A buddy, Sylvie, in Paris now, writes: “Paris is rather stressful at the moment, my revolutionary ardor seems to have left me…” I think she is reacting to the “pagaille” being led by high school students who are younger than we were in May 1968, the last time French youths took to the streets.
The logic of the juveniles building barricades and burning cars to protest delaying the retirement of older people from 60 to 62 is that it will prevent jobs opening up for younger people. This is an example of “the lump of labor fallacy” which the French firmly believe in (behind the 35 hour week the Socialists imposed.) Maybe someone should start teaching economics in lycees in France.
This issue is about insidious insiders, so let us start with a forecast from a Swiss private bank:
“With quantitative easing back on the agenda in the US and a lack of appreciation of the Chinese Renminbi, currency tensions are heating up before the 11-12 Nov. Group of 20 meeting. Although uncertain, a very positive outcome would be an announcement by the G20 that they have agreed to some cooling appreciation of the Renminbi along with some appreciation of other Asian currencies,” said Guy Monson, Sarasin Group’s Chairman of the Investment Policy Committee, speaking in Singapore.
He described this as a potential “gradual and controlled rebalancing” adding: “But this rebalancing will require 24-36 months to take effect, with Asia to experience extremely strong international liquidity inflows over the next 12-18 months.”
Asia will experience what Monson describes as “hyper-convergence”, where already higher growth rates, because of favorable demographics and the ability to leapfrog old-generation technology, get propelled even higher. Combining a powerful low interest rate shock with negative or very low real interest rates creates “a virtuous cycle of hyper-growth”.
“It’s like pouring rocket fuel on a fire that is already burning strongly. That growth will fuel profits for global brands, which are listed in the West and not Asia. Don’t confuse economic disaster with corporate disaster. Play the Asia growth miracle through cheap, cash-rich, balance-sheet strong equities in the West”, said Monson.
He also noted that quantitative easing is now boosting equity prices and that, if the Democrats lose Congress on Nov. 2, this could also boost equities. Monson points out that, historically, the best combination for the DJIA has been a Democratic president and a Republican Congress. He also forecast that gold would go higher as a hedge against quantitative easing.
More for paid subscribers about insiders and mispricing of stocks in Belgium, France, and Holland, confusion in Britain, outsiders in China, and Israeli insiders.
