There were numerous interesting, informative and mostly bearish speakers during the latest Strategic Investment Conference held at the end of May. Among them were Lacy Hunt, David Rosenberg, Neil Howe, Jim Grant, Mark Yusko, Gary Shilling, and JohnMauldin (readers can watch video interviews with these speakers on Mauldin Economics’ Youtube channel and their full presentations can be found at the following page) all of whom painted a very pessimistic picture for the stock market but, as Tony Sagami points out, the most alarming comment came from Richard Fisher.
Fisher was president of the Federal Reserve Bank of Dallas and a voting member of the Federal Open Market Committee (FOMC) from 2005 to 2015. He was one of, perhaps the only, skeptic on the Fed board going into the great financial crisis, warning on numerous occasions about the upcoming crash only to be ignored by his wiser peers and certainly Alan Greenspan and Ben Bernanke. He was also ignored in the post-Lehman era by both Bernanke and Janet Yellen.
Government Debt: he is worried about the $19 trillion US government debt (up $11 trillion since 2008) because the Fed has fired all its monetary bullets and can’t expand the balance sheet any further.
China and social instability: he thinks communist leaders care about production but not efficiency. "They might produce more, but our products work," jokes Fisher. There are entire cities in China with nobody living in them, according to him. Fisher says the biggest problem in China is social stability. "I'm deeply worried about their ability to maintain social stability,” but... “It doesn’t affect us directly.” Another risk in China is that millions of people are pulling their money out of the country.
Low interest rates don't work: "We had a long period of moderation and low interet rares, which did nothing to adjust." The online countries that adjusted were Poland and Mexico, according to Fisher.
The failed Brazilian experiment: Fisher said Brazil is a symbol of what's wrong with emerging markets. They lived through the crisis but learned nothing from it.“Brazil has always been a country with potential, and it’s never been realized."