Notes From the Russia Forum

Includes: CEE, RSX
by: Roger Nusbaum

This link will take you to a 68-minute video of a panel discussion at the Russia Forum moderated by Marc Faber with Nassim Taleb, Hugh Hendry and a couple of other panelists. It is worth the time spent.

Hendry struck me as the most interesting of the lot (he and Faber had some good banter going throughout) and Taleb, quite frankly, seemed a little out of his element. The other panelists were more narrowly focused on investment ideas and, as broad as the conversation was, Taleb was the most vague. This was the panel where he talked about shorting treasuries that Felix Salmon ripped up in this post.

Taleb is, in my opinion, a great thinker who has added to our (well my anyway) stream of consciousness, but at one point during the panel he made a comment about shorting countries based on the number of US-educated PhDs. No one else knew what to do with that one.

While there was a lot of meat on the bone throughout I was probably most interested as the discussion moved to China. Taleb noted, vaguely but it was a good point, that early in the last century it looked as though Argentina was poised to be the global economic leader and, of course, it never happened. A little more specifically, Hendry noted that at some point the country that becomes the big global lender eventually runs into trouble and he cited the US and Japan as examples. His argument seemed to be along the lines of this post from Michael Pettis from a few days ago. Hendry also expressed concern about the massive over capacity in China.

Faber made his usual bull case for China and one of the other panelists was bullish on China but made some odd points as to why. He (sorry I never heard his name mentioned) said, regarding of the over capacity, they might build a bridge to nowhere but that soon that bridge will lead to somewhere. He also talked about the demographics being a positive catalyst. That point would have had more credibility if he mentioned the problems they face later this decade or early next about an aging population.

One interesting point about over capacity was made by yet another panelist, this one from South Africa (sorry no name here either). He said that most of the railroad companies from the 1800s went bankrupt but that they still contributed to making the US a great country, meaning that the over capacity could be a short run problem not to be underestimated, but that China as a long term theme has legs. Another point made by this fellow was that while the US has its hands full trying to figure out China, the "rest of the world" loves China.

I'll finish this short post by saying that China is a theme and all themes go through a maturation process. Earlier on in the theme selectivity matter little. As time goes on, selectivity will become increasingly more important. If you've been reading this site for a while you know that I think the most important thing for now is to avoid Chinese financials. My preference is to own where money has to be spent.

Closer to the start of the video there were some interesting comments on farmland with the only memorable nugget being that Canada has 23% of the world's fresh water.