Global Market Comments
December 12, 2014
Fiat Lux
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It was with a mixture of nostalgia and awe that I attended the reunion luncheon celebrating the 72nd anniversary of America?s invasion of Guadalcanal. The event was hosted by my former division commander in Desert Storm, Major General Mike Myatt, at the Marines Memorial Association in San Francisco.
I was there to represent the family. My Uncle, Colonel Mitchell Paige, won the first Congressional Medal of Honor of WWII at Guadalcanal; single handedly wiping out 2,000 attacking Japanese in one night with his 30 caliber Brown machine gun (click here for ?Tribute to a True Veteran?).
My dad was there too, as a driver of a Steward light tank. My grandfather served in WWI, and historians tell me that I have a string of military heroes behind me that stretches all the way back to Valley Forge, where the first John Thomas served on George Washington?s staff.
I got plenty of dust under my fingernails myself, but lost a disc in my back from a plane crash, flying support missions for the First Marine Division in the Persian Gulf. Today I have three nephews serving in the Middle East in harm?s way, all in intelligence. So it is safe to say that my family has paid its dues in the defense of our country, and then some.
General Myatt delivered a lecture outlining the desperation and cruel arithmetic of the conflict. The Marines went in with virtually no intelligence and the few primitive maps they could scavenge from National Geographic Magazine against a Japanese army that until then had been undefeated. The US lost 7,000 men, 29 ships, and 600 aircraft. The Japanese lost 30,000 men, 37 ships, and many of their experienced pilots.
Japan never recovered from the blow, and played defense for the rest of the war. It was the single most important battle of the Pacific war. Afterwards, the Marines were sent to Melbourne, Australia for rest, wearing rags, often barefoot, but with weapons in perfect operating condition.
Whenever I give a strategy luncheon in that fair city, I never fail to thank my guests for the hospitality they once extended to my family. Today, a small case at the Melbourne Cricket Ground pays tribute to their sacrifice.
The youngest living Guadalcanal veteran today is 87, and eight of the elderly warriors made it to the reunion. Got to love that Marine health care plan! One 95 year old flew his own plane up from Los Angeles. Once a Marine, always a Marine.
I dined at a table with a van load of veterans from the California Veterans Hospital in Yountville, Napa Valley (click here if you want to, they need you).
One grizzled old sergeant told me that if a friend went missing at night, he was often found tied to a palm tree the next day, tortured to death.? Another time, a surrendering Japanese pulled a hand grenade out of his loincloth and threw it into a sympathetic, but gullible squad, with deadly results. Despite these atrocities, he respected the Japanese today as humble, respectful, and hard working. You don?t find these sentiments among the veterans of other nations at all.
Time has taken a toll on these aging vets more than the enemy ever could. Much of the conversation revolved around the daily aches and pains of living in your late eighties. Pulling out genuine anecdotes was difficult, often resulting in a canned memory dredged from a book or TV documentary produced decades after the event. Some may have been worried that if they did open the door to the past, they would dread what they found.
For a riveting account of the historic battle, please read ?The Pacific? by For a riveting account of the historic battle, please read ?The Pacific? by Hugh Ambrose.? You can purchase the book at Amazon by?clicking here. My uncle Mitch cooperated with Ambrose in the research for the book, which was the basis for the recently released and incredibly realistic HBO series of the same name.
I have been relying on David Hale as my de facto global macro economist for decades and I never miss an opportunity to get his updated views. The challenge is in writing down David?s eye popping, out of consensus ideas fast enough, because he spits them out in such a rapid-fire succession.
Since David is an independent economic advisor to many of the world?s governments, largest banks and investment firms, I thought his views would be of riveting interest to you.
I met him this time at the posh Ozumo restaurant on San Francisco?s waterfront, near the Ferry Building. A favorite of Silicon Valley?s tech titans, I bumped into Marc Andreessen on the way in, nearly impaling myself on his pointed head.
I settled for a delicate vegetable tempura and eel sushi, while David, being from the Midwest, dug into an excellent Wagyu beefsteak. We washed it all down with liberal doses of Kirin beer and Takagi Shuzo designer sake.
David is an unmitigated bull on the economy, predicting that growth will leap from 2.0% in 2013 to 3% in 2014. Fading away of the fiscal drag created by a gridlocked congress will be the main reason.
