The themes of the conference should come as of no shock to anybody. Key issues have been financial reform, saving the Euro, and how to increase growth in the West.
The Euro
As a currency, the Euro appears to be struggling politically and fighting for its "survival." At Davos, German Chancellor Angela Merkel went as far as to say, "...if the Euro fails, Europe fails." These are pretty strong statements as global leaders and investors are clearly looking to a strategy from Europe regarding the sovereign debt crisis that seems to overtaking Europe right now.
Essentially, the Euro issue boils down to this: there is a group of strong countries in Europe and weak countries at the periphery. In the strong countries, it is politcally unacceptable to continue to just give money to the peripheral countries to bail them out. As most leaders say, this isn't a strategy. To help the cris, the European Central Bank has continued to buy the bonds of Greece, Spain, and Ireland to keep yields low. The bank cannot continue to do this without losing credibility.
There appears to be no easy way out!
At Davos, No Clear Strategy to Save the Euro (click here)
Jamie Dimon
Jamie Dimon, CEO of JPMorgan Chase, had positive words coming from Davos regarding the global economy. For full disclosure, I own shares of JPMorgan, but highly regard Jamie Dimon as a CEO. During the financial crisis, JPMorgan did not take all of the "dumb" risk other banks did (i.e. Citi, Bank of America, etc.) and has become a stronger bank as a result.
In an interview on CNBC, Mr. Dimon stated there are plenty of positives and that everybody is looking for "black swan" events (an unforeseen event):
Now people see black swans behind every rock...The fact is loans are up, financial conditions are terrific, companies are growing again...we think there's a lot of cash. You're talking about trillions on balance sheets earning zero. Eventually people are going to say, 'Zero isn't an adequate return, I want to do something different than that.'
Cash Is Flowing Again, Will Fuel Global Recovery: Dimon (click here)
Another thing I like about Jamie Dimon is he is not afraid to stand up for the banking industry. At Davos, Mr. Dimon said, "...he was sick of “this constant refrain — bankers, bankers, bankers.” Mr. Dimon said he is not against regulation, just against irrational regulation. In addition, I highly applaud Mr. Dimon for breaking with other banking heads and state that there should be an orderly process for banks that fail to be dissolved.
Stop Picking on Bankers, JPMorgan Chief Says (click here)
Robert Schiller, economics professor at Yale, stated he believes markets are overpriced. In addition, he believes we are operating in the "dual economy" dynamic, where emerging markets and the developed markets are growing at two different and diverging growth rates.
Stock Markets Are Overpriced: Robert Schiller (click here)
Company size and IPO's
Below is a clip from Barry Silbert, CEO of SecondMarket, which is an exchange for trading shares of private companies. In this short clip, Silbert highlights the short death the IPO market over the past few years. Key reasons for this is the minimum size for companies to go public, having to deal with onerous regulations like Sarbanes-Oxley, and having to focus on quarterly earnings versus the long-term profitability of the business.
Voices from Davos - video clip (click here)
So, I went back and tried to do a little more research on SecondMarket. I believe it is a very interesting service and will provide another outlet for qualified investors seeking "private equity-type" (my phrase) exposure. In addition to the reasons above, SecondMarket also provides investors a market for their shares when the financial crisis caused liquidity for micro-cap and small-cap names to dry up:
In some ways, the financial crisis drew interest in these types of funds. During the crisis, the market for initial public offerings dried up, denying company founders and venture capital firms one of their main ways to cash out. Many employees of start-ups have substantial parts of their net worth tied up in company stock, and some want or need to cash out.
Buying Shares in Private Start-Ups (click here)
Start-Ups Could Sell Their Shares Privately (click here)
This whole segment of the market is extremely interesting to me. Expect a post just about these private exchanges soon!
Davos Mistresses
On a lighter note, the wife of Joseph Stiglitz, wife of the Nobel Prize winning economist, had an interesting blog post about wives and mistresses at Davos.
Jealous Davos Mistresses (click here)
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