We had our first piecemeal meeting since we started. It turned out that most of our attendees had
conflicts in their schedules or prior engagements. Jeff Harrington came by for some
time and then later on Ry Zamora joined VJ Arjan (sorry, but we didn't take pictures). Much of the minutes below are from some
notes made prior to the meeting upon various topics, certainly not as much
material as if we had a full meeting but still something to feast upon.
The Story of the Future
Economy
VJ started talking about the studies he has been making on
famed economist and hedge fund manger, Marc Faber's, take on the credit growth
of the American economy and the larger implications thereof.
The Federal Reserve has gradually since the 1970s enabled
the American economy to become addicted to credit, starting with the S&L
crisis in the 1980s, to the bailout of LTCM (Long-Term Capital Management) in
the late 1990s, to the most recent bailout of Wall Street in the Crash of
2008.
The gradual rise of the so-called Greenspan and now Bernanke
put has had two major effects upon the financial markets:
1. Greater price volatility fueled by easy monetary policies
2. Negative real interest rates for the foreseable future
He also commented upon the staggering increase in the level
of credit in the system.
Mr. Faber pointed out that it took 200 years for our country
to accumulate $1 trillion in debt (1776-1970).
It subsequently quintupled by year 2000 to $5 trillion, and today rests
at quadruple the amount at $16 trillion.
The anticipation is that debt levels will be expected to at least double
or even treble within the next 10 years at this pace.
Debt-to-GDP levels reached a peak level of 141% in 1929 and
subsided down to 50% by the 1950s.
Today, these levels are at 379% when unfunded liabilities are included
into the equation.
The result of all this money printing, must be, from a common-sense
perspective, resultant in some form of inflation (commodity prices or wage
levels particularly). The greatest
losers in this inflation will be the lower-income classes as the people in this
strata would use up all their incomes in the purchasing of ever-increasing prices of household goods.
He also noted that there has been a shift in how the money
is being spent by the American government and people in general. 100 years ago, the country's savings rate was
close to 10% and debt could only be secured after passing strenous creditworthy
tests. Today, as witnessed in the
2004-2007 real estate boom, homes were being used as ATMs to withdraw cash and
to simply spend on consumer goods, and most importantly, without capital
expenditures.
(U.S. current account deficit)
By not spending on investments within the country, the American
consumer partnering
along with Federal Reserve, would spur economic growth in
places like China and Vietnam, manufacturers of the consumer goods here in the
United States. This growth would often
lead to not only higher wages and higher standards of living in the
manufacturing nations, but also increased spending on infrastructure.
Slowly but surely, the percentage of world trade by the G7
(United States, Japan, Germany, France, United Kingdom, Canada, and Italy) is
becoming smaller and smaller, while the percentage of world trade of the
emerging economies (the countries in the G20 and outside of the G7) is becoming
bigger and bigger.
The money is
literally being transferred from West to East.
Geopolitical Showdown
(Shale gas basins in China)
Ry discussed a potentially new emerging industry within
China and that is its fracking of its shale resources. He explained that because China receives 95%
of its oil from the Middle East (this is not the case for most other
industrialized nations, where this percentage is between 25-30%), China has
understood that it must find a way to fuel its growing demand for energy while
bypassing the constant burgeoning threat of the presence of U.S. naval ships
and aircraft carriers that flank the route from the Middle East and through the
South China Sea.
He went on to say that
the United States knows that it can control China by controlling the oil that
flows from here, especially knowing the weight that it carries upon places like
Saudi Arabia, which may lead to diplomatic and economic, potentially even
military, tensions between the China and the United States.
Jeff mentioned that now that Myanmar has made a great effort
to democratize the nation, a decided victory for the West and a willing ally to
the U.S., the pipeline project that was supposed to funnel oil from outside the
Bay of Bengal may be jeopardized.
VJ explained that it is no wonder that China is concerned
about where it may get its oil from as its oil consumption has trebled since
1996, from 3 million barrels per day, to 9 million today, according to the CIA
world factbook.
Potential Investments
The following companies were mentioned as potential
investments (there were many mentioned, but for the sake of simplicity, I have
put down a few of them):
Noble Energy (NE)
Market Vectors Pharmaceuticals (PPH)
Rio Tinto (RIO)
Virgin Media (VMED)
BMW (BAMXY)
General Motors (GM)
Texas Instruments (TXI)
iShares MSCI South Korea (EWY)
iShares MSCI Philippines (EPHE)
The Clash of The Old
vs. The New
The winds of change are blowing through the once-thought changeless desert-mind of India.
On December 16th, 2012, a college student was on her way
home from watching a movie with a friend
of hers. While she was on a bus, she was
brutally raped and beaten between 40 minutes to 2 hours, while bystanders
looked on without helping, and then were thrown off the bus, left to be helped
to the emergency room. She later died of
her wounds.
There has been a torrent of protest ever since and directed
with great force especially by the youth of India. Hundreds of thousands have taken to the streets
demanding not only death for the culprits, but also a total overhaul of the
Indian government's corrupt and ineffective political system that has denied
equal treatment and tolerated even mistreatment of women for centuries.
It will be interesting to see if this turns in the the Arab
Spring of India, which is desperately needed if India is to seize its future as
a major economic powerhouse, but time will tell.
The Power of
Forgiveness
(Mandela in Springbok uniform)
"Sport has the power to change the world. It has the power to inspire; it has the power
to unite people in a way that little else does.
It speaks to the youth in a language that they understand. Sport can create hope when before there was
only despair. It is more powerful than
governments in breaking down racial barriers."
- Nelson Mandela
VJ recently watched an immensely powerful documentary called
"The 16th Man" about the South African rugby team inspired by the
efforts of Nelson Mandela in their quest for victory of the Rugby World
Cup.
If any one has not had the fortune of watching this
documentary, it would be highly recommended.
Pause, if you will; let us listen and let us take a word from the
wise, from perhaps one of the greatest leaders that has ever walked upon this
earth. What Mandela did might have been
reminiscent of what it might have been like during the time that Abraham
Lincoln endeavored to re-unite America after the Civil War.
If ever there was a definition of true leadership and if ever
there was a man who embodied true forgiveness in his or her heart, Nelson
Mandela would have to be one of them.
The documentary details the way in which Mandela was able to unite the
hearts of the blacks and whites into the country that is South Africa today
through a predominately white sport, rugby.
Whether he will have ultimately succeeded or not, perhaps time will
tell as it has been nearly 20 years since Apartheid was dismantled, but to watch
the man who was able to make this transformation occur is like watching a
miracle occurring in front of our eyes.
When one can genuinely win over the heart and mind of one's
enemy with the power of forgiveness, one reaches unto the realms of greatness,
and Mr. Mandela is certainly one of those individuals.
The documentary, fortunately, is on YouTube and is attached
for your viewing below.
The
next meeting will be on Sunday, February 3rd, 2013.
For
those who have not attended a meeting, but would like to attend, please email
your wish to VJ Arjan at scarletkings@gmail.com
Also I find that there are many domestic and
international readers who are following our blog posts not only in the United
States but all over the world including Europe, Latin America, and Asia. If you
wish to be added to our email list, please email at scarletkings@gmail.com