Last year, we were hobbled by the maximum Federal income tax rising from 35% to 39.5% for income over $400,000. Capital gains rose from 15% to 20% as well. These combined to subtract 1% off US GDP growth in 2013. There are no such tax hikes planned for 2014.
The economy continues to power along, supported by three legs: housing, the energy boom and a reviving auto industry. Detroit is expected to pump out over 17 million vehicles this year, a figure only dreamed about six years ago, when it hit a rock bottom 9 million unit annual rate.
Management has a death grip on controlling costs, which is why they aren?t hiring, and explains the feeble employment statistics. This has enabled profit margins to surge to all time highs. Expect more of the same.
Europe should grow by 1% in 2014 after delivering a near zero rate this year. It will take years for them to return to any kind of normalized growth rate. That said, continental stock markets could well outperform those in the US in the near term.
David spends much of his time traveling, doing a major intercontinental trip almost every month. The coming calendar includes Japan, Australia, and Europe by yearend. To have his frequent flier points!
Two years ago, David was banging his drum about an imminent recovery in Japan (EWJ) and a collapse in the yen (FXY), (YCS). He was ignored by virtually all, except by me. As you may recall, I started laying on major short positions in the yen about then at David?s behest, which proved wildly successful.
The proof is in the constant testimonials that I regularly publish in my letter. I don?t make these up and they come in almost every day.
David believes that Prime Minister Shinzo Abe is doing all the right things, so the recovery is real, sustainable and will play out over several more years. However, he would have been wise to spread out the VAT tax rise that took place in April, from 5% to 8%, over five years instead of bunching it all up in one.
He also should spend less time focusing on domestic nationalistic issues, which have the undesirable effect in that it focuses China on Japan?s regrettable past, not its bright future.
He is also quite an authority on emerging markets (EEM), which account for 40% of global GDP, and sees the recent collapse as presenting a once in a generation buying opportunity.
His favorite is Mexico (EWW), which will benefit hugely from the first new round of political and economic reforms in 20 years. The new oil and gas fracking technology has also arrived just in the nick of time, as its existing conventional fields are approaching exhaustion.
David thinks Greece (GREK) has more to run, although not at the heady pace of the past year. Nigeria (NGE) is another outstanding opportunity, where he recently visited. A privatization wave there could boost GDP growth from 7% to 10%.
To show you how wide David casts his net, he had lunch with none other than Syria?s Bashar al-Assad a decade ago. The country was then enacting a series of ground-breaking liberalizations by privatizing banks, and was viewed as the hot frontier market of the day. How things change!
This is why investors expect outsized returns from these countries. Less, and the risk is not worth it. They?re called ?frontier? for a reason.
David has in the past made some far out predictions that were real zingers. Population growth is grinding to a halt throughout Asia. It is already well below the replacement rate in Japan and South Korea, which will soon be joined by China.
This will eventually lead to labor shortages in Asia, and bring to an end the cheap labor regime, which has driven their economies for the past 100 years. The Chinese work force will shrink from five times ours to only three times.
Their cost advantage then goes out the window. The upshot for us is that perhaps half of the 6 million jobs that America lost to China over the last 20 years will come back. Many items can now be bought cheaper in Chicago than they can in Shanghai.
This explains why ?onshoring? is accelerating with a turbocharger (click here for ?The American Onshoring Trend is Accelerating?).
China will still become far and away the world?s largest economy in our lifetimes. In 1700, Asia accounted for 58% of world GDP. Some 250 years of wars pulled that figure down to 15% by 1950. It is on track to recover to 50% by 2050.
To learn more about David Hale and the extensive list of services he offers; please visit the website of David Hale Global Economics at http://www.davidhaleweb.com.
I managed to catch up with my former white House Press Corp colleague, Helen Thomas, just a short time before she passed away last year at the age of 92. Helen was the oldest and longest serving member of this esteemed group of journalists and had the traditional right to ask the first question at each press conference.
The native Kentuckian covered every president since Kennedy, but observed the political scene since the Roosevelt era (Franklin, not Teddy). I knew her when I was a wet behind the ears apprentice writer during the Carter administration and she was a senior writer for the old United Press International.
Helen never changed an iota and maintained a feisty streak. John F. Kennedy was her favorite president, a man of peace who knew war, who inspired people and launched the space program and the Peace Corp. Lyndon Johnson brought to life the most sweeping social programs since FDR?s New Deal, but saw his legacy shattered by the Vietnam War. She pitied Richard Nixon, who at the end felt the wrath of the nation fall upon his shoulders.
