And, to kick off such events in 2012, a panel of prominent international executives recently briefed executive students and others on world economic trends in 2012 as part of the Bridge executive enrichment program. The January 12 event was held by the Colorado-based International Business Circle.
Renowned economist Marshall Auerback, a portfolio strategist for international hedge funds and investment firms with extensive Asian experience, spearheaded the discussion. He expressed optimism about the US economy and concern about the European solvency crisis as well as a possible economic slowdown in China. For the US, he predicted 2.5 – 3.5 % growth in the economy in 2012 with the private sector doing better than the public sector. He also said the low US rental vacancy of 1.5% will stimulate the economy as Americans pay down debt and increase their savings rate.
Auerback also predicted serious problems in Europe in the upcoming six months because of the European Union’s (EU) institutional inability to respond adequately to the solvency crises in its member countries. Deficient consumer demand, weak spending power, especially in Greece, Portugal, Italy and Spain, and high unemployment rates are exacerbating the economic difficulties. Spain, he noted, has a 40% youth employment rate and even the German economy is starting to slow down. Because of Greece’s intractable solvency problems, he said it may leave the EU.
China is also slowing down and starting to cut back on credit, Auerback said. It has a major challenge in transitioning to a consumer-led economy and capital expenditures are currently 50% of its Gross National Product (GNP), with high real estate speculation. He speculated that continued population growth, migration to cities and increasing inflation may also aggravate social problems.
A second panelist, David Cole, President and CEO of Eurasian Minerals, which has 100 exploration projects in 11 countries, also expressed optimism about the US economy. US blue chip companies that pay dividends are “still shining,” he noted, and commodities are now one decade into a bull market.
Market demand will increase as the populations of Indonesia, Turkey and Brazil move up into the middle class and produce more consumers while China’s growing middle class alone could easily consume many of the planet’s resources such as oil and zinc. Cole also predicted continued substantial volatility in the prices of metal stocks, including copper, and a bullish economy for soft commodities such as agricultural products. In mineral and metal exploration, he forecasted a discovery deficit, especially in gold, and a shortage of highly qualified professionals.
Charles Williams, the Managing Director of Wealth Management and Foreign Exchange Director at Morgan Stanley Smith Barney, highlighted world currency issues for the upcoming year, particularly the weakness of the Euro as a global reserve currency. Whereas Europe used to devalue its currencies, it now adjusts its sovereign debt. In the US, Williams predicted that the Federal Reserve Bank is ready to do more quantitative easing, adding $600 to $800 million to the economy.
Williams predicted that the “Arab Spring” movement will re-emerge in Iran and that hyperinflation will heighten the conflict. Japan, meanwhile, will experience more financial difficulties because of its deficit. In Asia, he commented that Australia is a “coal mine” for China which is “gobbling” world resources.
“Globally, we don’t have free markets anymore,” he said. “The government interferes with the market, including the manipulation of interest rates. In the future we will face higher taxes or higher inflation.”
BridgeEnglish Denver student, Susumu Naito, General Manager of the Power Production, Purchase and Supply Business Group with Orix in Japan, found the event stimulating. “The economic predictions were interesting and useful to me because I work in finance,” he said. “I also enjoyed networking with interesting people in banking and fund management, as well as people from Brazil, Italy and the Netherlands.”
Bridge participants also included Pablo Conti of Argentina, Fumitaka Okuda of Japan and Ronaldo Lopes, Simone Romanholi and Danielle Rigesa of Brazil.
The event was sponsored by the International Business Circle, an invitation-only organization of Colorado people engaged in international business which hosts business forums and peer-to-peer learning opportunities. Members include executives and consultants in international marketing, sales, investment, manufacturing, transportation, oil and gas, tourism and education, including BridgeEnglish Denver.