Friday, July 4, 2014

DBS Asian Insights Conference 2014

Today I was lucky enough to attend the DBS Asian Insights Conference 2014. I think it was a fantastic conference and I learnt a lot from listening to all the speakers.

Of course, the main topics were about Asia, the economy and money stuff. I have to say that I am very proud of myself that I understood everything that was covered by all the speakers. Not bad for 24 year old punk, right?

I do not want to talk about specific views or opinions because honestly there was just too much going around. Very interesting stuff all around, but I think the most interesting part was at the very end, with Mr. Tharman Shanmugaratnam.

There were many fantastic tidbits throughout the entire conference, with many memorable quotes and learning points, but Mr Tharman owned the stage. He was extremely frank and honest the whole time. He did tactfully sidestep some particular issues and gave very very subtle hints on some sensitive ones. I guess the reason for that is because he really looks at the big macro picture rather than the small specific details, which is exactly how a guy like him should look at things. His answers were really top-notched and unrehearsed. He didn't have to rehearse because it is evident that he is very aware and knowledgeable about many issues. I really respect the guy.

So, I want to share just some of the things that he said that really stuck with me. These are not quoted word for word, but this is just how I remember his saying it.

"I don't think the US or Europe is anywhere close to normal. This new-normal is not sustainable"

My take-away from this is that he doesn't really know if the "recovery" in the US and Eurozone really is for real, and actually appears doubtful. I agree and concur. Nothing seems to be fixed - except their stock market.

"The US face risks of their growing pension crisis"

This is was with regards to the headwinds that the US faces in the future. The pension crisis is real, but no one seems to care about it because it is in the future. The longer they delay solving this issue, the tougher it will be to solve as each day goes by. It's a slippery road.

"Another risk is over-reliance on depending on Central Banks for growth"

Unconventional monetary policies, flooding the system with liquidity (Clt+P MONEY) was specifically highlighted by him to be only short-term measures to jolt the system, not as a long-term solution which does not tackle the underlying root problem. I totally agree with him on this. Pfft, Keynesians.

"The longer the unemployed remains out of the workforce, the harder it is to return"

Although he specifically was talking about the difficulty of unemployed to return back to the workforce, I think this can be applicable to many things. The longer easy money policies are around, the harder it is for companies to remember how to fuel real growth - capex, management, innovation and productivity. Not fake growth, through M&A and share buybacks.

"There are risks of prolonged subnormal growth"

This quite nicely ties in with the previous point. Globally, the economy has been spoon-fed into recovery, can it really walk on it's own now? Personally, this is also my view in the medium term. My hunch is telling me that we are going to see low growth and consequently, low returns until the end of the decade. Why do people keep thinking there is going to be a "take-off" that launches massive economic global growth?

"We welcome disruptive market players. They increase productivity and knock out old players who do not have a competitive product"

This is golden. While many countries are so nationalistic and protectionist, it is clear that this man believes in the free market forces. Why have a bleeding, unproductive industry? Take the hit, it will be pain. People will get retrenched, but they will get retrained, and then they will fill up other jobs in the market which are available (since the jobs that are available are only now in industries which are more productive and competitive). This is absolutely logical, pragmatic and long-term thinking to a very painful problem that many countries face. I am glad to hear that he is a proponent of the free markets.

Finally, there is one last thing that he said that that I can't really quote him because it is more of a concept, but I still find it fascinating and want to share it. He was alluding financial systems to be akin to a game. Well designed games are like well designed financial systems.

First, there must be rules to the game, which the players should stick by.
Second, there must be supervision in the game, to ensure players play by the rules.
Thirdly, there must be clear crisis resolution, to solve any problems and get all the players back into the game without much inconvenience or unhappiness.

He said that much of today's modern efforts are focusing on the first issue, creating rules to the game. However, he thinks that there is a lack of supervision, which I feel is a polite understatement by him. Just think about it. It does seem quite logical, doesn't it?

All in all, I must say that I am very impressed by this conference that DBS organized. Their speakers are definitely experts and Mr Tharman shared remarkable insights. The programme was well-run and was very pleasant. I drank 6 cups of coffee to power me through the day. Thinking makes you really tired.

While I learnt a lot about the current "feel" of the market, I think I learnt much more about myself, sound politics and sound economics. I hope to be able to attend next year again.

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