So farewell Jim O’Neill.
Goldman’s Mr BRIC is moving on to head the bank’s asset management business – FUM $802bn — and here (via Zerohedge) are some excerpts from his farewell letter.
In it the lifelong Manchester United fan — none of us are perfect — argues the BRIC and N11 story (next eleven) is far from played out:
(Emphasis ours.)
2) The past couple of days has seen China publish all its latest monthly data, for August. China is undoubtedly the star BRIC, and as I have shown in many recent presentations, “ you haven’t seen nothing yet”. Having overtaken Japan about 6 years earlier than we originally envisaged, this decade, the real US$ value of China’s GDP may double again, and contribute twice that of the US between now and 2019.
The data suggest that , firstly, last months perceptions of significant slowing were exaggerated, and secondly, China is in a good position to be regarded as having achieved some sort of soft landing. In terms of its ongoing performance and contribution to the world, two monthly numbers I keep special track of, are both looking encouraging. Firstly, in terms of the trade numbers, the latest data shows in the 8 months year to date, China’s imports have increased by $ 440bn, a bit slower than at their peak rate close to $ 500bn, but still huge.
As I am fond of saying, especially to Greek problem obsessed observers, China was importing another Greece every 8 months. It has slipped to every 9. Remarkable. Secondly, I track the relationship between monthly retail sales and monthly industrial production, within the context of overall growth. This month, while IP surprised a bit on the upside, retail sales surprised even more. If China can grow close to trend ( somewhere between 8-12pct) and within that, the ratio of retail sales to industrial production rise, then this is a great sign for the world and for life without the US consumer. At the reported 18pct plus rate-if this were representative of broader consumer spending, this would represent more than $300 bn per annum. By the middle of the decade, it will be above $500bn at the same rate.
3) The other 3 BRICs are , in aggregate, currently, about as economically important as China to the world, both in terms of overall size, and their consumers. Each of them keeps demonstrating that they are coping pretty well with the challenges of the US and the West, as they have done again this week, Russia included. Following their 8.8pct Q2 GDP, India reported an extremely impressive 13.8pct year on year increase in IP. Brazil exceeded expectations with a 8pct plus Q2 GDP also. As for Russia, they came through at 5.2pct. Lots of focus on policy reform across the board, especially Russia in recent days.
4) The “ Next 11” are generally coping reasonably well with the developed nations challenges, with one or two notable exceptions, and as we have shown on many occasions, some of these countries are also becoming more and more important in their own right. As I remarked recently, 9 of the 10 that have equity markets are all positive this year, 5 of them in a major way. A reader corrected me about this statement by informing me, that actually, the 11th, Iran, does have a stock market, and it is also having a very strong year. It is of course, one that many cant really access. I hear from some sources, that a Next 11 fund is about to be launched, perhaps not surprisingly.
Also worth highlighting is the fact that O’Neil seems to differ quite a bit with the rest of his colleagues when it comes to the topic of QE2:
Shifting to monetary issues, anyone who thinks the US is inevitably slipping down the Japanese path should read the interviews of outgoing Fed Vice Chair Don Kohn from early this week. From someone who has been close to the centre of monetary policy for decades , his thoughts are rather relevant to anyone trying to follow the Fed. He made it rather clear, and this is literally days after he formally left, that if the economy does not pickup in line with the Fed’s hopes, then they will undertake more “ QE” to achieve easier financial conditions.
Related links:
O’Neill heads Goldman division – FT
Goldman urges the Fed to take the big bank option – FT Alphaville
Goldman still expects a further $1 trillion of QE – FT Alphaville.