2023Investor's Guide: From the Peak of the US Dollar to the "Blue Bird"

2023-1-18 16:31| Publisher: 5566| see: 440| comment: 0|original author: Rugi Sharma|come from: Financial Times

abstract: Sharma: The era of loose money is over. Who will win? Who will be the loser? Can we see "Blue Bird" appear? No matter what industry leaders I chat with recently, I have a feeling that people are "frozen". They saw the first large-scale return of inflation in decades, forcing the central banks to ...
Sharma: The era of loose money is over. Who will win? Who will be the loser? Can we see "Blue Bird" appear?

2023Investor's Guide: From the Peak of the US Dollar to the

No matter which industry leaders I have been chatting with recently, I have a feeling that people are "frozen". They see inflation returning on a large scale for the first time in decades, forcing central banks to rise above the century80The fastest rate of interest rate hikes since the early 1990s. They understand that as the most important factor affecting economic and financial behavior, the sudden change in the price of funds signifies a completely different situation from before. But they did not take action. For a long time, they have been accustomed to "loose money", and when the world becomes different, they find it difficult to achieve even if they just think about that kind of world. There is a word that describes this psychological state: career planning phobia(zeteophobia)When it comes to making a decision to change the path of life, one dares not do anything.

Many people continue to do things from the past, hoping that they may not have to face changes. With the idea that the central bank will once again take action to rescue the market, investors still follow the proven path of the past decade and are enthusiastic about technology funds, private equity, and venture capital. The government is still borrowing to spend, and homeowners are unwilling to sell their homes, as if loose money will soon return.

But monetary tightening is not a short-term shock. The new standard of inflation will be closer to4%Instead of2%Therefore, interest rates will not fall back to zero levels. As this stage unfolds, tycoons, companies, currencies, and countries that have flourished due to loose currency will stumble and make way for new winners. Some things will improve. The era filled with absurd digital currencies and television programs will pass. A more decisive era has arrived, which will shape2023The trend of the year.

1、 The US dollar peaked

102For many years, the US dollar has been the world's dominant currency, surpassing the previous five dominant currencies, which can be traced back to15The average term of dominance for the century, most recently the pound, has been longer8Year. The decline should have started long ago. However, the mainstream view still holds that due to the lack of real competitors, the US dollar can maintain its dominant position both now and in the foreseeable future.

The long-term dominance of the US dollar is not a steady rise, but rather ups and downs in one long cycle after another. Two major rises - one starting in the last century70At the end of the decade, a time began90In the mid-19th century - they all lasted for about7However, by last year10So far, its latest rise has continued11Years long. By some standards, the US dollar is now the most expensive in history. Under the pull of the US dollar, New York topped the world's "most expensive" city list for the first time in many years (tied with Singapore for first place).

2023Investor's Guide: From the Peak of the US Dollar to the

The US dollar is approximately overvalued25%Such overestimation indicates weakness. USD Last year10The month begins to decline, and the turning point is higher than the long-term trend value20%The position is very close to the average inflection point that predicted years of decline in the past. This year, the economic growth rate and interest rate hike in the United States are expected to be slower than in other major countries. These signals signal a further decline in the US dollar, a decrease in global purchasing power for Americans, and an increase in people everywhere else.

2、 The Rise of the 'Rest of the World'

The so-called "rest of the world" has been living in the shadow of the US financial market for many years, and many people believe that the US's dominant position in this area will continue. After all, in the past century or so, the United States has been the world's best-performing market, so many people argue that why bother investing in other places?

But will anyone living today wait for a century to come in return? Consider a more practical time span. Since World War II, the US stock market has often outperformed the rest of the world in one decade, and then lagged behind in the next decade. Last century50Age70Age and21The first decade of the century was a great time to invest in markets outside the United States.

stay2010During the prosperous period of the s, the market value of the US stock market expanded,2021Reaching the global stock market capitalization by60%, which is completely higher than the long-term average level15%. From every other perspective, the United States' global footprint is much smaller: corporate profits account for less than half of the world, economic output accounts for a quarter of the world, the number of listed companies accounts for a fifth of the world, and the population only accounts for4%。

2023Investor's Guide: From the Peak of the US Dollar to the

As the valuation of the US stock market approaches post-World War II highs relative to other parts of the world, investors who insist on investing in US companies believe that the US can not only maintain its position, but also enhance it. This is not a safe assumption, especially with the end of the era of loose money. According to an estimate, half of the growth in corporate profitability in the United States over the past decade can be attributed to lower interest costs. Indeed, in the past, most countries were able to obtain loose funding. But financial engineering to increase returns has become an American specialty.

