Tuesday, October 5, 2010
Look to the East for Liquidity
We continue to see the impact from the collapse of liquidity and erosion of value in the old world economies flowing from the global financial crisis of 2007 and 2008. The Wharton School of the University of Pennsylvania recently reported ( In Search of Capital ) that during 2009 angel investing in the USA in start ups declined a further 8.3% to $17.6 billion - following an earlier massive drop of 26.2% in 2008. This didn't really overcome the positive news that because deals were slightly smaller in size last year there was actually a 3% increase in the total number of firms that got financing. If the US stops funding entrepreneurial activity there is something seriously wrong.
In June we saw Dave Kansas pose the question Did China Save Your Retirement in his Wall Street Journal article - proposing that unless the Chinese let their yuan appreciate against the US dollar US retirement savings were under severe threat - and expressing some relief that there appeared to be some signs that China appeared to making moves to loosen controls on their currency. More recently we have seen the US legislature approve new laws empowering the administration to take punitive action against the Chinese unless they relax their currency controls. I won't hold my breath. Why should/would they?
To me the best indicators of what is happening is to watch where the private bankers and investment bankers are going with staff, infrastructure and to source capital. And it's not Europe or North America. It's India and China. Look at the example of Lombard Odier Darier Hentsch, the small and venerable old boutique Swiss private bank - which is boosting its Hong Kong team. At the time it made this announcement in September it criticised it's larger private banking rivals also rushing to China stating that the days of product pushing are over and the future of private banking is "where the client is still the focus". "The deleveraging that has occurred following the global financial crisis in 2008 has resulted in a structural change in the market. It is not a cyclical change".
I am excited by this. As an Australian living in our island at the bottom of Asia I am living right in the middle of the largest global power shift since the war.
What opportunity there lies for the brave and the agile!