Gerald Ford was a decent human being, too nice, really, for the job that was thrust upon him. Ronald Reagan was a master at managing the press. George W. Bush lied to the people about WMD?s in Iraq and hung the albatross of torture around America?s neck. He then sanitized the war for public consumption and cowed the press into fearing being called unpatriotic and anti-American. Bush heard that Helen was murmuring that he was the worst president in US history and broke with a century of precedent by conspicuously ignoring her seniority during his administration.
Obama, who shared a birthday with Helen, lacks the courage to do the right thing and should stick to his guns. But all new presidents come in completely unaware of what they have signed up for and there is a tortuous learning process. Investigative reporting is gone forever because newspapers can?t afford it.
Helen has seen public morals become more liberal for ourselves, but more strict for our public officials.
I know there isn?t any real investment insight here. But hey, when a piece of living history crosses your path, you grab on to her with both hands and shake her until the gems of insight she possesses fall loose. If Helen could only bottle and sell the energy she had at her age, she could have made a fortune.
The commencement speaker at this week?s graduation ceremonies at the University of California at Berkeley just so happened to be Robert Reich, Bill Clinton?s Secretary of Labor, and an old friend of mine, who now a distinguished professor at the Goldman School of Public Policy. I attended a couple of Bob?s economics classes, and his grasp of the subject is mind-boggling. Never get into a debate with Bob over labor issues. You will lose.
A Rhodes Scholar who dated Hillary Clinton at Yale, ran for governor of Massachusetts, and authored 14 books, Bob is never without an original thought, nor a stranger to controversy. Reich, who is slightly over four feet tall, never skips an opportunity to joke about his diminutive stature. He warned the grads of the risks of overdependence on raw statistics, pointing out that the average height of himself and Shaquille O?Neal is six feet. He later said that he was over six feet before the Great Recession beat him down.
After the ceremony I managed to plow my way through the crowds and found Bob shipping a celebratory flute of Champagne. He thinks that globalization has become a dirty word. While it has generated immense wealth over the last 30 years, it has accrued only to those who were in position to take advantage of it. Those would be multinationals, technology firms, and emerging nations. If you are not one of those, or a shareholder in them, then you have been basically screwed by globalization.
Corporate profits are now at record highs. CEO pay this year us up 11%. Food and energy prices are rocketing. Those without the skills to benefit from these trends are being bounced out of the economy. As a result, the income, wealth, and power gap in the US are growing, creating a ?barbell? economy where the rich are getting richer and the poor are getting poorer at an accelerating rate. Virtually all of the wealth creation over the past three decades has accrued to the top 1% of income earners. The net worth of this top 1% has tripled over the same time frame.
Bob worries about the future of our country. A substantial portion of this wealth is now entering politics. Look no further that the vast expansion of the lobbying industry in Washington. There has been a massive profusion in ?independent? research firms that start with a conclusion and work backwards to string together a set of facts to support it.
This is how we hear that that US has the highest tax rates in the world, even though everyone cashes in on loopholes to avoid them, like General Electric (GE), which paid a 3% tax rate last year. We are informed that the oil and agriculture industries are in desperate need of tax subsidies, despite making record profits.
It is also how many have been instructed to believe that spending cuts leads to job creation, that all unions are bad, and that public school teachers are a bunch of lazy, money grubbing opportunists. I belong to the San Francisco Yacht Club, and as far as I know, the only boat that is owned by a teacher is married to a hedge fund manager. Never, ever raise taxes under any circumstances, even though the only ones that will be harmed will be the top 1%.
Bob left his graduates with two final pieces of advice. Grasp every opportunity for leadership. And know the difference between tenacity and martyrdom. As usual, Bob did not disappoint.
It isn?t often when a friend of mine wins a Nobel Prize. But that?s what happened this weekend when the Royal Swedish Academy of Sciences awarded the prestigious award to Yale University?s Robert Shiller. Shiller, along with Eugene Fama, and Lars Peter Hanson of the University of Chicago will share the $1.23 million cash award for their work on market pricing of assets.
Ironically, the New Haven based Shiller takes an approach that is completely the opposite of the theories propounded by his Chicago colleagues. Shiller believes that human psychology can lead to huge mispricings of assets, while Fama and Hanson argue that markets are much more efficient than that. Having spent 45 years in the financial markets myself, I think that Shiller is hands down correct.