3、 Pay attention to smaller technology companies

The decades of market prosperity in the United States often coincided with the technological boom. Last century90In the era of softwareIBMCisco in the field of internet hardware(Cisco)Led by a group of American companies, they have entered the top ten global market capitalization. But companies that enter the top ten in one decade are rarely able to continue in the next decade, and the technology industry is particularly vulnerable to disruption.

stay2010In the 1990s, leading technology companies emerged in the field of mobile internet services such as shopping, search, and social media, but this model is showing signs of exhaustion. Profits face pressure from the law of large numbers, regulatory agencies, and competitors. As of2020Ranked among the top ten global market capitalization in7Three of the technology companies have fallen out of the top ten. Both are Chinese Alibaba(Alibaba)And Tencent(Tencent). Another one isMetaIt fell out of the front20. The market value of other American giants is also shrinking, although they are currently in the top ten.

The next evolution of the information age is approaching, which will generate new patterns and winners. One possibility is that they will apply digital technology to serve industries - biotechnology, healthcare, manufacturing - rather than serving individual consumers.

If imagination is frozen to the point where it is difficult to imagine an era that is not dominated by today's large technology companies, then the arrival of the era of tight currency makes it more likely for high-level reshuffles. Loose money encourages investors to take risks and bet on expensive but rapidly growing stocks - in the past10Year is the stock of a large technology company. Nowadays, this tendency to pursue scale and growth at any cost is fading.

4、 Less money, better TV shows

The unrestricted access to cheap capital has helped drive the widely acclaimed "televisiongoldThe arrival of the era. previously5In, large-scale streaming services spent less than900Billion US dollars rose to over1400USD100mn The number of new television programs has exploded.

2023Investor's Guide: From the Peak of the US Dollar to the

But like most popular trends in the era of loose money, television is also spoiled by too much money. In the golden age, it self tarnished its reputation and produced more programs, but the quality was even worse.NetflixTeleplayIMDbAverage score on2010Reaching its peak in the mid-1990s8.5Full score10Points, and then steadily decrease to2022Of6.7Minute. There are more and more mediocre programs, and how and where to find a few exciting programs has become the main topic on the dining table. Every time 'White Lotus Resort' is released(The White Lotus)And 'Tehran'(Tehran)There are dozens of high-quality works like 'Snow Flower Mountain'(Snowflake Mountain)And 'The Kardashian Family'(The Kardashians)Such a rotten program.

The audience will not be so confused in the coming year. In recent months, large streaming services have shifted their focus to profitability, rather than acquiring new subscribers no matter how much money they spend. According to TV writers and producers I know, large-scale streaming services are reducing the number of new programs scheduled and setting higher standards for new programs and scripts. In the new era, in many cases, less money can bring better choices, which is also one of them.

5、 There is "residual foam" after foam

A foam may not burst cleanly all at once; In the process of market decline, there is often a sharp rebound - "residual foam" after the foam(echo bubble). In many famous foam, such rebound buffered the downward momentum, including the last century70The commodity foam and90The Internet foam in the late 's.

In the latter foam, the NASDAQ index reached2001At the beginning of the year, it has fallen nearly70%But before the end of that year, it had two false rebounds. Yu Mo looks very big, and technology stocks have risen at the highest point45%. But this is an illusion in mathematical calculations. Rebounding from such a low bottom, technology stocks must rise250%Only then can we return to the previous peak, and throughout2001It has never approached such a height in years. Technology stocks eventually bottomed out the following year and remained sluggish for the rest of that decade.

During the COVID-19, small foam emerged in many parts of the market, ranging from small stocks, including Tesla(Tesla)Clean energy stocks, cryptocurrencies including Bitcoin, to 'special purpose acquisition companies'(SPAC)And technology companies that are not profitable but have the support of major investors (such asSpotify、Lyft). These little foam have appeared50%to75%The decline, but the story is not yet over. Cryptocurrency Kings and Elon Musk(Elon Musk)Our financial fortune is still spinning wildly.

There are extremely powerful psychological factors behind the foam. People are reluctant to give up the thought that led to the foam. They buy on dips and only give up after their beliefs are repeatedly undermined.2023More Yumo may emerge this year, including the most popular theme of the past decade - large technology stocks in the United States and China - and Yumo may also emerge. Don't be foolish again. The next big winners will appear in other fields.

6、 Japan Returns

The image of "Japan's rise" - an unstoppable superpower about to emerge - was once so deeply ingrained in global imagination that it was not until1992American presidential candidate Paul Sangers(Paul Tsongas)He also claimed that 'the Cold War is over, Japan has won'.

Today, if there is any image of Japan, it is the elderly and bad debts, not the superpower. Global investors hardly think of Japan, and its leaders should have expected it that way. If a country that is at its peak will be hyped up to the skies, and a country in crisis will be widely disliked, then a country with hope for success should be ignored by everyone.

Silently, Japan is moving in a positive direction. The working age population of the entire developed world is about to shift towards negative growth, while Japan is shifting from30This trend emerged years ago. Measured by the ratio of debt to economic aggregate, the private debt of other developed economies is on average heavier than that of Japan.

For most of the past decade, Japanese households and businesses have been reducing their debt burden, and in the era of tight monetary policy, their lives may not be as difficult as outsiders think. The profit margin of the enterprise has maintained a steady increase. After adjusting for labor productivity, Japan's labor costs are now lower than those of China.

