Is Democracy the most preferable Form of Government?
Monthly Market Commentary: April 1, 2017
Last week, I was interested in re-reading an article which had appeared last November (before the election) in The New York Times by Op-Ed columnist Nikolai Tolstoy entitled Consider Monarchy, America. Tolstoy is a historian and author of several books. He is also a committed monarchist.
Before rejecting Tolstoy’s views as outrageous I suggest my readers to listen to his arguments carefully. The reason I am discussing political systems is that I came across a study by PwC which paints a rather pessimistic picture for G7 countries (US, UK, France, Germany, Japan, Canada and Italy) relative to E7 countries (China, India, Indonesia, Brazil, Russia, Mexico and Turkey) for the future. The PwC study is entitled The long view: how will the global economic order change by 2050? Its key findings are as follows: emerging markets will continue to be the growth engine of the global economy. By 2050, the E7 economies could have increased their share of world GDP from around 35% to almost 50%. China could be the largest economy in the world, accounting for around 20% of world GDP in 2050, with India in second place and Indonesia in fourth place (based on GDP at PPPs).
A number of other emerging markets will also take center stage – Mexico could be larger than the UK and Germany by 2050 in PPP terms and six of the seven largest economies in the world could be emerging markets by that time.
Meanwhile, the EU27 share of world GDP could be down to less than 10% by 2050, smaller than India. PwC also projects Vietnam, India and Bangladesh to be three of the world’s fastest growing economies over this period.
The PwC study rightly says that emerging market investing requires the “patience to ride out the storms we have seen recently in economies like, for example, Brazil, Nigeria and Turkey, all of which still have considerable long-term economic potential based on our analysis,” but I should point out that we also had some storms in the G7 economies over the last 30 or so years (Japan post 1989, all markets post 2000 and also post 2007).
Also, whereas I do not believe that it is an ideal time to buy equities I equally think that relative to the US, emerging markets are about as undervalued as they will become.
Bloomberg recently reported that sales of art and antiques dropped 11 percent to $56.6 billion in 2016. The decline, on top of a 7 percent slide in 2015, wipes out the gains seen in 2013 and 2014, when sales reached an all-time high of $68.2 billion.
Noteworthy is that art sales are not much higher than in 2007 – ten years earlier despite a huge increase in purchases by Chinese collectors as my friend Kenny Schachter (k@) will explain in the enclosed report. Although chicken feet are one of my favorite dishes in Hong Kong, the title of his reports is: Poisoned Tongues and Chicken Feet: My Sojourn to China’s Rising Kingdom of Contemporary Art. roveprojects.com
Wishing my readers a wonderful Easter holiday