I met with Shiller last year to get his take on the long term future of our economy. He is the kind of imp like, peripatetic college professor you might expect to find in a Disney movie. Highly animated and jumping from one radical idea to the next, it is hard to keep up with his stream of consciousness torrent of economic innovations.
After a two-hour barrage, I was so intellectually exhausted that all I could do when I returned home was to plop down on the sofa with a Jack on the rocks and watch Fox News.
You know Robert Shiller as the creator of the Standard & Poors-Case Shiller Real Estate Index, which tracks 20 major residential housing markets around the US. His data was originally the domain of a handful of real estate brokers with a theoretical bent, or securitizing investment bankers. But when the real estate collapse began to accelerate in 2007, it suddenly became the data point du jour for every property investor, business news network, and hedge fund manager.
Shiller thinks that financial markets are so emotional that they are beyond rational analysis. The systemic vulnerability of financial markets was a major cause of the 2008 crash and is still not well understood. He argues that people should have a 100-year time horizon when making investments, because that?s how long today?s children will live. Does anyone have the trading call for the Spring of 2113? (No typo!)
He says that teaching finance today is about as popular as being the university Reserve Officer Training Corps (ROTC) instructor during the Vietnam War. People are angry at bankers, as the Occupy Wall Street crowd has so amply shown, which Shiller sees as our own ?Arab Spring?. Since 1990, the top 1% of the wealthy have seen their net worth soar by 60%, while it has fallen for the other 99%.
When Occupiers discovered that their movement could cause governments to fall, it rapidly spilled beyond its Madrid, Spain origins. But the financial industry is not all bad. Witness the miracle in emerging markets, which has been made possible through new capital provided by western investment bankers.
Robert titillated me with some highly creative innovations, which we may see adopted in coming years. I?ll give you the highlights.
*Options on individual real estate markets, now six years old, will go mainstream and finally become liquid as individuals seek to protect their home equity during economic downturns. This will become a major area of new profits for Wall Street.
*?Continuous mortgages? should be created whereby the debt is never paid off, but is assumed from one owner to the next in exchange for a higher interest rate. If you package many of these together and securitize them, it would create far more efficient loan markets for consumers.
*The government already issues plenty of bonds, and next should sell equity in itself in one-trillionth increments. That puts the value of the government?s share price today at about $16.50. If the economy grows, the share price should go up, to the benefit of investors.
*Tax rates for the wealthy should rise with inequality. The more wealth that is concentrated with the 1%, the higher the maximum tax rate should go. Remember, the maximum rate was 90% at the time of the Roosevelt administration during the Great Depression, nearly triple today?s 39.5% rate.
*The actual impact of high frequency traders, who he refers to as ?millisecond traders?, is vastly exaggerated.
*Although the new ?crowd funding? bill has been described as the ?Boiler Room Full Employment Act?, it will provide a valuable source of venture capital for micro startups. Those earning only $40,000 a year are limited to an $800 bet, with the maximum legal investment set at $10,000.
*Some 14% of the total economic activity of the US involves security. Just having people watching people is an enormous waste of resources.
*?For profit? nonprofits, called benefit corporations, should proliferate to advance specific social goals. These should work well as they pay little in wages and enjoy community support. They are already legal in eight states.
The Nobel Prize was created by Sweden?s Alfred Nobel, the inventor of dynamite. It is believed he did so to atone for the millions who died from the military use of his product. Nobel?s original intention was to assist the mining industry. Prizes for physics, chemistry, medicine, literature, and peace were first awarded in 1901. The prize for economics was added in 1968.
The prize has long been shrouded in controversy. Some were awarded to scientists whose theories were later disproven. Others who richly deserved prizes never got them, like Jonas Salk, the discoverer of the Salk vaccine, which wiped out polio. The Academy once considered revoking one Nobel awarded to the brilliant chemist, Fritz Haber, because he went on to invent mustard gas for the German Army in WWI. Many peace and literature prizes in recent years have had a decidedly anti-American bent to them.
Of the 835 prizes awarded to date, about 10% were to individuals at California based universities, with UC Berkeley far and away taking the lead. The Swedish Royal family was an early investor in my hedge fund. So, in 2001, the 100th anniversary of the prize, the crown princes of Sweden invited me to attend a lunch honoring the California winners, 17 of whom were living at the time. As a financial guy, I was assigned to sit next to Milton Friedman who won his economics prize in 1976. The conversation was fascinating.
