This is a weekly update on what I've been reading and watching. To encapsulate, you had asset class predictions from GMO and BCA's perspectives on Brazil. Three strategists recommended selling this rally. Peter Bernstein reflected on the similarities to the Great Depression, and Bill Gross talked about a fat-tail possibility. The Indian finance minister's comments qualified him for the "bizarre quote of the week".
I haven't had a chance to
read the transcript of the annual Berkshire conference. I did manage to catch this quote from a
Marketwatch article, which discussed Berkshire's acquisition of a portfolio of subprime mortgages with frozen interest rate resets.
Buffett: "We're not in the business of resetting mortgages higher". That's quintessential Buffett for you. Candid, honest and fair. Long term profitable ventures are sustainable in nature, and you cannot sustain predatory lending which dupes gullible borrowers beyond a point. Berkshire's enterprises have a very human face to them (Sudan and PetroChina controversy notwithstanding), something that corporations would do well to keep in mind. With this fitting prelude, let's dig in on what the market commentators were saying this week.
Jeremy Grantham came out with GMO's seven year forecast on various asset class returns. I thought this chart was good food for thought:
BCA Research is clearly positive on Brazil's prospects:
P Chidambaram (Indian Finance minister) (Bizarre quote of the week) :
"If rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice."
Comment: I seriously worry that we could have a black swan event in food and commodity prices, further exacerbated by political expediency. There are elections in India next year, and the political posturing has begun. Deficit is high, inflation is out of control, futures trading on food staples has been banned, fuel subsidies are distorting fuel usage, exporters are demanding tax incentives, sops or government intervention in keeping the rupee pegged to the dollar. The list goes on . The news from China isn't getting any better.
