: Brilliant/Ridiculous Investment Concept

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BRIC is Brazil, Russia, India, China -- the acronym coined by Goldman Sachs banker Jim O'Neill 10 years back to describe the world's biggest, fastest-growing and most important emerging markets.  But according to Albert Edwards, Societe Generale's uber-bearish strategist, it also stands for Bloody Ridiculous Investment Concept. Some investors, licking their wounds due to BRIC markets' underperformance in 2011 and 2010, might be inclined to agree -- stocks in all four countries have performed worse this year than the broader emerging markets equity index, to say nothing of developed world equities.

For years, money has chased BRIC investments, tempted by the countries' fast growth, huge populations and explosive consumer hunger for goods and services. But Edwards cites research showing little correlation between growth and investment returns. He points out that Chinese nominal GDP growth may have averaged 15.6 percent  since 1993 but the compounded  return on equity investments was minus 3.3 percent.

But economic growth -- the BRIC holy grail -- is also now slowing. Data showed this week that Brazil posted zero growth in the third quarter of 2011 compared to last year's 7.5 percent. Indian growth is  at the weakest in over two years. In Russia, rising discontent with the Kremlin -- reflected in post-election protests -- carries the risk of hitting the broader economy. And China, facing falling exports to a moribund Western world,  is also bound to slow. Edwards goes a step further and flags a hard landing in China as the biggest potential investment shock of 2012.  "Yet investors persist in the BRIC superior growth fantasy...If growth does matter to investors, they should be worried that
things seem to be slowing sharply in the BRIC universe," he writes.

Thomson Reuters data earlier this year appeared to show some disenchantment with the BRIC concept. After rising 1600-fold between 2003 and 2007, assets in BRIC funds had shrunk to $28 billion by August 2011, almost a quarter below 2007 peaks, a bigger fall in percentage terms than most other fund categories.

from Ask...:

Will Greece be the first euro-zone country to restructure its debt?

The latest deal for Greece, including a new policy package and possible financing, does not contemplate the restructuring of its debt, but financial markets keep speculating on the possibility it may be the first of the euro-zone countries to reschedule its public debt. Who do you think may follow?

CFTC’s Gary Gensler just one of the “Little Monsters”

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Christopher Doering found there is more to the CFTC chairman than markets.

MUSIC-GRAMMYS/When he’s not scaring Wall Street and big banks to make sure they follow the rules, there’s a chance the head of the U.S. Commodity Futures Trading Commission is moonlighting as a “Little Monster.”

The haunting moniker, used by American pop singer-songwriter Lady Gaga to describe her fans, aptly applies to the hard-working Gary Gensler who was among the thousands of fans who attended the popular performer’s show in Washington last week.

Unlikely alliance: Congressman Barney Frank and the Tea Party

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At first glance it would appear that Congressman Barney Frank and lawmakers backed by the Tea Party movement would have little in common — one is a liberal Democrat, the others are conservative Republicans.

Look again.

FINANCE-SUMMIT/Frank said his quest to reduce military spending will probably attract Tea Party lawmakers who campaigned on a platform of fiscal discipline, even to cuts in an area that typically meet strong resistance from Republicans.

Bank regulator Walsh has pragmatic philosophy on financial crisis repeat

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John Walsh has spent many years in Washington — having worked at the Senate Banking Committee, the Treasury Department, and now as  acting Comptroller of the Currency — and has a bit of perspective on government reaction to crises over the years.

FINANCE-SUMMIT/WALSHSo he has a fairly pragmatic philosophical approach on whether U.S. efforts will succeed in making sure the financial crisis does not recur.

from Blogs Dashboard:

When is a threat not a threat?

By Kirstin Ridley

British bankers are not threatening to head for the Swiss hills. But that doesn’t mean they won’t pack their bags. So says Angela Knight, the head of the British Bankers Association.
Knight told the Reuters Future Face of Finance Summit that if British-based banks such as HSBC, Barclays and Standard Chartered consider whether to keep headquarters in London – given the banker bashing, punitive taxation and pay restrictions imposed here -- that is merely a fact.

Speaking one day after Europe’s largest bank HSBC cut profitability targets as tougher bank regulations eat into earnings, Knight conceded that she did not expect banks to move lock, stock and barrel to Geneva – and that images of jumbo jets laden with London bankers in pinstriped suits were mere “cartoons”.
But she said the simple truth was that the British economic growth lagged that of peers, while fixed costs were rising. Britain was not an obviously attractive place to be for bankers.
To remain an international financial centre, the country needed to be clever and get its regulation right. Banks, she said, were just telling it as it is. “Is there an expectation that employment in banking will be reduced? Yes … Is there an expectation that sentiment will turn around? No,” she said. “We are living in a country and a region where the costs of operation are high and (there is) a lot of personal condemnation (of the banking industry)... so I think that we cannot pretend that somehow that has no effect and no impact.

Senator Reed sees need for speed to chase bad guys

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Ann Saphir takes a look at Senator Jack Reed’s comments on cars and trading.

With traders buying and selling at dizzying speeds these days, underfunded U.S. regulators can’t hope to keep up unless they get more funding, better resources, and faster technology — think cars,  Democratic Senator Jack Reed says.

So how plugged in is the SEC chair? (technologically speaking)

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Securities and Exchange Commission Chairman Mary Schapiro says her agency has its work cut out to compete with the massive amounts of money that private firms, policed by the SEC, pour into the latest technology.

“Can we keep up with Wall Street? I think we have a fighting chance. We’ll never have, under any circumstances, the kind of budgets that would allow us to spend a billion dollars a year on technology as some firms do, I mean that’s just not going to happen, and I totally understand that,” she said at the Reuters Future Face of Finance Summit. FINANCE-SUMMIT/SCHAPIRO

Hensarling proud of fiscal conservative creds, embraces Tea Party allies

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It is clear that House Financial Services Committee Vice Chairman Jeb Hensarling is proud of his credentials as a fiscal conservative.

He may have more competition for that label after the November election swept in members of the Tea Party. But he sees that as a good thing. FINANCE-SUMMIT/HENSARLING

U.S. Treasury’s Wolin on tying debt limit to fiscal discipline debate: Don’t

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Deputy Treasury Secretary Neal Wolin is urging lawmakers not to tie the U.S. debt limit to the debate on fiscal discipline.

Arguing about the future fiscal path of the United States is fine, but playing games with the debt limit can hurt U.S. creditworthiness, he warned. FINANCE-SUMMIT/WOLIN

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