Japan may no longer give the impression of a rising superpower, but it is2023The year may be relatively better.

7、 Anywhere except China

Due to the continuous rise in labor costs in China, it is said that many foreign companies interested in outsourcing production are now turning their attention to "anywhere except China". In the United States, people are talking about "returning to China" or moving to neighboring Mexico, but the biggest winners so far are in the surrounding areas of Chinese Mainland: Vietnam, Taiwan, India and South Korea.

More than half of American companies in China stated that their first choice of relocation location will be in other regions of Asia; Less than a quarter of companies say they will return to the United States; Less than one fifth of companies say they will move to Mexico or Canada. Making these decisions involves considering various risks and costs, but there is a core advantage in Asia other than China, which is wage levels.

The average monthly salary of factories in Vietnam and India is less than300The US dollar is about half that of China, a quarter lower than Mexico, and a significant difference from the United States - the average monthly wage of American factories is about4200USD. No wonder American companies still want to set up factories overseas, but they don't want to settle in China anymore.

8、 Orthodox regression

last year11In January, a market sell-off occurred in Brazil, which is widely attributed to President Luis Inacio Lula da Silva(Luiz Inácio Lula da Silva)Lula dismissed the sellers as' speculators, not serious people 'for their massive spending plans. Investors continued to sell, forcing Lula's aides to retract some of his remarks.

2022Other countries that became market selling targets in include Chile, Colombia, Egypt, Ghana, Pakistan, Hungary, and even the United Kingdom. Their common denominator is the high external and government deficits, as well as leaders who threaten to worsen the deficit by adopting unorthodox practices.

The choice of selling targets is rational, not ideological. The market sell-off hit Lula and other left-wing populists, as well as former British Prime Minister Liz Truss(Liz Truss)Wait for the conservatives. Truss lost his job in the crisis. Everyone has to withdraw their previous unorthodox practices in substantive actions or words. The Colombian finance minister promised not to do anything crazy.

As the currency tightens, the market's tolerance for unorthodox practices is decreasing, and its list of selling targets is also getting longer. Last year, about8Compared to countries that have become targets2010In the s, the market was heavily targeted at only a few countries: the most notable ones were Greece, Türkiye and Argentina.

Since then, Greece has reduced its deficit and debt and become a popular borrower in the global market again, but Türkiye and Argentina have not. expect2023There will be more such struggles this year.

9、 Relax

What doesn't happen will affect2023The political sentiment of the year. This year is the first time in this century that there has been no G7(G7)The country holds national elections. stay20Group of Nations(G20)In other countries, there are not many election battles either. Nowadays, elections bring more differences than unity, so the suspension of elections will bring a sense of relaxation.

In election years, developed markets often lag behind other markets, but emerging markets often rise, perhaps because young countries hope that new leaders can have a greater impact on economic growth. Due to the lack of major elections this year, the spotlight may be more focused on smaller elections. Two of these elections are full of various possibilities.

In Türkiye, President Recep Tayyip Erdogan(Recep Tayyip Erdoğan)In the near term of governance20Facing severe challenges after the new year. Erdogan was a typical leader who initially was very strong, but later lost his direction. He may now be the world's most unorthodox leader in terms of finances, posing a long-term threat to his country's future.

In Nigeria, President Muhammadu Buhari(Muhammadu Buhari)Make people's lives worse. Poverty intensifies and corruption worsens. Now, due to term restrictions, Buhari is stepping down. stay2In the month's election, the election of any of the four main competitors may bring improvement. The most eye-catching one is Peter Obi(Peter Obi)He is a political outsider with serious plans to clean up Nigeria's oil theft regime. If a few elections can produce new reformers, then the feeling of a politically calm year would be even better.

10、 Bluebird

2000In the late 1990s, writer Nassim Nicholas Taleb(Nassim Nicholas Taleb)Make the term 'black swan' popular. The Black Swan theory originally stated that unexpected events may bring good or bad impacts, but in2008During the global financial crisis in, the black swan became synonymous with negative impacts. Since then, people have been on guard against black swans.

Now, the concept of the 'good black swan' may return in the form of the 'blue bird' - a rare, unforeseeable, and joyful event. since2008Since the beginning of the year, geopolitical shocks and economic downturns have persisted, and in an era of tight monetary policy, they may become even worse. Amidst endless worries, the world may shift its risk radar towards positive shocks that may bring comfort.

The next blue bird may be: Ukraine's unexpected peace, which will immediately reduce energy and food costs; The thawing of the Cold War between China and the United States will promote global trade; A new digital technology has re boosted productivity, thereby helping to curb inflation. These may seem unlikely, but accidents are precisely the essence of Bluebird.

Author Rugi Sharma(Ruchir Sharma)It's Rockefeller International(Rockefeller International)chairman
"Small gifts, come to Huiyi to support me"
No one has offered a reward yet. Give me some support

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