If you would like to attend one of Shiller?s economics classes for free and expose yourself to more out of the box economic thinking, you can do so through regular offerings of his online courses. To sign up for Open Yale University, which Time Magazine lists as one of the top educational websites, please click the following link: http://oyc.yale.edu.
Having spent time as an economics professor at MIT, Dean of the University of Chicago business school, Treasury Secretary, and Secretary of State, George Schultz has certainly covered all the bases. Now 91, he is the senior statesman and eminence gris of San Francisco, as well as a major philanthropist.
When I read his bio, I feel like my own life in comparison has been wasted watching Archie Bunker on TV in All in the Family. I first ran into George in the seventies as the CEO of Bechtel, and pursued him while I was in the White House Press Corp. I have since occupied the box next to his in the San Francisco Opera, and joined him in several Marine Corps charities.
George said that America?s health care headache started in WWII, when wages and costs were controlled, but not benefits. So companies competed for labor by offering increasingly generous, tax-free benefits programs. And when something is free, you use a lot of it, driving total costs through the roof. The end result is large misallocations of resources that you don?t see in other businesses.
Private American companies have made possible tremendous medical advances for a profit, and this system should be allowed to continue. But we need to incentivize future advances with cost containment. We need a universal, subsidized plan that heads off intergenerational conflict by not allowing healthy young people to escape obligations, nor denying older people with preexisting conditions.
Allowing consumers to buy private insurance across state lines is a start. Today your average 65 year old lives for 20 years, compared to 13 years in 1965, and two years in 1900. An equitable system would enable those who wish to continue working after 65, without burdening employers with health care costs, adding $1 trillion to GDP that will help us pay for this all.
No one can explain the most complex economic and monetary issues in a simpler, more homespun fashion than former governor of the Federal Reserve, Bob McTeer. He is known for carrying around two yardsticks, one slightly longer than the other, to demonstrate to your average guy the monthly changes in employment.
Bob argues that the Fed is getting a bad rap today. Ben Bernanke?s quantitative easing is neither inflationary, nor causing the collapse of the dollar. This ?money printing effort? is not actually printing any money. The $3 trillion QE executed so far was designed to buy mortgage-backed securities to bring liquidity back to the market place. It then enabled the purchase of a further $600 billion in Treasury securities to prevent a double dip recession. On top of this, the Treasury piled the $700 billion TARP to recapitalize the major banks. All three of these programs were wildly successful.
As a result, the Fed balance sheet has grown from a pre-crash $800 billion to $3.6 trillion. Normally this would be inflationary, but it is not this time, as all of the extra money is being tied up with excess reserves at the banks. The proof of this is that the money supply, M2, is growing at a very modest rate, barely enough to accommodate the population growth. Without the Fed programs, the monetary base would have fallen off a cliff.
The challenge going forward is for the Fed to unwind its balance sheet at the same rate that the banks start paring back excess reserve through more aggressive lending. Too slow, and the Fed risks inflation. Too fast, and it risks falling back into recession. After the end of QE the Fed is likely to maintain a neutral stance, rolling over maturing debt, instead of paying it down. They may never sell their bond hoard.
Although it appears that the dollar is in a free fall in the foreign exchange markets, it is in fact at the same level as it was before the financial crisis. All it has really done is given back its flight to safety bid. The dollar is really a function of our international balance of payments and global interest rate differentials.? Bob feels that the next big move in the greenback is down.
McTeer points out that the Fed has been a huge cash cow for the Treasury, and ultimately, the taxpayer. So far, it has taken in more than $200 billion in profits. The TARP funds paid a 5% preferred dividend and brought in tens of billions of dollars in profits from the banks, General Motors, and AIG.
Bob views Obama?s $900 billion stimulus package as ?an attempt to shoot a hog with a shotgun.? The big problem is that businesses view such programs as temporary and act accordingly. Permanent changes to government policies get you more bang for the buck.
Bob, 70, was probably one of the last people in Texas to use a functioning outhouse. He grew up in rural Ranger, Georgia, the son of a truck stop operator, and his first brush with the real economy was pumping gas and picking cotton.? Somehow, he scored an economics degree from the University of Georgia, and moved on to work at the Federal Reserve.
He was named president of the Dallas Fed in 1991, and went on to pioneer the analysis of the impact of technology on the macro economy. Bob is simple, but he is no lightweight. Today, he serves as a chancellor of Texas A&M University, with 100,000 students.
