The Investment Thoughts of the Hamilton Financial Panel
About twice a year, Hamilton Financial, Independent Financial Advisors invites some investment luminaries to discuss the current global economic situation and make some predictions for the future. Here is a synopsis of the debate chaired as usual by our Chairman Alex Hammond-Chambers (former Chairman of Ivory and Sime and director of a number of investment companies). Other members of the panel were: Angus Tulloch (joint managing partner, Asia Pacific/GEM Equities, First State Investments), Max Ward (former partner of Baillie Gifford and current manager of The Independent Investment Trust plc), Robbie Hunter (investment Manager at Gillespie MacAndrew).
The Discussion
AH-C: I’d like firstly to take a look at what the big trading nations are doing to help their economies.
AH-C: Angus, let me start by asking you about a chart I saw the other day showing the Chinese Stock Market has fallen circa 60% in just under 3 years. Given that China is now so important to the world economy, is its stock market sending out a warning?
AT: No I don't think so. The stock market in China is dominated by the natural instinct of the Chinese to gamble; it is a largely closed market and not really a barometer of economic conditions. China’s problem is excess liquidity, exacerbated by artificially low interest rates. Until interest rates are raised to a level which is above the level of inflation, its government will face having to tackle one speculative bubble after another; first the stock market, currently property and next, possibly, gold. The export driven fundamentals of its economy are not particularly affected by this yet; however, in time, China must both consume and import more.
AH-C: Thanks Angus. Now can we take a look at the USA, which as far as I can see, is the one major country that’s doing little to address its fiscal deficit? President Obama seems addicted to economic morphine (printing money) with no real plan to balance the books – are we nearing the point when the US dollar goes to hell in a handbasket?
AT: The fate of the US Dollar is inextricably linked to China; China exports its goods to the US and lends money to the US by buying US Treasury Bonds; the US uses the money to buy Chinese goods; just as companies like Jardine Matheson…
