Two Expert Opinions on Global Risk
Last week I attended the annual TD Ameritrade Advisors Conference. During the conference I had the opportunity to hear several good speakers and felt the knowledge that I gained would be very beneficial to share with you. Two speakers in particular provided excellent insight into the current global political and economic state of affairs. Those two speakers were Ian Bremmer and Michael Hayden.
Ian Bremmer is the president and founder of Eurasia Group, the leading global political risk research and consulting firm. Dubbed the “rising guru” in the field of political risk by The Economist, he teaches classes on the discipline as Global Research Professor at New York University. He has authored several books, with his latest being, Three Choices for America’s Role in the World.
Michael Hayden is a retired four-star General and the former director of both the CIA and the NSA. Needless to say this is a guy who knows a few things about global risks.
Below are the primary points from their speeches.
- Geopolitical risks are now having significant impact on world markets as America has pulled back from policing the world due to loss of public support and domestic budgetary demands. Geopolitical risks must now be considered when investing and managing one’s wealth.
- America is uniquely positioned to be a preferred place for people to invest due to our rule of law, productive workforce, innovative culture and location.
- China is not our enemy because the Chinese need a strong, stable America who continues to be a key trading partner. The risk to America is that the current Chinese political structure is replaced with a less stable form of democracy as we are seeing in parts of the middle east.
- Both men expressed concern about the increased proliferation of nuclear weapons in politically unstable countries. Countries such as North Korea, Pakistan, Iran and Russia.
- Ian Bremmer felt that the discussion about the disappearance of the middle class is being overplayed for political reasons during an election year. The truth is, America’s middle class is the envy of the world. He feels many of the developing nations of the world such as Brazil, China, Russia, etc., face a much bigger risk of having their manufacturing or commodity-based economies suffer significant job losses in the future due to artificial intelligence and robotics.
- Bremmer continued to provide some commentary on the current political elections in America. He feels no one should make investment decisions based on the actions of candidates on both sides of the isle. He feels that all of the candidates are positioning themselves as party extremist during the primaries and will have to become much more moderate during the general election in order be electable on a national level. Bremmer believes that if a moderate from either party is elected President, Speaker Ryan has signaled he is willing to work with the new President to advance much needed reforms in Corporate taxation and Social Security.
- Interestingly, Bremmer has recently interviewed over 20 of the Fortune 100 CEO’s and found not a single CEO who is altering their companies’ future plans based off of the Presidential election cycle.
- Hayden feels the current Iranian nuclear deal is not a good deal, but at the risk of being inconsistent, the next President will likely support and implement the pact.
- Lastly, Hayden feels protecting our national assets from cyber threats will continue to demand increased resources.
So where does this leave us with regards to your investments? We currently do not have any direct investments in emerging market economies, and have increased the cash position in your portfolio. I’m expecting one more big downturn in the stock market in the near term and will likely use that as an opportunity to reallocate some of your cash back into US stocks. If you would like to review your account with me, please click here to access my schedule.