2012: the hot money went into America

So what’s the year been like from an investment view?

Hmmm, well at the start of the year everyone said invest in America and, looking at the returns from the US markets, they may well have been right:

Closing prices                   31
Dec 2011        17 Dec 2012        % change

Dow Jones Industrial Average    12,217.56             13,235.39                8.3%

NASDAQ                                     2,605.15               3,010.60               15.6%

S&P 500                                     1,257.60               1,413.54               12.4%

FTSE 100                                    5,572.30               5,932.96            
   6.5%

Gold                                           1,566.80               1,700.76                 8.5%

US investing was a good thing in 2012, but long-term maybe not.  After all, it was clear from SIBOS this year that the action is in
Southern commerce, rather than Northern.

North-North is the old world of trading, where we would deal
with Europe and America, and the rest of the world didn’t get much of a look-in.

That was 20^th century commerce.

21^st century commerce is a world where Latin
America, India and China trade, and the rest of the world doesn’t get much of a
look-in.

South-South commerce.

This has struck me for a while, from the 2003 BRIC acronym
coined by Jim O’Neill at Goldman Sachs to a speech by the Treasury Head of
Lenevo two years ago.

In the latter case Damian Glendinning, Vice President and
Treasurer with Lenovo, talked a lot about how markets had turned on their head
since his start of career to his transition from IBM to Lenevo.

His speech made me wonder why any
Asian firm would want to buy a Western company where there’s no growth, when the
growth is all with countries in the Southern Hemisphere?

Damian’s view was reconfirmed at SIBOS in Osaka this year, where
discussions about a global regulatory framework were seriously flawed by a world with a two-stream economic model, one in
austerity and the other in growth.

In other words, we need to reverse our mental outlook in Europe
and America from thinking we rule the world to thinking more about how we
re-energise our world to make it more relevant to the rest of the world.

That has been the learning for me from observing the European
Sovereign Debt crisis.

This crisis has raged for almost three years and the fires
of Greece, Spain and Italy still have not been doused.

They are embers rather than raging fires now, and the Banking
Union will make the embers burn out hopefully. 
However, the Union will be at the expense of the Union, imho, as the ten
non-euro countries will soon either have to bite the bullet and also join the
Eurozone or get out of the European Union completely.

We shall see.

Anyways, back to the growth markets, where to invest?

Maybe it’s not the BRIC economies, as they’re only growing at
6.1% which, as can be seen by our opening, was outperformed by every major market in
America.  Even China’s dropped to a mere
7.7% growth this year.

So where to put your money?

I’ll answer that when I look at the 2013 outlook on return in
January.

Meantime, more on 2012 reviews tomorrow (the technology
review).