Monday, June 30, 2014

How Nouriel invests himself

I believe investors should invest for the long run, so I don't buy and sell. I usually maintain the classic index of global equities, diversified U.S. and global and emerging markets, and when the risk is larger, I diminish the amount in global equities and put more into liquid assets - but very irregularly.

Thursday, June 26, 2014

Stocks and Bond markets are not in agreement

The stock and bond markets have offered conflicting indications for the economy this year, giving investors a case of "schizophrenia". 

I am still of the view that most economic growth might surprise to the downside

Wednesday, June 25, 2014

Positive mood surrounding Eurozone

On the surface things have improved and the mood is positive about the Eurozone. However potential growth is slow, the actual recovery is anaemic and debt ratios are rising, and the region still faces long term competitiveness issues.

People are willing to tighten their belts if they can see light at the end of the tunnel from austerity with the creation of jobs, incomes and investment.

Thursday, June 19, 2014

Roubini on Middle East, War and more

The Middle East remains a region mired in backwardness. The Arab Spring — triggered by slow growth, high youth unemployment and widespread economic desperation — has given way to a long winter in Egypt and Libya, where the alternatives are a return to authoritarian strongmen and political chaos. 

In Syria and Yemen, there is civil war; Lebanon and Iraq could face a similar fate; Iran is both unstable and dangerous to others; and Afghanistan and Pakistan look like failed states.

In these cases, economic failure and a lack of opportunities and hope for the poor and young are fueling political and religious extremism, resentment of the West and, in some cases, terrorism.

In the 1930's, the failure to prevent the Great Depression empowered authoritarian regimes in Europe and Asia, eventually leading to the Second World War. This time, the damage caused by the Great Recession is subjecting most advanced economies to stagnation and creating structural growth challenges for emerging markets.

This is ideal terrain for economic and political nationalism to take root and flourish. Today’s backlash against trade and globalization should be viewed in the context of what, as we know from experience, could come next.

Wednesday, June 18, 2014

Why nationalism is on the rise

The main causes of these trends [of Nationalism and anti-globalization] are clear. Anaemic economic recovery has provided an opening for populist parties, promoting protectionist policies, to blame foreign trade and foreign workers for the prolonged malaise. 

Add to this the rise in income and wealth inequality in most countries, and it is no wonder that the perception of a winner-take-all economy that benefits only elites and distorts the political system is widespread.

Tuesday, June 17, 2014

Nationalism rising in Asia... War could follow

In Asia,, nationalism is resurgent. New leaders in China, Japan, South Korea, and now India are political nationalists in regions where territorial disputes remain serious and long-held historical grievances fester. 

These leaders — as well as those in Thailand, Malaysia, and Indonesia — must address major structural reform challenges if they are to revive falling economic growth and, in the case of emerging markets, avoid a middle-income trap. 

Economic failure could fuel further nationalist, xenophobic tendencies, and even trigger military conflict.

Monday, June 16, 2014

Nouriel Roubini says Commodities super cycle is over

The commodity super-cycle is over. This is not just because China is slowing; years of high prices have led to investment in new capacity and an increase in the supply of many commodities. Meanwhile, emerging-market commodity exporters failed to take advantage of the windfall and implement market-oriented structural reforms in the last decade; on the contrary, many of them embraced state capitalism, giving too large a role to state-owned enterprises and banks.

These risks will not wane any time soon. Chinese growth is unlikely to accelerate and lift commodity prices; Fed has increased the pace of its QE tapering; structural reforms are not likely until after elections; and incumbent governments have been similarly wary of the growth-depressing effects of tightening fiscal, monetary, and credit policies. Indeed, the failure of many emerging-market governments to tighten macroeconomic policy sufficiently has led to another round of currency depreciation, which risks feeding into higher inflation and jeopardizing these countries ability to finance twin fiscal and external deficits.

Friday, June 13, 2014

Tea Party and extreme right factions gaining in USA

In the US, the economic insecurity of a vast white underclass that feels threatened by immigration and global trade can be seen in the rising influence of the extreme right and Tea Party factions of the Republican Party. Economic nativism, anti-immigration and protectionist leanings, religious fanaticism, and geopolitical isolationism characterizes them.

Thursday, June 12, 2014

Nouriel Roubini on Eurozone economic and political effects

Economic insecurity for the working and middle classes is most acute in Europe and the euro-zone, where in many countries populist parties, mainly on the far right, outperformed mainstream forces in last weekend’s European Parliament election. As in the 1930s, when the Great Depression gave rise to authoritarian governments in Italy, Germany, and Spain, a similar trend may now be under way.

If income and job growth do not pick up soon, populist parties may come closer to power at the national level in Europe, with anti-European Union (EU) sentiments stalling economic and political integration. 

Worse, the eurozone may again be at risk: some countries, such as the UK, may exit the EU; others (Spain and Belgium) eventually may break up.

Wednesday, June 11, 2014

Nationalism on the rise

In the immediate aftermath of the 2008 global financial crisis, policy makers’ success in preventing the Great Recession from turning into another Great Depression held in check demands for protectionist and inward-looking measures. But now the backlash against globalisation — and the freer movement of goods, services, capital, labour, and technology has arrived.

This new nationalism takes different economic forms: trade barriers, asset protection, reaction against foreign direct investment, policies favouring domestic workers and firms, anti-immigration measures, state capitalism, and resource nationalism. In the political realm, populist, anti-globalisation, anti-immigration, and in some cases outright racist and anti-Semitic parties are on the rise.

These forces loathe the alphabet soup of supranational governance institutions — the EU, the UN, the WTO, and the IMF, among others — that globalisation requires. 

Even the internet, the epitome of globalisation, is at risk of being balkanised as more authoritarian countries, such as Russia, China, Iran and Turkey, seek to restrict access to social media and crack down on free expression.

Tuesday, June 10, 2014

Roubini worries about China growth effects

If my view about China growing below 6 percent were to materialise in the next 24 months, a number of surprises are not priced in to markets like commodities or yen equities in Asia.

Monday, June 9, 2014

Managing a rising China wont be easy

Dr. Nouriel Roubini
Of course people worry about the Middle East, people worry about Iran, North Korea or they worry about what’s going on in Ukraine and Russia – but if you’re thinking about what is the biggest geopolitical challenge of our time, there is one that is bigger than all of them: it’s the rise of China and how to manage that peacefully.

Tuesday, June 3, 2014

Nouriel Roubini: How to protect your portfolio

If you’re an investor in this low volatility environment, then buying insurance against tail events such as a 10-20 percent correction in U.S. and global equities is reasonably cheap. So, you would buy insurance if you’re concerned about this risk materialising and you can then get the reassurance.

If you worry about China hard landing - and that it could have a negative implication on commodities, like copper and others - then buying options against those kinds of risks is something one can do relatively cheaply.