2. A New World Disorder
McKinsey & Company, March 2009
Political‐risk consultant Ian Bremmer of Eurasia Group discusses how the downturn is reshaping globalization.
“If the United States doesn’t have the same level of access to China’s markets, if the US doesn’t have the same level of
access to Chinese money surpluses—in terms of purchasing US Treasuries—the US has a serious problem… Now,
Chinese citizens are angry about the downturn—but they’re not blaming Beijing, they’re blaming the West. And I think
the Chinese government is likely to make use of that. We already saw it recently with Chinese leaders definitively
saying that the American political model is not for them. I don’t think those two things are a coincidence. And so we’re
definitely going to see a more difficult environment for us to make money out of China. Maybe a more difficult
environment for us to secure Chinese lending for American treasuries. But I think China, itself, will be resilient”
“Saudi Arabia, with only 25 million people, with very strong popularity of their king, Abdullah; with a succession model
that looks much more stable and able to get through than a lot of people had feared before. [The country is] starting to
unlock the untapped potential of women as employees within their country—50 percent of potential productivity that
no one’s ever bothered with. Recently, now, they’re starting to. Over 50 percent of incoming university students in
Saudi Arabia are women—one of the extraordinary stories there. And the fact that they are starting to look to really
diversify their economy. I think the Gulf, in general, taking a longer‐term view, will be able to get through this crisis
relatively well.’
“And then I’d say Brazil. Brazil’s changed. The political spectrum has really consolidated around the center. They’ve
built a middle class that supports growth, that supports the creation of entrepreneurship in Brazil. They also are the
Saudi Arabia of biofuels, and they have some of the world’s largest untapped oil reserves just to boot, off shore. Put all
that together, Brazil looks very strong to me. And so, in this incredibly volatile environment, we do need to recognize
there are some countries out there that are clearly going to outperform. And there are places that will be very
attractive.” For full article click on this link: http://www.mckinseyquarterly.com/A_new_world_disorder_2339
Behind ‐ ‐ the building of the next bubble ‐ ‐ Goldman Sachs’ Second Quarter Profit
Economic Policy Institute, 07‐15‐09
“Shrewd business decisions by Goldman traders (along with a reduced field of competitors) were undoubtedly responsible
for a good share of the profits being crowed about by the firm this week. Notably, the firm cashed in on profit margins for
commodity and foreign exchange trading.” For full article click on this
link: http://www.epi.org/analysis_and_opinion/entry/behind_goldman_sachs_second_quarter_profit/
Why Venturing Abroad Still Makes Sense for Fund Investors February 2, 2009, Wall Street Journal
Simon Hallett, lead portfolio manager of the Harding Loevner International Equity fund, backed away from emerging
markets in 2006; but now he's re‐establishing positions in these markets, “emerging markets expects to have a
substantial overweighting by the end of this year … One appealing country is Brazil, which has a well‐managed economy
and is investing in infrastructure and education.”
“It's easy to criticize foreign investing these days. Though the U.S. was the epicenter of the global credit crisis and
market meltdown”… small companies in emerging markets are bargains. Ron Florance, director of asset allocation and
strategy at Wells Fargo Private Bank, recommending that clients overweight emerging‐market holdings. The current
valuations and demographics in emerging markets are compelling, he says, because there is an emerging middle class and
improving education and worker productivity. For full article click on this link:
http://online.wsj.com/article/SB123308918983621063.html
3. My case why investing in U.S. bonds, U.S. treasuries, and U.S Real Estate is the most unattractive
—to put it mildly— Investment you can own!
• Did you bother to look at the return after subtracting the costs of borrowing?
• Do you think that the U.S. is the only nation that needs to borrow —$46 cents on the dollar on 09— heavily?
• Will you know how much your Dollar —I mean, your paycheck and investments— will be worth in the future?
You don’t know, right? Not easy questions to answer? Well, that case, let’s have Warren take a shot at it for us!
Warren Buffett:
On the Dollar:
“Canada’s currency is likely to outperform the U.S. dollar in coming years. I bought a couple billion dollars worth of
Canadian currency some time ago, and now I wished I had bought more.” Mr. Buffett continues his bearish stance on
the U.S. dollar and continues to hold the Brazilian real.
He said he was “happy to invest in overseas companies, because currencies in those countries are not likely to decrease
to the same extent as the U.S. dollar. The federal government appears likely to follow policies that will make the dollar
even weaker.” Mr. Buffett stated that he does not feel a need to hedge on other currencies.
On the Recession:
He confirmed his view that the U.S. is in fact in recession. If people find their financial situation is worse than it was six
months ago, his advice is to “remain calm.” He added that investors should think for themselves and be detached from
the crowd. Berkshire Hathaway plans to continue to insure municipal bonds issues, but if premiums are too low, it won’t
accept the coverage. Mr. Munger said that much of the present trouble in the financial markets is the result of “stupidity
and over‐reaching” by people who ran the institutions.