![McTeerRobert[1]](http://madhedgefundradio.com/wp-content/uploads/2013/05/McTeerRobert1.jpg)
I spent an evening with the New Yorker magazine columnist, Malcolm Gladwell, author of The Tipping Point, Blink, and Outliers, and probably the most prolific publisher of original, consensus challenging ideas today.
Half English and half Jamaican, the preeminent challenger of clich?s and stereotypes was himself a clich? and a stereotype. He wore the standard issue New York intellectual?s blazer, pressed shirt, blue jeans, and loafers, to compliment his gaunt face and conspicuous afro.
His latest book challenges the myth of meritocracy, that luck is a bigger factor in success than privilege or education, and that, in fact, all meritocracies are rigged. Bill Gates built Microsoft not by being brilliant, but by having the good fortune to be raised by a family who could send him to one of the few Seattle high schools that then had a computer program. The Beatles made it only because they practiced more than any other group in history.
The falling crime rate since the seventies was not the result of a series of new, tough anti-crime laws, but the removal of lead from gasoline in 1973, which literally drove young inner city dwellers violently insane. Successful hockey players are almost exclusively born during the first three months of the year, enabling them to beat the crap out of younger, smaller competitors in their junior years.
It is cheaper to deal with the homeless than ignore them, because of the massive drain they create on the public health system. He cited the infamous example of the drunk, ?Million dollar Murray,? who single handedly drained the budgets of Reno, Nevada?s emergency rooms. Gladwell?s arguments may not be accurate, or even right, but he certainly forced you to look at problems from a new perspective. This I value highly.
I have always been a sucker for a visiting Nobel Prize winner in economics. So when I heard that Dr. Michael Spence was passing through town, I was on the next BART train. Michael was here to promote his latest book, The Next Convergence; The Future of Economic Growth in a Multispeed World.
Michael believes that world GDP will triple over the next 40 years, and that the bulk of that growth will come from emerging markets, which will account for half of all GDP within 5-10 years. China is now moving the needle on the global economy big time.
The great challenge moving forward is that the emerging markets can no longer use proven economic models that worked in the past. Investing in aggressive export sectors that pulled their countries forward worked well for Japan, and then South Korea, Taiwan, Singapore, Malaysia, and Thailand. But China and India are now too big, and the US too small to replicate that feat.
Furthermore, the big BRICS are now pushing up against the theoretical limits to growth. China is now consuming up to 80% of some commodities, and further demand could bring dramatic price increases. While America accomplished its economic miracle with oil at $1 a barrel, today?s emerging markets are going to have to pull it off at $100 a barrel. China is now in the middle income range of $4,000-$8,000 per capita, where a lot of developing countries tend to get stuck.
These countries have also reached their environmental limits, with pollution so severe that it threatens to stifle growth. If you don?t believe him, try taking a summer afternoon stroll in Beijing sometime, and see if you can breathe afterwards. The current environmental mess in China will cost a fortune to clean up.
The answer to is accelerate technological development, eventually bring it up to western standards. Throwing coddled state protected enterprises to the wolves and allowing creative destruction to work its way will also be important. Asia already has a big advantage in that their entire infrastructure is brand new, so they don?t have to ?obsolete? it first to move forward, as we do.
Exports become less important in this model. In fact, you can see how this works by tracking shoe maker Nike?s production base over the years, where Spence was once a board member. It started in Japan, and then migrated to South Korea, Taiwan, China, and ended up in Vietnam.
The great revelation for Michael in doing his research, the ?aha? moment, was to discover that economic growth is not an economic issue, it is a political one. Great leadership is the common ingredient among the most successful countries. Governments that are too big fall into the abyss of central planning. Those that are too small can?t adequately invest in infrastructure to prime the pump for the private sector.
Michael has identified 13 countries currently in the sweet spot, including Brazil (EWZ), South Korea (EWY), Taiwan (EWT), Singapore (EWS), Hong Kong (EWY), Thailand (TF), Indonesia (IDX), Oman, Botswana, Malaysia (EWM), China (FXI), Malta, and surprisingly, Japan (EWJ). Since I believe that emerging markets will lead the next leg up in global equity markets, this gives me a great short list to work from.
You may recall that Michael is the Harvard professor who, along with Joseph Stiglitz, won his prize in 2001 for the dynamics of information flows and market development. A Rhodes Scholar, he is also the former dean of the Stanford business school. Among his recent chores has been assisting the Chinese government to develop their upcoming 12th five year plan for economic development.
