“…in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children's futures. And we are all mortal.” John F. Kennedy - American University Speech, June 1963.
There is nothing new about the US starting a trade war. The last one happened during the Reagan presidency in the early eighties (but there were others before that) and culminated in the so-called Plaza Accord in September 1985 (more about this later).
President Trump may be right about the Euro being undervalued versus the dollar. Popular measures of valuation, such as Purchasing Power Parity (PPP), are not particularly reliable in the short to medium term because of the underlying assumptions that underpin them and the myriad of soft and hard variables that have an impact on currency fluctuations.
Now it’s official: The trade war is about great power competition, not about trade. This is the fourth newsletter we dedicate to the trade war since the first one in March 2018. Although we suspected all along that there was more to the trade war than met the eye, we merely confined ourselves to strictly economic issues lest we be accused of propagating conspiracy theories
With China rapidly approaching its final stage of development, we as investors are hard pressed to find the next great success story. We believe that Vietnam will be such a story for a series of reasons: Vietnam is still not in the radar of international investors because of scarce liquidity and lack of presence in the major indices.
I thought I would start the year with a few thoughts on what could happen in 2019. While I view this as a fun exercise, I leave it up to you to assess just how far-fetched the below “thoughts” really are.
As practitioners active since 2014 in venture capital investing, we are beginning to see a definite change of attitude on the part of our HNW clients toward venture capital. This does not surprise us. In fact, investors, especially those who are professionally advised, appear to know we are presently in the middle of a transition whereby central banks are gradually raising interest rates (FED), or already mapping out their exit strategy (ECB).
The relative outperformance of the US stock market is cited as evidence that the trade war is being won. While this type of narrative may be politically useful in the runup to the November mid-term elections, I believe it misses the point completely.
There is an eerie quiet in the equity markets of developed countries. Yet there is no shortage of reasons to be worried. Amid the bombast surrounding the tariff confrontations, sanctions, cold and hot wars, QE tapering and general hubris, the world hardly seems like a tranquil place.
“I don’t do it for money. I’ve got enough, more than I’ll ever need. I do it to do it. Deals are my art form. Other people paint beautifully…or write wonderful poetry. I like making deals.”.