By FS Staff
Global intelligence and advisory firm, Stratfor, recently released their outlook for the third quarter of 2015. From cyber warfare to economic instability, Financial Sense spoke with Stratfor's Vice-President of Global Analysis, Reva Bhalla, about the top threats facing investors and the international community.
Bhalla explains how the current economic and geopolitical problems around the world are greatly intertwined and lists a number of concerns for investors: countries bracing for currency volatility as the Federal Reserve prepares to hike interest rates; the decline of commodities and related impacts on commodity-exporting countries; the European drama surrounding Greece, which will reach another crisis point; and a possible re-escalation of fighting in Ukraine were just a sampling of the topics discussed.
On the topic of emerging markets, Bhalla says a number of countries are struggling with sinking commodity prices and the rise in the U.S. dollar. While many regions are expecting a Fed move and taking moves to insulate themselves, she says Russia is a huge concern. The country's budget has been slashed, except in the area of defense. Startfor sees this as foreshadowing "another wave of escalation in the eastern Ukraine," which will force the United States to act and strengthen sanctions. Even more concerning, according to Bhalla, is the regional fiscal situation in Russia and the potential for social unrest. The country could be facing "significant internal turmoil" with limited funds to bailout faltering regions.
Echoing comments made by one of our prior guest experts, Russell Napier (see here), Bhalla also listed Turkey as a potential threat to global and financial stability and listed the problems they are facing.
We asked Bhalla about China and noted that her warnings of a crash in Chinese stocks in her last interview with Financial Sense (see here) proved quite timely. Given recent developments, we asked about their outlook for China moving forward. "We're definitely going to see more volatility in the stock market and the authorities will continue to intervene both overtly and covertly," she says. Bhalla goes on to point out that equity markets are not a significant source of corporate financing, and (so far at least) the boom and bust has not caused major stresses in the real economy or abroad. In agreement with many of our guests, including recent comments by Dr. Woody Brock (see here), Bhalla cites a number of structural issues causing a continued slowdown in the region.
Touching on the broader future of the BRICS (Brazil, Russia, India, China, and South Africa) and plans to cooperate, Bhalla explains that while there is a desire for an alternative to U.S.-led institutions, Stratfor is skeptical about the idea of BRIC integration as a rival superpower to the West and highlights a number of long-term structural and political concerns, particularly between Russia and China, that will put pressure on their economic alliances.
Listen to this full interview with Reva Bhalla, Vice-President of Global Analysis at Stratfor by logging in and clicking here.