30 August 2012

Pankaj Ghemawat Questions Globalization Effects

By
Pankaj Ghemawat, Anselmo Rubiralta Professor of Global Strategy at IESE Business School

Pankaj Ghemawat, Professor of Strategic Management and Globalization at IESE Business School, has been questioning the effects of globalization for years, addressing a number of anti-globalization concerns and deflating several pro-globalization exaggerations. His studies have found that people are susceptible to what he calls “globaloney,” the idea that the world is more connected and interdependent than the data shows it to be.

According to Ghemawat, this globaloney can lead businesses and governments to overlook opportunities for positive change, such as practices that address environmental issues or measures that could rehabilitate troubled European economies.

Read More

tagged:

6 August 2012

Robert C. Merton Defends Quantitative Risk Analysis

By
Nobel Laureate Robert C. Merton, School of Management Distinguished Professor of Finance at MIT Sloan School of Management

In the eurozone’s chaotic investment environment, where news stories revive ailing markets or send them into a new tailspin on a daily basis, portfolio managers and other financial professionals hope that tracking macroeconomic risks will protect them from serious losses — even as quantitative analysis, a risk analysis tool that many would have relied on before the Global Financial Crisis, has fallen under a cloud of suspicion.

However, Nobel Laureate Robert C. Merton feels that quantitative risk analysis will be very much a part of the future of finance. In an interview with Risk (subscription required), Merton said he is “really optimistic” for the future of quantitative analysts, explaining that “The industry is more technical than ever, and there is as much need to understand the risks in the system as ever. This means you need technically minded people.” Read More

tagged:

13 July 2012

Anatole Kaletsky Discusses the Economic Crisis in Europe

By
Economist Anatole Kaletsky, Reuters columnist and chairman of the governing board at the Institute for New Economic Thinking

Economist and journalist Anatole Kaletsky has strong words for what he sees as political inaction in the face of the world’s economic crisis. “In much of the world today the economic situation is verging on catastrophic,” he writes in his latest column  for Reuters,  “but ‘not serious’ seems a perfect description of the political response.” Kaletsky is especially critical of what he sees as inaction in Europe, compared to the “self-stabilizing feedback” at work in the United States. Read More

tagged:

12 June 2012

Tomáš Sedláček on Using Economics to Minimize Debt

By
Tomáš Sedláček, chief macroeconomic strategist at CSOB Bank

According to author and economist Tomáš Sedláček, economic policies that emphasize growth above all else will only lead to debt. “Debt is a dangerous journey through time, while interest is a sinister weapon,” Sedláček proclaimed in an interview with DER SPIEGEL magazine. Instead of courting debt in a short-sighted pursuit of growth, Sedláček feels that the general goal of economic policy should be to minimize debt — even if it means failing to maximize GDP. Read More

tagged:

11 June 2012

Fifth Annual CFA Institute European Investment Conference: Registration Now Open

By

Registration is now open for the Fifth Annual CFA Institute European Investment Conference, which will be held in Prague on 18–19 October 2012. In the coming weeks, this site will be updated with information about fees and travel, and a complete conference schedule.

The European Investment Conference brings together noted researchers, speakers, writers, investment professionals, academics, and experts to examine unique regional issues and bring financial professionals up to speed on a broad range of global investment topics, much like its regional counterparts, the CFA Institute Middle East Investment Conference and Institute Asia Pacific Investment Conference.

Individuals interested in sharing ideas and building rewarding relationships can register to attend the Fifth Annual CFA Institute European Investment Conference to learn more about the latest perspectives, research, and practical solutions to European and global investment challenges. This blog will also be updated with news on speakers and other information as the conference draws closer.

9 November 2011

Video: Key Takeaways from the Fourth Annual CFA Institute European Investment Conference

By

In an interview following the conclusion of the fourth annual CFA Institute European Investment Conference in Paris, Nitin Mehta, CFA, Managing Director, CFA Institute, EMEA, discusses the main themes covered by leading speakers at the conference, provides details on their analysis and insights into the present crisis, and highlights the key takeaways.

Mehta also discusses important findings from a CFA Institute survey of members in Europe on the eurozone crisis, highlighting that 70% of members believe a failure of the euro would be a failure for Europe — and that two-thirds of respondents think that a breakup of the eurozone is not very likely.

tagged:

7 November 2011

“Miracle of Africa” Stands in Sharp Contrast to Europe and U.S.

By

Clifford D. Mpare, CFA, Frontline Capital Investors

Africa is growing economically and is rich in commodities. The continent has favorable demographics and consumers with rising purchasing power. And even as its financial sector is developing, inefficiencies in Africa’s financial markets offer investors opportunities for alpha.

That, in summary, is the case for investing in Africa, according to Clifford D. Mpare, CFA, Executive Chairman and CEO of Frontline Capital Advisors Limited, an investment advisory and consulting firm based in Ghana. Mpare outlined the bullish case for Africa last week before more than 200 investment professionals who attended the fourth annual CFA Institute European Investment Conference in Paris.

Using data from the International Monetary Fund and The Economist magazine, Mpare showed that of the world’s ten fastest-growing economies from 2001 to 2010, six — Angola, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda — were African. Not only is Africa still growing at a fast pace, he added, but the average growth rate is also higher than that of Asia, and is forecast to remain so.

