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Morgan Stanley's Stephen Roche Says Keep You Money Abroad

|Includes: iShares MSCI Emerging Markets ETF (EEM), MS

I couldn’t help but laugh when I saw my old colleague from Morgan Stanley, Stephen Roche, on CNBC today. The current chairman of Morgan Stanley Asia (NYSE:MS) is bearish on the economy and sees no chance of a “V” shaped recovery, just a very weak one at best. The “green shoots” are still underground. “The consumer is toast,” he averred, and he expects consumer spending to plummet from a record 72% of GDP to 67% in five years. Since a massive external deficit has to be funded by foreigners, the outlook for the dollar is “down, down, down.” There won’t be a crash, just a gradual descent, as we have seen for the last 38 years. China isn’t going to bail us out. The US has only 4.5% of the global population, but accounts for $10 trillion of consumer spending. China and India together have 40% of the population, but only spend $2 trillion. This disparity is 50:1.  Steve was an early BRIC fan, like me, and since China is so overbought short term, India is his first pick. You want to buy countries that have to build infrastructure and a middle class, and China has already done that. India’s recent election of a more pro business government is the trigger. I aggressively pushed India at the beginning of the year (http://www.madhedgefundtrader.com/January_5__2009.html), and it has doubled since then. The humorous thing about all of this is that Steve has been spouting the same bearish line for the US for 15 years. The in-house joke at MS was that he was sent to China because his negative sentiments were scaring the firm’s conservative US institutional investors. Given the performance of the BRIC’s since then, it is Steve having the last laugh.