On Mortgages:
Both Mr. Buffett and Mr. Munger agreed that home buyers that were misled on mortgages are facing a crisis. Mortgage
should be provided a one‐page document that is headlined “WARNING” in red and the industry’s continuing write‐downs
due to bad debt are not over by a long shot. For full article click on this link: http://seekingalpha.com/article/76061‐
warren‐buffett‐on‐the‐dollar‐the‐recession‐subprime‐and‐bear‐stearns
Why Venturing Abroad Still Makes Sense for Fund Investors February 2, 2009, Wall Street Journal
Simon Hallett, lead portfolio manager of the Harding Loevner International Equity fund, backed away from emerging
markets in 2006; but now he's re‐establishing positions in these markets, “emerging markets expects to have a
substantial overweighting by the end of this year … One appealing country is Brazil, which has a well‐managed
economy and is investing in infrastructure and education.”
“It's easy to criticize foreign investing these days. Though the U.S. was the epicenter of the global credit crisis and
market meltdown, overseas markets were generally hit harder than domestic … everybody sells everything," says Alec
Young, international equity strategist for Standard & Poor's Equity Research. “Commodity‐sensitive markets like Latin
America are starting to look appealing. A commodity rally would likely boost Latin American currencies against the
dollar, adding extra juice for U.S. investors. We'd rather play markets that benefit from stability in commodity prices
versus markets dependent on an end to the global credit crunch … and they are offering fatter dividend yields than U.S.
shares."
Small companies in emerging markets are bargains. Ron Florance, director of asset allocation and strategy at Wells Fargo.
For full article click on this link: http://online.wsj.com/article/SB123308918983621063.html
![A New World Disorder
McKinsey & Company, March 2009
Political‐risk consultant Ian Bremmer of Eurasia Group discusses how the downturn is reshaping globalization.
“If the United States doesn’t have the same level of access to China’s markets, if the US doesn’t have the same level of
access to Chinese money surpluses—in terms of purchasing US Treasuries—the US has a serious problem… Now,
Chinese citizens are angry about the downturn—but they’re not blaming Beijing, they’re blaming the West. And I think
the Chinese government is likely to make use of that. We already saw it recently with Chinese leaders definitively
saying that the American political model is not for them. I don’t think those two things are a coincidence. And so we’re
definitely going to see a more difficult environment for us to make money out of China. Maybe a more difficult
environment for us to secure Chinese lending for American treasuries. But I think China, itself, will be resilient”
“Saudi Arabia, with only 25 million people, with very strong popularity of their king, Abdullah; with a succession model
that looks much more stable and able to get through than a lot of people had feared before. [The country is] starting to
unlock the untapped potential of women as employees within their country—50 percent of potential productivity that
no one’s ever bothered with. Recently, now, they’re starting to. Over 50 percent of incoming university students in
Saudi Arabia are women—one of the extraordinary stories there. And the fact that they are starting to look to really
diversify their economy. I think the Gulf, in general, taking a longer‐term view, will be able to get through this crisis
relatively well.’
“And then I’d say Brazil. Brazil’s changed. The political spectrum has really consolidated around the center. They’ve
built a middle class that supports growth, that supports the creation of entrepreneurship in Brazil. They also are the
Saudi Arabia of biofuels, and they have some of the world’s largest untapped oil reserves just to boot, off shore. Put all
that together, Brazil looks very strong to me. And so, in this incredibly volatile environment, we do need to recognize
there are some countries out there that are clearly going to outperform. And there are places that will be very
attractive.” For full article click on this link: http://www.mckinseyquarterly.com/A_new_world_disorder_2339
Behind ‐ ‐ the building of the next bubble ‐ ‐ Goldman Sachs’ Second Quarter Profit
Economic Policy Institute, 07‐15‐09
“Shrewd business decisions by Goldman traders (along with a reduced field of competitors) were undoubtedly responsible
for a good share of the profits being crowed about by the firm this week. Notably, the firm cashed in on profit margins for
commodity and foreign exchange trading.” For full article click on this
link: http://www.epi.org/analysis_and_opinion/entry/behind_goldman_sachs_second_quarter_profit/
Why Venturing Abroad Still Makes Sense for Fund Investors February 2, 2009, Wall Street Journal
Simon Hallett, lead portfolio manager of the Harding Loevner International Equity fund, backed away from emerging
markets in 2006; but now he's re‐establishing positions in these markets, “emerging markets expects to have a
substantial overweighting by the end of this year … One appealing country is Brazil, which has a well‐managed economy
and is investing in infrastructure and education.”
“It's easy to criticize foreign investing these days. Though the U.S. was the epicenter of the global credit crisis and
market meltdown”… small companies in emerging markets are bargains. Ron Florance, director of asset allocation and
strategy at Wells Fargo Private Bank, recommending that clients overweight emerging‐market holdings. The current
valuations and demographics in emerging markets are compelling, he says, because there is an emerging middle class and
improving education and worker productivity. For full article click on this link:
http://online.wsj.com/article/SB123308918983621063.html](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)