With the economic curveballs being thrown at the world in the past few weeks from the situations in Japan and the Middle East/North Africa (MENA) region, investors must consider a number of new, or less-used, factors when deciding how to protect and grow a portfolio.
To that end, Sallie Krawchek (left), president of Bank of America Global Wealth and Investment Management (GWIM), hosted a webcast on March 21 that discussed the dangers and opportunities presented by current world events. Her guests were Ian Bremmer, founder and president of Eurasia Group, and Michael Hartnett, chief global equity strategist for BofA Merrill Lynch Global Research.
Bremmer (right), who spoke in October at FPA Denver and warned that the free market might be at an end, pointed out two dangers presented by Japan: higher taxes and higher energy costs, thanks to the need to deal with Japan’s heavy load of debt and the necessity of replacing nuclear power with other sources of energy. He also said that foreign investment there, even prior to the catastrophe, had begun to look less desirable thanks to a combination of slow growth and high debt.
Hartnett pointed out that because of the nuclear disaster the world’s energy focus would largely shift toward other sources of power; he cited natural gas, thermal, and coal. He also cautioned against fixed-income investments, adding that he felt corporations were actually safer investments currently than government debt.
Bremmer outlined the MENA situation and said that there could be a wild card to drive the price of oil sky-high. He also said that today’s global environment is one of retreat and introspection, as nations fail to lead and instead turn inward, with geopolitical instability driving a global rebalancing away from the U.S., Europe and Japan as formerly prominent leaders. This tied in with his message at the FPA conference in October: that currency wars, increasing tariffs and reduced global growth were the future.