Key Points:
- US Treasuries expensive, not bubbly, with more downside and less upside potential due to the massive deficits incurred by the government
- AxJ is his favourite region, strong employment, capital inflows, low leverage and growing consumption
- Chinese yuan is going to be an international currency in about 10 years – China is big enough and stable enough and convertability is the remaining hurdle that will fall with increasing amounts of RMB-denominated assets being traded on capital markets
- China is also pouring large amounts of capital into emerging economies in particular with physical resources and this also contributes to China’s ascendency
- US will not fall into a double dip because of the strength of the corporate sector, which cut costs and upped profit margins and this will translate into higher capital expenditures for replacement and expansion, as well as employment. However, when pitted against the deleveraging process, this will overall translate into fairly weak growth.