World Economy: Left &Nbsp Or Right?

If you work in London, you will be able to see two very different worlds one day last month.

That morning, Goldman Sachs held a global strategy meeting in their offices in fleet street.

And that afternoon,

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The two meetings are not only very different in style, but also different in content.

The team of Goldman Sachs wore a suit and tie, and the large amount of charts and data they carried were thick enough to serve as a tool to repel robbers.

The clothing of analysts at Societe Generale seems to be more like going to sea or attending company meetings. Their slide information can even be easily put into trouser pockets.

The disclosure of regulatory disclosures in Goldman Sachs is longer than all the supporting materials of Albert Edwards, a global analyst at France and.

The contents of the two meetings are also quite different.

In the world of Goldman Sachs, the world has bright prospects. In the world of France, the audience needs not only to bring umbrellas, but also to wear gas masks.

However, when the audience of the Bank of France has a hard time, they have a slide showing the similarities between the Ben Bernanke and the Rudolf von Havenstein, the German National Bank Chairman Rudolf, Germany's hyperinflation era.

Goldman Sachs believes that this year's global economic growth will be stronger than expected, and inflation will remain low.

The world outlook in Goldman Sachs seems to rely on their confidence in emerging economies, especially the BRICs (BRICs, Brazil, Russia, India and China).

The abbreviation was first created by Goldman Sachs analyst Jim O Neill, and now he is president of the asset management division of Goldman Sachs, Jim.

In his view, Western observers have underestimated these developing economies.

For example, in the past ten years, China's consumption expenditure has risen to $1 trillion and 600 billion, and this year there will be a new growth of US $400 billion.

Differences in cyclical adjusted P / E ratios

In the model of risk premium for government bonds, Goldman Sachs shares remain cheap.

In their booklets, there is no diagram of a cyclical price earnings ratio (CAPE), which is another tool for valuation, but this issue has also caused much controversy at the conference.

David Kostin, an analyst at Goldman Sachs, said that if CAPE was used as a valuation tool, the valuation of Wall Street would be slightly more than the reasonable value of Kostin.

This argument will be surprising to those who follow Yale University's "Robert Shiller" website, Professor Robert's "irrational prosperity" website.

In that case, Professor Schiller's CAPE value is 23, which is 40% higher than the long-term average.

In fact, the four speakers at the FA Hing strategy meeting used charts of cyclical adjusted price earnings ratios.

This has been a very useful long-term forecasting tool.

Andrew Lapthorne, a Societe Generale analyst at the Industrial Bank, pointed out that if the stock is bought at the current valuation level, the average annual real return is only 1.4%.

Edwards and his team in faxing have actually advocated their "ice age" argument, that is, deflationary pressure will lower the valuation of stocks relative to government bonds, just as what happened in Japan before.

Sometimes, for example, before the end of the Internet bubble in the late 1990s, this argument has been completely ignored.

However, if Edwards is regarded as "dead and empty", most investment bank analysts tend to be "dead long".

"Ice age" short-term funds no worries

Where is the correct view of the camp? There is no indication that investors are showing their preference: two meetings are overcrowded.

This atmosphere is neither the excitement of 2000 nor the depression of 2008.

Goldman Sachs believes that the empty bearer has not taken full account of the economic growth of developing countries, and has been too focused on small crises such as Greece or Portugal.

Like many occasions in history, fiscal and monetary stimulus will revive the world.

In the view of France, the world economic outlook has been shaken by the financial crisis of 2007~2008, and the debt driven mode has gone bankrupt.

The central bank tried to revive the economy by keeping interest rates low and raising asset prices and restoring consumer confidence.

But the result will be the blow and burst of another bubble.

In Edwards's words, "monetary policy based on loose monetary policy to boost asset price growth is doomed to fail."

We prefer the view of the team.

But in the short term, cheap money is a strong driving force.

Experience has shown that it can push asset prices far higher than investors are willing to accept.