Ghana’s economy, Mpare explained, is likely to grow at 17.5% in 2011, the highest GDP growth rate in the world. Meanwhile Nigeria, the most populous country in Africa, had a debt-to-GDP ratio of just 18% in 2010, compared to 100% for Greece. This “miracle of Africa,” as Mpare called it, stands in sharp contrast to Europe and the United States, which are both struggling to recover from the ongoing financial crisis.

Mpare, who returned to Africa after working in the U.S. financial sector for many years, identified Africa’s natural resources — particularly commodities — as a significant driver of the continent’s economic growth. He suggested that commodity price forecasts often show an upward trend, and Africa has a significant share of the world’s reserves, from oil and gas to platinum and even diamonds. Mpare argued that this time the upward trend in commodity prices is not cyclical but rather secular, thanks to demands from growing economies like China, and that Africa stands to gain from this trend.

Sustained economic growth supported by commodities is increasing the purchasing power of consumers in Africa, and is both feeding and fuelling further growth, Mpare said. For instance, he noted that “mobile phone penetration was over 50% in 2010, having grown from 1% in 1998.” Africa’s demographics also favor growth as the continent is young — even younger than Asia — and its economic growth will create demands in other sectors, such as education and health care, Mpare contended.

Read More

tagged:

How to Allocate Capital in an Uncertain World

By

William De Vijlder, Chief Investment Officer of strategy and partners at BNP Paribas Investment PartnersWilliam De Vijlder, chief investment officer of strategy and partners at BNP Paribas Investment Partners, opened his address on 3 November at the fourth annual CFA Institute European Investment Conference by focusing on the increasing uncertainty of the future of the eurozone. Indeed, what looked like an agreed deal between European leaders last week to stabilize the eurozone’s finances was plunged into turmoil following the Greek Prime Minister’s surprise announcement to hold a referendum on the bailout, a decision that has since been revoked. Against this unprecedented economic backdrop, De Vijlder tackled how asset managers can best allocate the money entrusted to them by their clients — and how they can best fulfill their fiduciary duty to these clients.

De Vijlider asserted that the good thing with bad news is that you knows it is bad — and therefore, as an asset manager or investor, you can act on it. The problem with uncertainty, however, is that by definition you do not know the outcome, and of course this leads to a loss of confidence in the accuracy of the information available and your capacity to predict the course of future events.

Still, De Vijlider did not shy away from making predictions. He argued that markets are likely to witness increased volatility; that investors will display more fearful investing behavior; that there will be increased demand for safe assets; and ultimately, that there is an increased likelihood of economic recession.

Read More

tagged:

4 November 2011

The Lesson from Japan: Western Policymakers Must Apply Sustained Fiscal Stimulus

By

Richard Koo, Nomura Research InstituteIn one of the concluding sessions at the fourth annual CFA Institute European Investment Conference in Paris, Richard Koo, Chief Economist at Nomura Research Institute, challenged the widely held consensus view of fiscal consolidation and austerity as being the best pathway to economic recovery. Koo argued instead that sustained fiscal stimulus is the only economic policy that can forestall the protracted and potentially irreversible economic malaise in western economies — and he called on policymakers to learn from the Japanese experience.

Koo observed that balance sheet deleveraging is today a common feature across several major western economies, as this is the only way that firms can avoid potential bankruptcy following the bursting of asset price bubbles. However, the net effect of deleveraging is the creation of dormant financial capital and shrinking aggregate income, and these effects cannot be offset by monetary policy measures. Koo’s belief that fiscal stimulus is required to minimize the scale of GDP shrinkage whenever deleveraging is occurring is primarily based upon Japan’s experience over the last two decades, but he also drew on key macroeconomic data from the United States, the UK, the eurozone, and China. Koo emphasized that as policymakers in western economies grapple with seemingly unprecedented economic times, they ought to apply their analytical “binoculars” and learn from the Japanese experience.

While many observers might consider Japanese policymakers poor economic crisis managers, there have been plenty of parallels in macroeconomic data trends during the current crisis (e.g. anemic economic growth despite reduced interest rates). In Koo’s opinion, Japan can boast of having undertaken the “best economic policy in history” through its largely sustained expansionary fiscal policy, which injected a cumulative stimulus of 460 trillion yen during the 1990 to 2005 period and forestalled a potential precipitous shrinkage in GDP. In his view, the only mistake made by Japanese policymakers was when they failed to stay the course and abandoned fiscal stimulus in the 1997 to 2001 period following the “green shoots” of economic recovery that had begun to emerge in 1996.

Read More

tagged:

3 November 2011

Is the United States the Rising Phoenix of the Financial Crisis?

By

Following almost two days’ worth of bearish sentiment about Western economies at the fourth annual CFA Institute European Investment Conference in Paris, at least one speaker is taking a decidedly contrarian position. Charles Dumas, Chief Economist of Lombard Street Research, said that in 2013 the place to invest will be the United States, not China. His thesis represents a provocative twist on the prevailing paradigm: that China is the growth engine of the future and the United States is poised for a decade of stagnation.

Although Dumas’ views on future economic growth are anything but mainstream, he agrees with many economists who believe that the credit crisis was caused by a massive global imbalance triggered by Western economies spending too much and Asian economies (namely China) saving the balance. This massive current account imbalance helped create easy credit, asset bubbles, and ultimately a global financial crisis.

Read More

tagged: