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Mix-Ansicht- Konsequenzen der Arroganz und Falsch-Einschätzung - Emerald, 22.08.2006, 00:12
Konsequenzen der Arroganz und Falsch-Einschätzung
-->There's a really fascinating interview in this week's Barron's with David Richards (interview by Sandra Ward). Richards, formerly a top money manager. Richards sees inflation coming, and he likes oil, gold, Berkshire and Microsoft. Richards is bearish on the dollar and on bonds. A few paragraphs from the interview below --
When bonds were yielding 10% and 12% years ago, somebody referred to them as certificates of confiscation. At about 5% today, there is no real return in bonds and they might as well be certificates of confiscation. People like Bill Gross are bullish on bonds because they think the Fed will cut rates because housing is so weak. That's a possibility. If the Fed cuts rates, bond prices will go down because of the loss of international confidence in the dollar. I don't have a position in bonds.
Risk is not being paid for the way it should be at a time when everyone is under tremendous pressure to seek higher yields. The big municipal and state pension funds are underfunded, and can't make the 8% to 9% return assumptions in a 5% world. They're subject to the snake- oil salesmen coming out of Wall Street, and that's why there is a flood of money going into hedge funds and private-equity funds and derivative securities, under the assumption they will save them from raising taxes to fund the pensions at a time when people are desperate.
Question -- How does the geopolitical scene affect your scenario?
U.S. foreign policy is out of line with the economic situation the country is in, and it has been for the last few years. We are living on borrowed money, and we are living on imported oil.
We are living in a world today where people are increasingly angry at us, including our creditors and our oil suppliers. We don't give them any incentive to behave differently. President Hu Jintao of China comes to the United States, and he is not accorded the trappings of a full state visit. Talk about insulting your creditor! The administration goes to St. Petersburg and [Vice President Dick] Cheney makes a speech that basically insults the hell out of the Russians. He tells them how to run their country. This sort of bullying unilateralism is just nuts. The whole Arab world is angry at us because we sit on our hands and do nothing to prevent the Israeli destruction of Lebanon. Why should they buy dollars? Why should they buy U.S. assets?
Our behavior has been stupid and insulting and arrogant and, financially, these guys could say -- screw it.
Russia, for example, has $250 billion of reserves. This was a country that was bankrupt several years ago. Their finance people have concluded that they shouldn't hold so many dollars and need to diversify into euros and gold.
The Chinese are making noises about revaluing again because they have inflation problems. Wages and salaries in China are going up at a very rapid rate: The minimum wage in the south rose 17% recently. More seriously, the shortage of skilled workers, managers, accountants and financial people is extraordinary, and they have to bid for local workers. That means the cost of producing stuff in China will be rising. The cost to American consumers of exports coming out of China is definitely going to go up. There has been a huge margin squeeze there, and prices are now going to be pushed up.
(aus Richard Russel's Tages-Kommentar vom 21.8.06)
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